Buyers can expect stable to slightly declining prices for standard logic through the rest of the year as the overall economic slowdown in the semiconductor industry limits demand for standard logic.

Global standard logic revenue will grow by about 4% to $2 billion in 2008 up slightly from 3.5% in 2007. However, growth rates will expand in 2009 and 2010 as the economy improves, according to researcher iSuppli, rising to 8.5% in 2009 and 7.5% in 2010. By 2012, the standard logic market will reach $2.7 billion.

"In 2009, we will see a recovery from 2008. Often when you have a depressed year, there is a recovery the next year," says Roger Banks, a market analyst with iSuppli in London.

Some suppliers say they have not yet felt the impact of the overall economic slowdown and are optimistic about growth.

"We see a normal a seasonal pattern right now," says Steve Kelley, vice president and general manager of Texas Instruments' standard linear and logic business in Dallas. "The doom and gloom in the general economy has not reached our market."

The decline in the overall economy is affecting the housing market, car sales and vacation plans of people, but not the electronics industry and standard logic, he says.

Kelley says portable equipment such as cell phones, MP3 players and notebook equipment are major drivers of standard logic and "people are still buying those products at high rates."

He says those segments require new faster and low-power standard logic products. "We have invested in new products and that is driving our growth. Those new products are being adopted into portable consumer platforms and computing platforms," says Kelley.

He adds many OEMs are upgrading their logic from older product families such as HCMOS to "AUC which is the world's fastest logic and AUP, which is optimized for lower power."

He says there is also strong demand for translation devices used in mixed supply voltage systems. In addition TI is coming out with electrostatic discharge (ESD) and electromagnetic interference (EMI) circuits, which are new for TI and help revenue growth. "They have been well received and we have had design wins in cell phones and notebooks," says Kelley.

Of course, other standard logic companies are introducing new products as well. New products can bolster a company's bottom line because they have higher margins than more mature parts.

Fairchild says it will introduce 12–18 new products in 2008. Last year it introduced only three.

While some suppliers will fare better than others, most will see some price erosion although there is "not a lot of room for them to fall," according to Banks.

Banks says at the beginning of the second quarter the average price for a standard logic chip was about 9.4¢, but "it varies from month to month."

"Gone are the days when the price was 20¢. Now the price is up or down between 9.9¢ and 9.7¢," he says.

Kelley says there is always price pressure in the older product lines. "The best way we counterbalance that is to improve our product mix and get new design wins. It's a win-win because customers get more functionality, better performance. They pay a little higher price but it is a better value for them," he says.

He says TI will see a slight degradation in prices, but nothing major, although the cost to build logic has increased over the past year because of raw materials price increases.

"The price of copper, gold and energy impacts our cost to build. We have not passed these price increases on to customers. We are feeling it on our bottom line," he says.

Banks says despite growing demand there should be enough capacity to go around for the rest of the year. He says a lot of packaging is outsourced, although some logic manufacturers are bringing back packaging in-house.

Banks says if there is a capacity issue in the future it will be with packaging, which could result in longer leadtimes and higher prices. "You have to separate fab capacity from packaging capacity," he says. "The last problem we had with chip supply including logic was about packaging capacity, which is often shared with other technologies."

In fact, buyers need to pay close attention to packaging because more standard logic devices will be housed in smaller packages such as TI's Nanostar and Fairchild's Micropak.

"The growth of MicroPak is encouraging," says Hank Volin, senior business marketing manager, logic products at Fairchild inPortland, Maine. He adds that it has been well adopted by big cell phone companies like Sony-Ericsson, RIM, and Samsung, all of which are projecting strong growth.

Packaging can be different among suppliers, which can present second—source challenges, says Gary O'Donnell, senior technical manager for logic products at Fairchild. "With standard logic, there is very little differentiation around process technology, other than part numbers. What is different is the packaging," according to O'Donnell.

Some supplier packaging is similar to other suppliers, but some is not.

"For example we do MicroPak. It is alternatively sourced by NXP. TI has Nanostar but it is not quite the same," says O'Donnell. "We spend a lot of time thinking about how our packaging roadmaps line up vs. our competitors' much more than we did five years ago," he says.