denali memory report--march 2003

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tMarch 2003—Volume 2, Issue 3

Market Analysis and Trends in the Semiconductor Memory Industry

MEMORY INDUSTRY UPDATE

2 Memory Industry Outlook2 PC Market—The Gaping Hole in Semiconductor Demand2 Networking—Even the Pessimists Were Optimists2 Micron Reports Fiscal 2Q034 The Mummy’s Curse: Dominion Semiconductor’s Latest Victim5 News and New Products5 Flash Market News Abounds6 ONO! Infineon Also Joins Flash Hunt—New Flash Memory Architecture Promises to Stir Up the Industry7 Network Search Engines—A View of the Market and its Opportunity

INTERVIEW

10 DMR Interviews Cypress’ Antonio (Tony) R. Alvarez

Denali Software, [email protected] • www.denali.com • www.eMemory.com

Analyst: Lane Mason • Managing Editor: Jonah McLeod • Production Designer: Alissa WyffelsPublisher: Kevin Silver

©2003 Denali Software, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, transmitted, or used for any commercial purpose, without the prior written permission of Denali Software. This publication is based on information that Denali Software believes is generally reliable. However, Denali Software cannot guarantee the completeness or accuracy of this publication or the information on which it is based.

*All third-party trademarks are the property of their respective owners.

In This Issue:

The Denali Memory Report is produced and distributed by Denali Software, Inc. It is delivered free of charge to registrants on Denali’s web site, www.eMemory.com. This web site also contains back issues of DMR and other presentation materials from Denali MemCon Conferences, which were launched last year in Boston, Tokyo and San Jose.

In the DMR, readers will find memory market news, discussions of market trends, products and product strategies of memory vendors, alliances and industry technical consortia, and corporate financial performance. In each issue, we have included an interview with an important industry spokesperson, commenting on his company’s status or corporate strategy, the outlook for the industry, or technical trends within his company’s markets.

Denali Software, Inc. is the world’s leading provider of EDA tools and Semiconductor Intellectual Property (SIP) solutions for chip interface design, integration, and verification. PureSpec is the most robust interface verification solution for bus protocol interfaces. Denali’s Databahn product provides designers with the highest quality solution for producing memory controller cores for all of the new and emerging DRAM memory technologies. Denali’s MMAV product is the de facto industry standard for modeling and simulating memory during all phases of design and verification. Memory selection, memory controller configuration, and memory system performance analysis are supported through Denali’s online infrastructure at eMemory.com. More than 400 companies worldwide use Denali’s tools, technology, and services to design and verify complex chip interfaces for communication, consumer, and computer products. For more information, please visit Denali at www.denali.com or contact Denali directly at: 650/461-7200, or email: [email protected].

Register now for MemCon Boston!www.memcon.comMay 13, 2003—Westford Regency, Westford, MA

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tDenali Memory Report • March 2003

©Denali Software, Inc.

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Denali Memory Report • March 2003

©Denali Software, Inc. Page 3

MEMORY INDUSTRY UPDATE

Memory Industry Outlook

We are sorry to say that the turnover of 2002 into 2003 has brought no prosperity to the memory market. New Year, New Hope? …Hardly! Indeed, the lethargy in late 2002’s market has been continued uninterrupted for computers and networking; those markets which were strong in 2002, as flash has been, now face renewed price competition even with rapidly expanding markets. There are not enough bright spots, however, and, at least for the first half of 2003, it will be tough sledding for virtually all memories, specialty memories included.

PC Market—The Gaping Hole in Semiconductor DemandPCs, depending on how broadly one defines the term, to include laptops and servers, are estimated to comprise between 20 percent and 25 percent of total semiconductor consumption. At the birth of the PC era, in about 1980, it was essentially zero percent. It has been the single greatest driver of consumption. PCs today deliver perhaps a thousand-fold better price performance value only a little worse than a decade ago. But the PC market is stalled, and the semiconductor industry will have a hard time replacing its dynamic growth—in volume and diversity—any time soon. PC sales have been about 135M-140M units annually for three years, and even for 2003, no one expects much unit growth. At the same time, every chip that goes into a PC costs far less than it did last year, and far, far less than five years ago. The semiconductor market, driven by its present mix of computer, consumer, telecom (telegone?), and other markets, cannot grow without more stable component prices and a resumption of PC unit growth. It is just too large a revenue hole to try to fill with smaller, nascent markets which drive only a few thousand wafer starts, not the dozens of total wafer fabs, as PCs do.

Networking—Even the Pessimists Were OptimistsThe recent write-off of about $35B in hard assets by WorldCom clearly shows that we are not at the bottom of telecom’s bursting bubble, but have more to fall before any thought of a rebound and recovery can reasonably be entertained (“From WorldCom, an Amazing View of a Bloated Industry”, see NY Times, 16 March 2003). The value of the network, which they had carried on their books for $44.8B, was now deemed to have a value of only $10B. The fortunes of both networking system houses (Juniper, Cisco, JDS Uniphase, etc.) and their silicon providers (Cypress, IDT, Micron, Broadcom, et al.), being inextricably tied to the growth and build-out of the networking world, must similarly be revisited, and likely reduced.

We can thank Mary Meeker, Henry Boldgett, Jack Grubman and a host of cheerleaders, self-interested promoters, ignorance and greed (only two of the seven deadly sins) for this transfer of perhaps $5Tr from someone’s bank account to someone else’s from 1997-present. How much lasting value from the internet bubble remains can be judged, in part, by this recent write-off from WorldCom.

Micron Reports Fiscal 2Q03On 20 March, Micron Technology reported its Fiscal 2Q03 financial results. Over the past several months, Micron had made many adjustments to its business, had a layoff of 10 percent of its workforce (the first since the 1985 downturn), departed from the SRAMs and CAMs businesses (The CAMs business was only purchased in 2002 from Music Semiconductor), and a rededication to being the ‘low cost producer’ they once were by Steve Appleton at a recent Confab in Sun Valley.

Micron reported a loss of $619M on sales of $785M in the Dec-Jan-Feb quarter, with the pro forma loss of $386M, 22 percent greater than the $316M they had reported the preceding quarter. 2Q03 revenues rose $100M from 1Q03’s $685M. Some of these one-time restructuring charges were included in their 2Q03 report, including a $197M

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inventory and WIP write-down and $116M in restructuring charges, including a charge for their layoff, and for shutting down the 200mm line at Dominion Semiconductor, purchased from Toshiba a year ago.

It is no wonder. The prices of most species of high-performance DRAMs have declined steadily from November 2002, and even as Micron shifted its mix from SDR to DDR, they were not able to hold their mix ASP high enough. In matter of fact, as SDR prices rose, Micron actually benefited from being a laggard in the move to DDR (DDR was 40 percent of output in 1Q03, and rose to only 60 percent in 2Q03 just completed). Had they been further along towards DDR, their loss would have been much worse.

DDR 256M DRAM prices are down by more than 50 percent from their November 2002 high-water mark. Since that time, on the other hand, SDR prices have risen by more than 100 percent—just in time to meet a rollback of SDR production at almost all producers. Performance premiums for DDR333 and DDR400 are fast being reduced or disappearing as vendors’ yields are steadily improving.

… And Now ThisThis composite headline, collaged from DigiTimes during just two days, 17-18

March 2003, underscores the DRAM vendors’ problems of oversupply:

Nanya DRAM Output to Grow by 21 Percent in March [vs. February] Yield reaches 80 percent in transition to 0.14um process; DDR400 to reach 8 percent of output in April; wafer starts rise to 68,000 in March, and 70,000 in 2Q03.

Admittedly, February was a short month, but the move from 0.17um to 0.14um will give up to 45 percent more die/wafer, when yields come up—and it sounds like they are good, already. An extra 7 percent wafer starts/month since year-end 2002 adds more output, and an 8 percent yield to DDR400 is more than the market needs today, and will eventually push price premiums down. For the DRAM industry today, this is both the downside of productivity and the only way out.

Again, RDRAM is a winner for those ‘who preferred to fight in the market and not in the courts’. Though the RDRAM market is dwindling in size, and is now about 5 percent of total MB shipped, there is more profit there than in ALL of the commodity DRAM markets combined—SDR and DDR, all densities, all speeds.

There is a renewed interest in 512M DDR and SDR DRAMs, and their associated DIMMs for servers, and more

Table 1. DRAM Prices, February and March 2003 (Dollars per unit)

Week of:17 March 10 March 3 March 24 February 17 February

128M SDRAM 2.68 2.61 2.40 2.28 2.21

256M SDRAM 3.56 3.65 3.48 3.27 3.37

128M DDR 1.77 1.73 1.68 1.72 1.88

256M DDR266 3.38 3.06 2.94 3.01 3.44

256M DDR333 3.34 3.16 3.11 3.42 4.18

256M DDR400 4.30 4.48 4.22 4.75 5.39

128MB Rambus RIMM 37.03 37.00 36.62 35.32 33.37

(equivalent 128M chip) 4.63

256MB Rambus RIMM 71.87 71.92 71.48 69.42 64.87

(equivalent 256M chip) 8.98

Source: DigiTimes, DRAM eXchange and Denali

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interest in graphics DRAMs, both as places of somewhat elevated prices, and more protected than the commodity PC DRAMs. DDRII is also showing some early life, but volumes compared to DDR266/333/400 are still miniscule.

The coming 2Q03 really does not look any better, on the demand side (still tepid growth) or on the supply side (still in excess). We would like to be pleasantly surprised, but, two years into the business fall-off, layoffs are still happening, adjustments to a ‘new reality’ are still being made, companies are losing much money. Delusional in our expectations in mid-2000, we have yet to realize how far off the mark we were, until we started falling—and fell, and fell some more, and are still falling in many key markets. It will probably take a few more quarters, a clear vision of what happened in the Mideast, and an upturn in the overall semiconductor market and in investment spending, before the ‘memory industry’ can pull itself out—or, alternatively, the unconditional withdrawal of a few of the marginal DRAM players, or their weakest fabs being decommissioned.

The Mummy’s Curse: Dominion Semiconductor’s Latest Victim

When IBM went through a major downsizing in the early 1990s, it shut its Federal Systems Division, laying off thousands from its plants in Manassas Virginia, and selling the business to Loral. As in the Hudson River Valley, when they had similar layoffs about the same time, this layoff in Virginia deflated the local real estate market, and made what once was a Good Corporate citizen into a pariah. But Big Blue did not forget its debt.

In 1994, IBM looked for a place to locate a Joint Venture (JV) fab with its Triad Partner Toshiba. IBM still had some real estate and buildings in Virginia, wanted to redeem themselves with the Governor and the local community, and pushed hard to choose Manassas as the JV manufacturing site. It could relieve them of more real estate (to be sold to the JV), make use of some buildings

they still had, ingratiate themselves with the Virginia community they had devastated a few years earlier, plus expand their DRAM capacity and relationship with Toshiba. All this when the DRAM market was minting money, with >50 percent gross margins and better.

Toshiba, for its part, did not want an East Coast fab in the US, but did want the IBM JV for IBM’s trench DRAM technology. They went along with the deal, but only reluctantly. However, once the location decision had been made, IBM and Toshiba did some engineering studies on the existing buildings, and found them unsuitable for a then-state-of-the-art 0.25um fab. One delay after another pushed the Dedication Ceremony into the spring of 1996, after the DRAM market was well on its way to oblivion. IBM was getting cold feet on additional DRAM expansion (despite a miniscule 3 percent share of the DRAM market, IBM had three DRAM sites ramping concurrently, in Manassas at DSC, Essex Junction, and France, where they shared DRAM facilities with Siemens/Infineon). Budgets were cut back, and the DSC facility never was expanded past 300 wafer starts per day, about 30 percent of the design capacity for the facility. There was even some defacilitization, as Dominion equipment was moved to other facilities or sold. The DSC wafer process costs were outrageous—more than $3200/wafer start when the competitive cost was under $1700/wafer in 1997-98. This was Excedrin Headache #7 for IBM and Toshiba.

In 1999, IBM exited the DRAM business, and took a $171M pre-tax charge on its DSC investment, which it sold to their JV partner, Toshiba. In addition, IBM had lost tons of money, in operating losses, for the 3+ years that they made 0.25um and 0.20um 64M, 128M, and 256M DRAMs at Dominion.

Over time, Toshiba turned the fab over to run NAND Flash as well as the IBM-Toshiba trench cell DRAMs. In 2000, Toshiba brought in a partner, SanDisk, to share the cost of flash capacity expansion (the FlashVision JV), taking

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a $700M investment from SanDisk for ‘technology rights’ and to pay for SanDisk’s proportionate share of the fab.

In late 2001, Toshiba themselves exited the DRAM business, and sold the fab to Micron. Toshiba and SanDisk regrouped, moving their NAND flash to Toshiba’s Yokkaichi Works in a contract manufacturing line run by Toshiba, and a JV line which they shared. With this shift, Toshiba, itself, probably took a loss on its investment in DSC, SanDisk traded capacity in DSC for capacity in Yokkaichi.

Micron took over the fab in early 2002, but had trouble getting the trench design to yield well. After months of trying, they decided to port their standard DRAM process to DSC. But not for long did they work on this plan. In this latest quarter, they announced abandonment of their technology transfer to the 200mm line at DSC, and decided instead to refit DSC as their lead 300mm line, with their new 0.11um process. This write-off for abandoning the 200mm line is included in the $116M restructuring charge for this quarter. Did Micron make any DRAMs for sale from DSC from late 2001 to present?

In addition, as we have noted in last month’s DMR, Micron has to buy back the 1.5M shares of Micron stock they gave to Toshiba in payment for the DSC fab and Toshiba’s DRAM business. In October of this year, Micron has to come up with

$58M to buy back what is today about $12M in Micron stock—which payments they have started setting aside cash for.

IBM lost money on Dominion Semiconductor, Toshiba lost money on DSC, Micron lost money on DSC, and SanDisk may have lost money on DSC. Maybe Toshiba and SanDisk made NAND flash money, but for sure, every DRAM made there since 1996 had a $5 bill wrapped around it as it passed through final test on its way to the market.

News and New Products

Cell Phones Grow Six Percent in 2002One piece of good news coming out of the disappointment of 2002 was the resumption of growth in the cell phone market. Although independent analysts do not appear to have a firm grip on end customer actual sales, or an assessment of inventory levels, it was heartening to see Gartner estimate a resumption of growth to 423M units in 2002, up about 6 percent from a two-year stall at about 400M units per year for 2000 and 2001. More important than the sheer unit numbers, perhaps, is that 3G moves steadily forward and today’s cell phone feature set and silicon content (sq mm) are about double what they were 3 years ago. The bad news is that few people seem to utilize the 3G features, even if they

Flash Market News Abounds: Source

The New World Order in Flash; Samsung, Toshiba Rise... Silicon StrategiesFlash Memory Vendors Ranked by 2002 Sales Silicon StrategiesSemico Separates Flash Into NOR, NAND Segments Silicon StrategiesIntel Says No Plans to Cut NOR Flash Prices DigiTimesNAND Prices to Stop Falling on Rising Demand DigiTimesToshiba Unveils 2Gb Flash Memory EBN OnlineFlash Market Topped $7.7 Billion in 2002, Semico Says Silicon StrategiesSanDisk 1GB Compact Flash Card for $169.99... SanDisk PRLoyalty Tested Amid Growing Price Gulf EBN OnlineCellular Phone Makers Could Make Flash Switch EBN Online

Links to the full articles for all of these headlines can be found on the Denali News web site, www.eMemory.com/news. Also, on www.eMemory.com can be found Denali SOMA simulation models for all flash memory products from all vendors, all architectures, all densities, and all speeds.

http://www.eMemory.com/news


http://www.eMemory.com/news

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have the phones, and price competition and different views of the ‘silicon solution’ for cell phones keeps the market competitive and at reduced margins. Nokia disappointed when they said they were unable to maintain their mix average cell phone price, even by shipping a far richer mix of full-featured phones than in 2001. But, no one can argue with a 37 percent market share for market leader Nokia, either.

ONO! Infineon Also Joins Flash Hunt—New Flash Memory Architecture Promises to Stir Up the Industry

On February 20th, the relatively unsung memory market for NAND flash got a new voice. Infineon Technologies AG of Munich, Germany entered the market with a new form of flash device called the NROM. It can function as either a NAND or NOR type flash device but the company chose the former because this market had fewer competitors and was poised for significant growth in the next several years. IC Insights Inc. predicts the entire global flash memory market will grow 36 percent this year to $10.6 billion from $7.8 billion in 2002. In 2002, 30 percent of this total was NAND flash, up from 11 percent in 2001 says Scottsdale, AZ-based IC Insights.

Infineon entered the market by way of the joint venture Infineon Technologies Flash GmbH & Co. KG, which it formed with Saifun Semiconductors Ltd. of Netanya, Israel. This follows an earlier joint venture the two formed in 2001 called Ingentix GmbH & Co KG. The net result of the two ventures is the introduction of Saifun’s contribution to the partnership, the NROM flash memory cell, which has several important functional advantages compared to alternatives.

Most importantly, say Ulrich vom Bauer, Product Marketing Flash, and Eugene L. Chang, Senior Marketing Manager, NROM advantages include: greater storage capacity per cell, smaller die size, lower voltage operation and simpler manufacturing. Armed with these advantages, Infineon aims to take market share

from giants Samsung and Toshiba, ranked second and third largest flash memory vendor respectively by IC Insights. Both currently ship NAND flash predominantly.

NROM is a departure from the flash architectures that are at the heart of the two major flash products currently in mass production: NOR and NAND. The NOR device, with its premier supplier Intel Corp., has been largely used for program storage in cell phones, for PC BIOS, etc. The NAND, with Samsung as the leading supplier—and Toshiba a major challenger, is widely used for data storage in digital cameras, PCMCIA cards, etc. Both, NOR and NAND use a floating gate architecture, which stores a single bit in two polysilicon layers sandwiched between two layers of oxide that isolates the source and drain of a transistor.

The first unique element of the new NROM device is that it contains two bits of data in a single storage element. To achieve comparable storage density the floating gate must resort to variable levels of charge to represent different stored values. Four levels of charge represent the state of two locations for all combinations possible in the two storage cells: 00, 01, 10, and 11. To achieve two bits in a single level, the NROM architecture uses a dielectric sandwich of oxide-nitride-oxide (ONO) separating source and drain of the transistor, vom Bauer explains. Individual bits are stored at either end of the sandwich immediately above the transistor’s source and drain. To read and write the two different bits, the transistor source and drain are reversed (see Figure 1 on page 7).

The NROM architecture also allows for a smaller die area than existing flash devices, thanks to a more compact transistor design and a slightly smaller charge pump. To contain 512Mbs of data in an NROM device requires 30-40 percent less area than a floating gate flash devices implemented in the same process technology. Also contributing to this smaller die area is the amount of control logic required to control the NROM memory area. In a typical floating gate flash die, Chang says that control logic consumes

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40 percent of the area, but the NROM devices take only 30 percent. A third benefit of NROM technology is power. It takes on the order of 17V to program a floating gate flash device, but an NROM memory takes about 9V. This ~50 percent savings is a major plus for portable applications using the memory. The NROM device requires less programming voltage due to its storing mechanism. Also it stores a smaller charge, a mere 400 electrons, compared to about 8000-10000 electrons for a floating gate cell. A corollary benefit to lower power is increased reliability, which is inherent in the NROM ONO dielectric material. Floating gate technology stores a bit in a polysilicon layer surrounded by two layers of oxide. Chang says a failure mechanism of this structure is that the oxide can leak draining the charge of electrons. The NROM ONO structure stores electrons dispersed in the dielectric material. If one area of the dielectric leaks, the remaining areas are unaffected, thus maintaining the stored electrons.

Finally, the NROM device is easier to manufacture than the floating gate flash memory devices, vom Bauer declares. He estimates that the NROM memory

requires 15 percent fewer mask steps, on average, than competitive products. Said another way, the NROM device will take only two or three more mask steps than a standard DRAM process. This plus for the memory maker should translate into a lower cost to the memory consumer.

Network Search Engines—A View of the Market and its Opportunity

The Denali View, and OverviewOne of the most needed functions within Internet silicon is the Network Search Engine (NSE), which is fast becoming the jargon of choice, displacing the older term “Content Addressable Memory” (or CAM). NSEs store vast arrays of data, locations, and terms within their memories, and spew them forth when addressed with a specified command (search objective). Put in a word, ‘gold’; get addresses where this term is found. Put in an alphabetic company address, www.denali.com, out comes the site’s Internet address, 66.216.77.25, which tells the location and pathway to the selected site. Search engines link common terminologies to precise internet locations, or sort through millions of stored pages of information to


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identify those most relevant to the search criteria: vast and fast look–up tables that sort through hundreds of millions of ‘locations’ each second, to find the ‘right one’ that matches the input terms and selection criteria.

The NSE market was to be a recognized beneficiary of the Internet buildout from the early 1990s (Kawasaki LSI started looking at CAMs in 1992), and gave a push to a market that had existed conceptually for a long time, but never had the volume or commonality of functionality to drive features, specs, high volumes, and low prices. But the networking business was to be different. Sure, no standards were there to start, but with a faith that, after a few generations of product development, standards would settle out, volumes would rise and prices drop. No one knew what the Holy Grail looked like, but few doubted it was out there.

In the late ‘90s, external and internal funding kick-started a dozen NSE programs throughout the industry. The year 2001 and 2002 saw many of them disappear into larger, better-funded, companies.

Date ActionJune 2001 Cypress bought Lara Technology for $225MFebruary 2002 ISSI bought Purple Ray, a privately-held CAM makerMarch 2002 Micron bought ternary CAM assets of Music Semi. for $4.5MJanuary 2003 KLSI announces plans pull- back from high-density CAMs

Other players in CAM/NSE market today include market leader IDT, SiberCore, NetLogic, CMOS Micro Devices, and Mosaid. Music Semiconductor continues selling its binary CAMs. There is additional market presence and interesting technology participation along the edges from Altera with a CPLD CAM, Vitesse, and IBM, which has an embedded CAM in its cell library.

It is a very unsettled market, full of promise, which to date, has been largely unfulfilled.

The earlier market, or vendors’ perceptions of the market, has steadily been dropping from its peak of “about $1B in 2005”, from the

vantage point of mid-2000, to about ‘$300M in 2005’, as today’s forecast for 2005. In 2002, the merchant NSE market was about $175M—BUT, BUT, as we have said in an earlier DMR, Cisco alone, which makes proprietary NSEs to its own spec, is about $100M of consumption by itself. Adding to the confusion of NSE market sizing is the fact that the NSE ‘function’, which is addressed by a host of alternate SRAM-based, DRAM-based, and ASIC-plus-SRAM solutions, and is therefore, arguably 3-4 times as large. So it is a hard market to define, and to size. The system application for which NSEs are ‘applications specific product solution’ is far greater than that which has adopted off-the shelf (anybody’s shelf!) NSE solutions.

There are a number of reasons for this lack of homogeneity in the NSE marketplace. There is no second sourcing in NSEs—even the Micron-Netlogic ‘design to a common spec’ is now kaput, with Micron’s withdrawal from the NSE market. The NSE market is dominated by small-ish suppliers whose futures are sometimes questionable and uncertain, which is especially important when their NSEs are being designed into the market-leader’s high-end multi-million dollar router. In addition, due to lack of standards, lack of multi-sourcing and lack of stable feature sets, NSE prices have remained relatively high. And they may not drop over time, compared to solutions that use blends of commodity DRAMs and SRAMs, plus an ASIC or a CPLD, to accomplish the same application solution. Things are in a constant state of flux. What is needed and what the designers are capable of, are also changing quite fast. This makes the ‘ideal design choice’ a moving target. This hurts vendors’ roadmaps and limits the time in which a given NSE is the part-of-choice for new designs, limiting lifetime and ROI. The problems are limitless, the promise of NSEs is much diminished, but many NSE companies persevere, design and sell product, and maybe even make profits.

Mosaid on CAMsMosaid is a fabless semiconductor manufacturer, with a long history of

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memory design dating back more than 25 years. They designed, on a contract basis, many DRAMs that were brought to market by various supplies over the years, and have a broad portfolio of memory IP, which they license to other memory designers.

They got their start in NSEs with the introduction of a 2M CAM in 2000. Though that particular product introduction was difficult due to foundry and manufacturing problems, they came back with a 9M CAM in 2001. Both of these parts were general purpose, 100MHz bus, wide bus (72 bits) CAMs. Each of them could be cascaded into a bus of up to 288-bits. Variants of the basic designs can have 16- and 18-bit interfaces, and busses up to 200MHz. Presently, Mosaid’s CAMs are built with Fujitsu’s 0.18um eDRAM process.

Mosaid is one of the few NSE companies whose elemental bit cell is a DRAM cell; almost all the others use a conventional SRAM cell. Even though Mosaid’s NSEs do not use the fastest eDRAM processes, the DRAM performance has not been shown to be a performance limiter for the complete CAM solution, and does save a considerable amount of silicon area due to the DRAMs smaller cell size. For their 9M CAM, this die size savings is estimated to be about 30-35 percent. By using DRAM technology, as well, they can build their CAMs on a more stable, back-from-the-hairy-edge process, which yields better than cutting edge 0.13um or 0.11um designs that might be needed for an SRAM-based CAM of the same density. In addition, their DRAM-based CAMs results in a smaller package footprint, and lower power utilization.

One can see from the Mosaid web page, www.mosaid.com, and promotional literature the diversity of requirement, and the changing nature of the feature set for NSEs. It is no wonder, as customer requirements for NSE functionality evolves so rapidly, that there is no stable set of common features. In addition, the needs in which NSEs are used cover an extremely wide range of applications. One size does not fit all.

Although Mosaid does not have the ‘broad networking product portfolio’ that Cypress and IDT do, they have designed parts which have standard interfaces to higher volume network processors, and QDR SRAMs, which enable them to lock-on to the products in other portfolios. They see some long-range advantages in using a DRAM-based cell, as densities increase and power requirements become more severe. They also consider their feature-rich NSE offerings to be a competitive differentiator, including ‘user bits’ that can be customized to the NSE application, high performance of 100M search/s for a 288-bit word, auto-aging (which purges less often accessed entries, freeing up NSE memory space for most often sought-after addresses), and their ‘multiple match output’.

In a market in which ‘NSE feature set’ does not stay still for even a minute, much less a generation, Mosaid appears to have a good fundamental NSE technology, and a forward plan to grow with the market.

IDT on NSEsIDT is acknowledged to be the leading supplier of NSEs, with about a 45 percent share of the world market. They do standard designs, and custom products, which they have designed for Cisco, which was their original customer. Their strengths are (1) a wide-ranging networking and communications chip portfolio (2) large market shares and reputation in FIFOs, multi-port SRAMs, bus switches, and other related products, and corporate focus on comms. (3) offering total system integration capability with enabling software and (4) strong relationship with NPU vendors (and Cisco). In a market where many have mis-stepped on bringing their designs forward, IDT has executed rather well.

About five years ago, IDT shifted its corporate focus strongly away from standard SRAMs, to communications chips. Their broad NSE portfolio today allows them to offer many NPU-specific interfaces that eliminate FPGA glue chips that designs would otherwise be needed.

http://www.mosaid.com

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INTERVIEW

DMR Interviews Cypress’ Antonio (Tony) R. Alvarez

Tony R. Alvarez was appointed Senior Vice-President and General Manager of the Memory Products Division at Cypress in February 1998, reporting to CEO T.J. Rodgers. Under his tenure, Cypress’s SRAM market position has improved from number 7 to number 2 in the world. Tony joined Cypress in 1987 as BiCMOS Program Manager and was promoted to Senior Vice-President of Research and Development at Cypress, responsible for all technology platform development, in 1991.

Prior to joining Cypress from 1979 – 1987, he worked on Analog and VLSI BiCMOS at Motorola’s Semiconductor Sector. His team was one of the early leaders in this field. Tony earned a Bachelor’s (1978) and Master’s (1979) degrees in Electrical Engineering from the Georgia Institute of Technology. He has published over 25 papers in the Integrated Circuit process and technology sector and edited the book BiCMOS Technology & Applications. As a member of IEEE, Tony has served as the Chairman of the Symposium on VLSI Technology (2000).

In recent quarters the slow down in the communications sector of the U.S. high technology industry has struck hard at semiconductor companies, including Cypress, that supply components to system manufacturers. The Denali Memory Report spoke with Tony to learn how the company was coping and what insight he might offer about a market recovery.

Denali Memory Report (DMR): Can you provide our readers a business outlook and company overview of Cypress?

Tony R. Alvarez (TRA): Cypress has just released its earnings and the fourth quarter was pretty dismal for us. After increasing revenues several quarters in a row, we went backwards by roughly 15 percent. Our revenues went from $205 million in Q302 to $175

million in Q402. The decline was mostly in memories where our MicroPower products had a poor quarter. We’re seeing a recovery in business in Q103, however. Though we do not think we will get completely back to $205 million, we believe we will achieve modest growth this quarter and the next.

DMR: Your Q402 earnings release mentioned that the company was late with its 16Mb SRAM, which impacted sales and earnings. So, is the recovery that you mention due to the overall market coming back or due to Cypress catching up with the SRAM pack?

TRA: It appears that the overall market might be bouncing back. We’re seeing strength across all operating divisions, but it’s fairly early in the quarter—things can change. The first quarter is seasonally week in some areas, typically PCs and consumer products, so it could be a mix of factors. We’re being cautious in our forecast. There are no clear crystal balls today.

DMR: Taking a longer-term look, what are your expectations for 2003?

TRA: We’re operating on a tactical day-to-day basis. We don’t have much long-term

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visibility. There are too many uncertainties in the economy and in the world. If we were to go to war in the Middle East, what’s going to happen? Assuming there are no major changes in the world’s political scene, it’s reasonable to expect a modest recovery in the second half of 2003, based on previous semiconductor cycles. Historically, we’ve had two to three years of increasing revenue followed by two to three years of decreasing revenue. Both 1999 and 2000 were relatively strong years; 2001 and 2002 were extremely weak. If historical patterns hold, 2003 should be a transitional year. It’s difficult to predict the turning point. Everybody I’ve spoken with feels more confident about 2004 and 2005 (laugh), but no one feels that way about 2003.

DMR: Cypress is an $800-million-a-year company and there has been increasing talk about companies of this size having a difficult time remaining competitive in processing technology because they lack the business volume. How does Cypress feel about this assessment?

TRA: The ability to afford the investment in manufacturing depends on how efficient your process development R&D is, how you leverage your equipment vendors, whether you’re able to strike partnerships with other companies, and how focused your process technology group can be. I think Cypress scores reasonably well in all four criteria.

As to whether we can maintain a sufficient level of R&D, that’s a question we’ve been asked since we were a start-up. How could we afford the R&D investment when we were at $15 million per quarter rather than $200 million a quarter? We were always leading edge so if we could afford it then, we can afford it now. The percent of revenue we spend on process technology is lower than it’s ever been, while the output of the organization is higher than it’s ever been. It’s not affordability so much as execution.

DMR: Do you have many unique process flows for your SRAMs?

TRA: Cypress has two process flows: fast and slow. And over 95 percent of the process steps of the two flows are common. The two flows also serve as the base process for all our other technologies. We make liberal use of foundries for non-commodity products. We continue to ask what’s the best way to leverage manufacturing to make money.

DMR: I’ve not seen a public number on how much foundry business Cypress does. Are you prepared to provide the information?

TRA: Today, roughly 15 to 20 percent of our revenue comes from foundry-manufactured products. We even do some business with TSMC for specialty SRAM products. Logic products provide Cypress a great opportunity to use foundries because logic is what drives a foundry’s process development. We don’t produce sufficient volumes of logic products to justify the R&D investment to develop a leading-edge logic process.

DMR: Then you would use a foundry for some of your specialty SRAMs because they were low volume or had a special process flow?

TRA: Yes, but it’s really a business issue. It makes sense to use a foundry if the market is enough of a niche, if it is proprietary enough, and it requires specialized technologies. In the case of memories, there are very few situations that warrant us using a foundry. I want to emphasize that this is not a religious issue with Cypress.

If you’re making commodity parts, especially memories, and you’re not making your own silicon you don’t have a viable business model because so much of the value of what you ship is in the base silicon. If you’re using a foundry, the value is captured entirely by the foundry and you’ll be put out of business. Of all the fabless memory companies, none have any degree of success. No one in the DRAM world has even attempted it. The successful fabless semiconductor companies are those with intellectual property in their end products or who are software-driven. For them, the value is not in the silicon so much as in the end product and/or

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support—applications, etc. If you look at successful companies such as Xilinx and Altera, their value is in the chip architecture, software, support, and macros—not so much the silicon. This is not true in the memory world. At Cypress, the memory contribution to the company’s revenue varies between 35 to 55 percent. That drives us to do our own front-end and back-end manufacturing.

DMR: Looking at Cypress’s quarterly results, your gross margins tend to be higher, suggesting that you make your money more on the design and features than on sheer manufacturing prowess.

TRA: For memories, that’s not correct. My internal wafer cost is much less than what I can get from a foundry. And, my cell sizes and die sizes are always smaller. If I compare Cypress to anyone getting wafers from a foundry, I always win on raw manufacturing. My die sizes compete favorably with Samsung, Micron, or any Japanese competitor. That is how Cypress got to be number 2 in the world in SRAMs.

DMR: Can you position Cypress relative to other major memory suppliers?

TRA: If you look at Cypress since 1998, we’ve gone from number 6 or 7 in SRAMs to number 2. In a very tough market we continue to increase the gap separating us from the rest of the SRAM suppliers. At this point, it’s Cypress and Samsung if you want to do business with a broad-based, significant-sized SRAM player.

DMR: When you say increase the gap are you referring to technology or revenue?

TRA: I’m referring to revenue, but if you didn’t have the manufacturing muscle, technology, and product breadth to back it up, that gap wouldn’t be increasing. If you look at our product line, we’re number 1 in fast asynchronous SRAMs and have large market share. In the MicroPower SRAM product line, we have four generations of mobile SRAM, each with longer battery life and have expanded beyond the original 6T cell to a 1T cell pseudo SRAM (PSRAM). To serve

the networking market, we have high end QDRsTM (Quad Data RateTM). We’ve also just gotten our first silicon on a 6T, 72Mb synchronous NoBLTM (No Bus LatencyTM) part. That’s a tremendous achievement since it comes on our 90nm technology node. In fact, it is our first product from the 90nm line. It was built on our RAM9TM process. It’s our sixth generation of 6T product. We started the 6T product on RAM3TM. Prior to that, we were offing a 4T, with two pull-up resistors. Then, we introduced the 6T with self-aligned contacts on RAM3 and have continued shrinking the cell. The 6T cell size is extremely small, on the order of one square micron, comparable to—or better than—the rest of the industry.

DMR: You will have a 1T 72Mb NoBL PSRAM and a 72Mb 6T NoBL SRAM?

TRA: The 6T is a more full-featured part without the timing restrictions of the PSRAM. I think that kind of execution has made us the number 2 player in the market. In memories, the rules for winning are not complicated. You have to make your product extremely cost-effective. You have to provide tremendous service to customers in terms of delivery, quality, and application support. And you need a roadmap that keeps you at the forefront of customer requirement. There is not a lot of software to worry about. Architectures don’t change too often. You have to do well at business basics.

DMR: Can you discuss your on-going technology partnerships, in PSRAM and any others in SRAM technology or product development?

TRA: The ProMOS relationship is our biggest. We’re also part of the CellularRAM consortium and we’re one of the founders of the QDR consortium. Micron and Infineon initiated the CellularRAM consortium and we joined. Micron, IDT, and Cypress formed the QDR consortium. We brought in Samsung and the other major SRAM players. We have a relationship with NanoAmp Solutions, which is an R&D cooperation on the PSRAM product. The

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Enhanced Memories Systems relationship is more of an R&D effort, looking at bringing to market a high-speed 1T product—a 72Mb device. That product is sampling now. In some ways, it contains NoBL-like features. We call it a NoBL burst PSRAM.

DMR: What kind of latency does the NoBL burst PSRAM have? Is this how it resembles an FCRAM

TRA: The NoBL burst PSRAM was intended to provide low latency. There are many variations to FCRAM. Some are low power, others are high speed. That’s why I’m hesitant to use the term FCRAM. The original FCRAM was fast cycle, but the term now has become more generic. Many of these products are going into cell phones to take advantage of their low power characteristic.

DMR: Can you talk about your PSRAM thrust: directions, target markets and how you think the lower-performance asynchronous SRAM will fare against the PSRAM solution?

TRA: Our main PSRAM thrust is in the low power, relatively modest-speed mobile market, of which the cell phone is the largest segment right now. We’re sampling 16Mb, 32Mb and 64Mb at this time.

DMR: Where will true 6T asynchronous SRAMs find a home five years from now. Will they be an ultra low-power solution or do they have other markets where they will remain viable?

TRA: Today, besides the lower standby power of 6T, we are seeing that it also has a speed advantage. I think that the total available market for the 6T SRAM, which had been on the decline before the cell phone market boom renewed its growth, will return to historically lower growth rates because the largest part of the 6T market will be taken over by PSRAMs. Nevertheless, the transition from 6T to PSRAM will take some time to complete.

DMR: So you see PSRAM holding a lock on the cell phone market in the long run?

TRA: Yes and no. Some customers building cell phones in Japan and Korea are using triple-stack memories. The stack includes flash, PSRAM, and a 6T SRAM. They use the stack to achieve extremely low standby power. This may be a transient trend but I’m not sure. The 16Mb capacity is the low-end of where PSRAM has encroached on 6T. There doesn’t seem to be a strong desire in our cell phone customers to proliferate PSRAM below this memory density. One reason: phone makers conclude it’s not worth the large overhead to make PSRAMs SRAM-like at this density. Also, the memory array efficiency worsens and the relative advantages in cost between PSRAM and 6T narrows below the 16Mb-density.

DMR: For the cell phone business, do you offer a multichip solution? Or do you sell your SRAM die to others who put them onto multichip packages?

TRA: I don’t want to get into building multichip components, which is very much a custom market. I’ll let the flash manufacturers play in that space and I will sell them my die. I have three major customers, one each in Japan, the U.S., and Europe.

DMR: Many large systems in the networking space take a long time to design. Can you discuss the life cycle for a new class of memory product from the time of conception until the time it’s designed in these systems and reaches volume production?

TRA: It takes customer a long time to absorb a new architecture even though there are obvious advantages to that architecture in certain applications. Even in the networking market where NoBL and ZBT offer an advantage in lower latency, it’s taken years. A life cycle can be as long as 18 years. For example, we introduced the NoBL SRAM at the 2Mb density. We went through 2, 4, 9 and 18Mb parts each with 2 to 3 years per generation before NoBL achieved parity with Synchronous SRAM in terms of unit volume. I expect our newest QDR offering to follow a similar path.

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DMR: Does that mean the time to profit is longer? Or are you able to price it so that you’re making money from first product rollout?

TRA: It means that it takes a long time to recoup your R&D investment for a new architecture. In memories, customers tend to purchase the lowest cost solution that meets their system requirements. That’s what gets a product accepted. Pricing the new technology higher can limit its acceptance, though there will always be systems that require the highest-level of performance and are willing to pay for it.

DMR: You mentioned QDR. Has it won the QDR-SigmaRAM battle?

TRA: If you look at the market, all the major players are backing QDR. Within the top ten memory suppliers, Samsung, Cypress, Hitachi, NEC, IDT, and Micron are all QDR vendors. The only top 10 supplier backing SigmaRAM is IBM and they are not a broad based memory supplier. They don’t have the cost structure to compete in a commodity market.

DMR: Are there too many QDR suppliers chasing too little market today?

TRA: That’s the way it is today. But the market is just emerging. The expectation is that QDR will be the next synchronous SRAM platform. The way NoBL and ZBT achieved parity with the Synchronous SRAM, QDR will over time come to parity with the NoBL and ZBT. QDR offers better performance in the networking space. The downside is that it’s still a larger die and more expensive for us to manufacture. So the cost per bit is higher. From a value creation point of view, the customer comes out ahead. I don’t think we will see volume in QDR for another 12 months or so. We’re seeing a lot of samples and design wins and lots of systems about to go into production. However, partly because of the weakness in the overall networking market, the volumes are relatively low.

DMR: When those systems start to ship, will they be using the next higher capacity QDR?

TRA: The systems designed with 9Mb QDR will never ramp because they will have been redesigned to take 18Mb and 36Mb. The 9Mb generation that IDT, Micron, and Cypress introduced will never go into volume. That generation was an R&D investment, a foundation that the competitors coming into the market later offering the 18Mb and 36Mb generation, derived the benefit from. Those entering the market first may not always have the advantage.

DMR: Let’s talk about the CAM market. You made an acquisition of Lara and it seems to fit well with your thrust of selling to Juniper, Cisco, and the likes. What’s your view of the CAM market?

TRA: Putting Cypress muscle behind the Lara acquisition, we’ve grown to number 1 or a close number 2 in the network search engine market. We’ve gained tremendous market share and we’re doing very well.

DMR: Netlogic Microsystems and Micron recently announced a CAM license and alternate source agreement. Is that what it’s going to take to get the CAM market broadly accepted? (Note: Since DMR

interviewed Tony, Micron has exited the CAM market.)

TRA: That was in the works for a while now. For us, it was not a surprise. Certainly Micron and Netlogic make a powerful partnership. It would be one more competitor besides Cypress and IDT in this market. I think Samsung is interested in getting into this market as well. Any time there are competitors, it’s good for customers and it broadens the market, but we may have more suppliers than customers.

DMR: Cisco showed some data on their CAM consumption at Semico and it looks like they buy half the world market in CAMs.

TRA: I worry more about the narrowness of the customer base than about additional competitors.

DMR: We would like to thank Mr. Alvarez for taking time to share his knowledge of Cypress and the semiconductor memory market.

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