SPECIAL FEATURE REPORT: VOIP SPREADS ITS WINGS
September 29th, 2005
Semiconductor, Systems and Software Companies Anticipate High Growth
THE VOIP SEMICONDUCTOR AND SYSTEMS MARKET
Voice over Internet Protocol or VoIP products, the products that enable
voice phone calls over the Internet, has produced numerous outgrowths. These include Fax Over IP or FoIP, VoIP over Cable,
Video Over IP, for videoconferencing over the Internet and Wireless VoIP or WiFi VoIP. There is likely more to come. Such
as Powerline VoIP and UWB VoIP, to name just two emerging technologies that could be adapted to VoIP.
The allure of VoIP has been great. The prospect of making inexpensive
or free phone calls over the Internet attracts almost everyone. However, the promise of free is often never kept. Today, one
has to sign up for VoIP, which in the United States can easily cost over $15.00 a month. But even at that, there is still
the prospect that consumers and businesses could save more. There is the possibility of direct connect VoIP, which would
limit who one can call, but offers, again true no-cost operation. In that type of system there is no VoIP service provider,
your standard Internet provider will do.
Despite the $15.00 a month VoIP service charge, which limits you to
500 minutes a month, VoIP is still lower than the cell phone or regular phone service. That in itself is more than enough
to lure many to purchase VoIP phones and service.
VoIP Market Doubts Disappear - Will VoIP Technology Panic
Last year, 2004, there were still doubts if the VoIP market would
make its move in either 2004 or 2005. However, now in 2005, the VoIP market appears more prepared for growth than it did in
2004 and even more so than in the year 2000, when everyone saw that technology as the endless, end-all of all markets.
One reason the VoIP market is poised for growth now is that chip technology
has progressed to such a point that the overall cost for an Internet phone has become very inexpensive. As well the Internet
infrastructure is firmly established in the corporate world and the home market. By contrast, in 2000, the Internet infrastructure
had just begun to develop. Furthermore, the wide spread technology recession of 2001 also stalled the anticipated growth of
the VoIP market, which many predicted was to occur between 2000 and 2004.
That’s not to say that the bout of hurricanes and high oil prices
couldn’t put a crimp on VoIP expansion. It may, but if VoIP can come through with lower monthly phone bills and a low
price entry point, the market will be hard to stop.
The danger for VoIP vendors may be in oversupply now. As market doubt
disappears, technology panic could set in. Companies, venture capitalists and the like who fear missing the VoIP boat, may,
as is usually the case flood into the market, overhire, overproduce and drive down prices. Specifically, Taiwan and China
based chip companies, who often hit a market last, may again be instrumental in keeping prices low and further accelerating
market acceptance of VoIP system products.
The next technology step is then expected to set in. Here vendors
are already have VoIP-WiFi integrated chips. As of yet, VoIP-UWB chip solutions have not been seen or for that matter
VoIP powerline based chips have not appeared–surely though they are coming.
VoIP: A Billion Port a Year Market?
Lower phone bills, the promise of free phone calls and low-cost chips
and VoIP equipment, has led most market analysts to project that revenue for VoIP equipment, software and semiconductor products will
rise exponentially. The rise of VoIP is expected not only to come from the existing base of world telephone subscribers who
clamor for lower phone bills, but also from those that previously could not afford phone service and see the benefit of virtually
free long distance.
But just how big and how fast will the VoIP chip and systems market
grow? Most think very fast and very big, right now. One reason is that VoIP is expected to be integrated into cell phones
and PCs. With cellular phones shipments at 700 million a year and PC shipments in the order of 200 million a year, one can
readily assume that VoIP port shipments will be at the billion unit market sometime in the near future.
Furthermore, with the explosion of VoIP phones will also come the
need for Internet service providers to build up their infrastructures to accommodate the large volume of VoIP traffic. Such
a buildup of infrastructure effectively has the potential to set in force the complete overhaul of the existing telecommunications
infrastructure that has been built up over the last 100 years.
The Semiconductor Market Prepares for the VoIP Updraft
Today, most industry analysts place the VoIP chip market as only a
few hundreds of millions dollars. However, the general consensus is that the market for chips will rise significantly
over the next few years - potentially into the billions of dollars. IDC, a market research based in Framingham, MA, for
example, pegs the VoIP chip market at $338 million in 2004 and expects VoIP chip sales to reach $1.7 billion in 2008. In-Stat,
another market research firm, reported in a May 2005 issue of Electronic Business magazine that the number
of VoIP ports will increase to 200 million in 2008. This compares to 52.9 million ports shipped in 2004. The major driver
is expected to be the home market. So far the majority of VoIP sales have been from businesses, which could afford to adopt
VoIP infrastructures to lower inter and intra company phone costs.
VoIP Chip Market Dominated by a Few – Smaller Companies
see Plenty of Growth
Many semiconductor vendors have their eyes set on the billion of dollars
of annual revenues VoIP headsets and associated infrastructure equipment are expected to generate. However to a large
extent, the foundation for the VoIP game has already been placed down. Texas Instruments already has laid claim to over 150
million port shipments and estimates that for the VoIP phone market segment, has up to 80 percent penetration. Legerity also
lays claim to 14 million port shipments. And Broadcom also has a major share. Our data indicates it has shipped chips into
millions of VoIP ports and continues to grow rapidly.
Among the runners up for the top ten VoIP chip positions include Agere
Systems, AudiCodes, Centillium, Conexant Technologies, Freescale Semiconductor, Infineon Technologies, Marvell Technologies,
Mindspeed Technologies, and PMC-Sierra. Mindspeed and Audiocodes VoIP sales are in the tens of millions and Centillium’s
sales are quickly rising to those levels.
Other notable VoIP chip companies include Silicon Laboratories, whose
SLIC was selected for inclusion into Huawei’s VoIP systems, and LSI Logic, whose DSP chip was selected by SyChip for
inclusion into a small form factor stacked VoIP module chip package. Rounding out the VoIP chip market players are Atmel,
Fortemedia, Tiger Jet and SOC Technologies
The DSP chip companies have a significant stake in the VoIP market,
in that DSP chips are fundamental to the implementation of DSP algorithms. Texas Instruments, long considered the DSP chip
leader, in part owes its dominance in the VoIP Market to its long respected DSP expertise and market share.
Putting it all Together – Chip Companies Interlace VoIP
Carriers to Cores
In order for a chip company to put together the pieces of a successful
chip development program, a chip company has to consider the right IP Cores to design into the chip, the right VoIP development
software to implement and be able to ensure that the chip will work in the system as well as meet the protocols and standards
of VoIP carriers.
Finally, a chip company needs a good reference design board that system
developers can use to integrate its chips, software and see if the design work correctly in an actual working environment.
Good reference designs reduce system product development time for both hardware and software aspects of a project. Good reference
designs also reduce the amount of software code needed to run a VoIP application.
Texas Instruments could be chosen as a role model for such a development
program. The company selected MIPS microprocessors core for integration into its chips, acquired VoIP development software
and silicon through the acquisition of Telogy Networks and works with Vonage, one of the leading VoIP carriers to develop
a chip that works throughout the telecommunications infrastructure.
The VoIP IP Core Market
In the VoIP IP semiconductor core market, MIPS Technologies has made
a number of agreements to strengthen its VoIP presence. ARM Holdings, another microprocessor IP company is also involved in
the VoIP market. However the number of ARM license wins that the PerfectDisplay has uncovered, falls short of MIPS’
licensees in terms of numbers and market leader integration.
So far to date, the ARM core has been reported to have been integrated
into VoIP products from Atmel, Broadcom, Conexant, Freescale and Marvell. MIPS Technologies cores have been reported in VoIP
chips from Audiocodes, Broadcom, Centillium, Infineon, PMC-Sierra, Texas Instruments and Toshiba. Broadcom's BCM1101, BCM1113
and BCM1115 have all been reported to contain the MIPS32 RISC processor.
In addition to RISC processor cores, DSP cores are also sought after
by VoIP chip companies. LSI Logic and StarCore are two of the successful companies in the DSP IP core VoIP market. LSI Logic’s
ZSP cores are integrated into the majority of Broadcom’s chips. StarCore’s DSP cores have been selected by Freescale
Semiconductor and Legerity for inclusion into VoIP chip solutions.
CEVA (NasdaqNM:CEVA) also offers DSP cores for the VoIP market, but
so far too date, no direct VoIP design wins have been uncovered. The company has partnered with Acoustic Technologies, Floreat,
GAO Research, and Vocal Technologies in the VoIP arena and also has a a line of DSP cores and reference designs for the specific
development of VoIP systems and chips.
Ittiam Systems, based in India, is also in the VoIP core market. The
company works with companies to provide DSP based solutions for VoIP systems. Such solutions include the development of HDL
IP and C core models as well as system level design.
The VoIP Chipware Market
There are also a number of companies that provide chip makers the
necessary software to empower VoIP applications. Specifically Global IP Sound, Hellosoft, SPIRIT DSP, Trinity and Unicoi have
all reported software development activity with VoIP chip companies. .
Analog Devices and Freescale both have partnered with Unicoi to develop
a VoIP Reference Design, which Unicoi released in April of 2004. Infineon licensed Global IP Sound iLBC codec.
In January of 2005, MIPS Technologies along with D2 Technologies,
Hellosoft, RADVISION and Trinity Convergence jointly announced a solution for the low cost development of VoIP products such
as gateways, Voice over Wireless LAN phones and terminal adaptors.
Texas Instruments, works with its own Telogy Software to provide the
software to implement VoIP solutions. Telogy Networks, which is a Texas Instruments Company, integrates its Telogy software
with Texas Instruments chip for the development of Voice over IP, Fax Over IP and Data over IP applications.
QSound Labs, Inc. (NASDAQ:QSND), a provider of software, with its
financial report in August of 2004 reported that it anticipates VoIP revenues to commence in the second half of 2005.
Finally, SPIRIT DSP, based in Moscow, has licensed its DSP software
for VoIP chip applications. Among the chip companies that have licensed SPIRIT’s technology are Agere, Atmel, and Texas
Instruments. The company has also licensed its software to a number of system level companies. The company claims that its
software is used to power over 50 million voice channels.
Who Buys VoIP Chips – Working Through the Telecom
The semiconductor companies develop their VoIP products for a variety
of different end-products from telecommunications equipment manufacturers and consumer electronics companies. One of the primary
products telecom equipment companies offer are VoIP phones, both wired and wireless for the consumer. However, these companies
also provide both access point and central office VoIP equipment.
Besides VoIP phones and analog terminal adapters, telecom companies
are adapting modems, PBXs, gateways and router equipment for Internet voice connectivity and switching. The cable television
communications network is also being adapted for voice communications. For that market, companies such as Texas Instruments
and Mindspeed have developed chips and software that allow for voice based telephone calls over the cable television communications
network. Yet to come are powerline modems, which offer VoIP capability.
The infrastructure of the telecom market that semiconductors sell
their chips into is complex. Large VoIP service provides, such as Vonage, besides offering low-cost VoIP telephone services,
also are involved in the qualification and development of telecom equipment, although often indirectly. For example, Texas
Instruments, which has a long-standing relationship with Vonage, has developed telecom products with telecom equipment companies
to ensure that the equipment will work over the Vonage network. Vonage is well-funded company, which has activated over 1
million VoIP lines. In 2005, it obtained $200 million in funding and may go public. A public offering at Vonage could bring
large amounts of money into the VoIP market and greatly accelerate the adoption of VoIP in the consumer market.
It is often difficult to discern if a telecom company actually manufacturers
telecom equipment. Often, the large telecom companies provide equipment through third parties. With both third party hardware
and software, the large telecom companies will install complete networks at corporate campuses and other business institutions
such as hotels – retrofitting them with everything from VoIP PBXs, switching equipment, phone terminals, and cabling.
Among the most notable telecom companies are Avaya, Nortel, Cisco
Systems, Siemens, Vonage, Mitel and NEC. Others that have significant VoIP market shares include UTStarcom, and TCL Communications,.
U.S. Robotics also has recently announced that it plans to enter the VoIP equipment market.
A definitive way to determine which telecom system companies actually
manufacture systems based on chips is to look at VoIP customers of VoIP chip companies. Find below a listing of companies
that have been reported as VoIP chip customers.
TABLE: VoIP Chip Companies and Their Customers
Agere Systems: Nortel, UTStarcom
Atmel: Cisco Systems, SENAO International
Vonexus, Texas Instruments (Marketing Agreement)
Broadcom: Alpha Networks, Ambit Microsystems, Hitachi Communication
Technologies, iCableSystem, Inter-Tel Incorporated, Iwatsu Electric , Moimstone, NEC Infrontia, Scientific-Atlanta, TCL Communications,
Centillium: NETGEAR, Uniden America Corporation, UTStarcom (Agreement)
Conexant Systems: Aztech Systems,
Pirelli Broadband Solutions
DSP Group: Westell Technologies
IXYS (Clare Division)
Legerity: Amrivox Ltd, ARRIS, VOCAL Technologies,
LSI Logic: SyChip
Micro Linear: Uniden
Mindspeed: Harbour Networks,
Huawei Technologies Co., Ltd , Siemens Communications Inc., Teleca, TelcoBridges, Vierling Communications GmbH, Viking Interworks
Silicon Laboratories: Huawei Technologies Co
GmbH: VOCAL Technologies
SMSC: VOCAL Technologies
Texas Instruments: 3Com, Alcatel, Arris, AudioCodes (agreement), Cisco
Systems, Ericsson, General
Bandwidth, LG Electronics, Mitel, Motorola, Netgear, Nortel Networks, Pace, Quintum Technologies,
Siemens, Sonus Networks, Terayon, TCL Communications(Joint Development), Uniden America,
Viseon, VOCAL, Vtech
An examination of who the semiconductor companies are selling
their products to can give also give one a good idea of whose got the VoIP phones, gateways, servers and access points. As
well, it can help determine the positioning of chip companies with VoIP venders.
From the list above, it can be seen that Texas Instruments and Broadcom
have reported the most customer accounts over the last year, which lends credence to recent market research reports that indicate
Texas Instruments and Broadcom have the major percentages of market share. The increased customer activity at Broadcom is
also indicative of improved market share at that company.
System Manufacturer Market Data
ARRIS is a leader in VoIP cable modem market, which include its Touchtone
series embedded multimedia terminal adapters. In June 2005, ARRIS reported that it had shipped over one million of the units.
During the first quarter of 2005, the company had shipped over 334,000 of the units.
Avaya Inc., with first quarter 2005 revenue of over $1.2 billion,
reports that it designs, builds and manages communications networks for over 1 million businesses, which includes hotels.
Avaya does offer equipment and has worked with integrated circuit companies, such as Intel and Broadcom, for its product development
Huawei Technologies Co., Ltd. is another large telecom company, but
it focuses on China’s telecom market. The company designs, develops and manufactures telecom equipment. The company
employs over 22,000 people and had sales in the order of RMB31.7 billion in 2003. There are about 8 RMB to the dollar.
Nortel Networks has a vast VoIP collaboration program that involves
over 120 companies. Companies that are involved in the program to further the adoption of SIP includes semiconductor companies
and a wide range of telecom equipment companies.
Table: VOIP Equipment Companies
Huawei Technologies Co
Pirelli Broadband Solutions