London — In a semiconductor industry that is generally reckoned to be maturing, John Daane, chairman and CEO of Altera Corp. (San Jose, Calif.), is one of the few executives who thinks his company will be able to maintain double-digit growth for the next few years. Daane predicts a compound annual growth rate of 16 percent, roughly the same as the 15 percent that Altera experienced from 2002 to 2006 and beating the predictions of 6 to 8 percent across the industry.
“Some sectors will grow faster and some slower, but any industry that grows at 6 to 8 percent a year must be considered mature,” Daane said. “This era, when we have a combination of rising R&D costs and slowing end market, is going to force companies to reevaluate their business and what products they want to be in. It is also going to force a tremendous consolidation in our industry going forward.”
According to Daane, some sectors, such as EDA, have already gone through this consolidation, but the semiconductor sector has yet to do so, for two reasons. First, he said, semiconductor managers have been “in denial” and continue to spend for strong growth rather than to manage a more-stable industry. A second reason is that capital has been available, even for companies with broken business models. But that will change, Daane said.
Daane said the programmable-logic industry has already gone through its consolidation, so the M&A route to growth is blocked. But he believes Altera will be able to expand its markets by increasingly targeting the ASIC sector.
“When I joined the company six years ago, I said that the opportunity was not to steal market share from the other PLD suppliers but to compete for the ASIC market,” he said.
Altera is banking on the Hardcopy structured ASIC, which enables designers to prototype with the company's FPGAs and migrate to a cost-reduced custom device. According to Daane, 13 of Altera's top 20 customers are using Hardcopy.
At present, Hardcopy provides only around 4 percent of Altera's revenue, but Daane expects this to rise over the next few years to between 10 and 15 percent. “This year we expect a very significant increase in our Hardcopy business, as we have prototyped a number of designs for the communications and consumer areas,” he said. “Our aim is to be No. 1 in custom logic. We have already developed low-cost silicon platforms that enable us to move into other areas with just investment in IP [intellectual property].”
A number of other IC companies, including Infineon and TelASIC, are becoming “meaningful customers of Altera” using either programmable devices or Hardcopy to ship their own IP as a standard-product solution, Daane said.
To become a major player in ASICs, Daane said the company needs to target $7 billion in revenue. But he ruled out acquisitions to grow market share. “In the PLD space there is no one to acquire; in the ASIC space, we could acquire another vendor but this probably would not bring us anything we don't have access to today,” he said. “We already have the tools and a lot of the IP, and the IP we don't have we can license.”
Daane reckons that programmable logic is remarkable for its lack of successful startups. “We estimate that there has been over $1 billion in venture capital money spent in the last 10 years on [programmable and quasi-programmable] technologies,” he said. “Over $750 million of this investment was in companies that have gone out of business, and a number of big companies–such as STMicroelectrtonics, AMD, Philips and Intel–have also got out of the programmable market.”
Programmable logic is a moving target that adapts to advances in process technology. “We have approached each process node with the idea that we cannot just implement what we have done before. We have to reengineer and reimplement from scratch everything that we do to stay fresh and meet the requirements of the end customers,” Daane said.