Electronic Design
Logic Gives Xilinx Some Smart Choices

Logic Gives Xilinx Some Smart Choices

Xilinx, which engages in the design, development, and marketing of programmable logic solutions, has seen some significant growth over the past couple of years. After placing 29th on our 2009 list of the top electronics employers, it improved to capture ninth in our 2010 edition. Among OEMs, Xilinx jumped from 11th place in 2009 to second place in 2010, falling just behind Synopsys.

The company offers advanced integrated circuits in the form of programmable logic devices (PLDs); software design tools to program the PLDs; predefined system functions as intellectual property (IP) cores; design services; customer training; and field engineering and technical support solutions. The PLDs include field programmable gate arrays (FPGA) and complex programmable logic devices (CPLD), which customers program to perform desired logic functions, achieving greater design flexibility and cutting time-to-market.

As a “fabless” semiconductor company, Xilinx does not own or operate silicon wafer production facilities. Rather, it forms strategic alliances with chip manufacturers. This strategy allows Xilinx to focus on research and development, marketing, and technical support while having access to the most advanced chip processing technologies currently available.

67% of Xilinx’s sales are outside North America, and 47% comes from the communications segment. New products account for 36% of sales. In the PLD market, iSuppli estimates Xilinx holds a 52% share, with Altera its biggest competitor at 35%.

The company sells to OEMs such as Cisco, IBM, Raytheon, Samsung, and Sony as well as to electronic components distributors in the aerospace, automotive, computer, consumer electronics, medical, optical, networking, and communications markets.

Xilinx sells its products through independent domestic and foreign distributors, direct sales, a network of independent sales representative firms, and a direct sales management organization in North America, Asia/Pacific, Europe, and Japan. The company has operations in Ireland, Singapore, and the U.S., as well as sales offices worldwide. 

Founded in 1984, Xilinx is headquartered in San Jose, Calif. Its chief competitors include Altera, Actel, and Lattice Semiconductor. Unlike many other companies in the recession, it held the line in key areas, with a 0.9% dip in sales and in R&D funding from 2008 to 2009 as well as a 5.0% improvement in pretax income.

However, Xilinx did not publish its current 10K until June 1, so the data included in our rankings is fiscal 2009 (as of March 28, 2009) versus fiscal 2008. Fiscal 2010 (as of April 3, 2010) versus fiscal 2009 data shows no change in sales, an 8.0% loss in pretax income, and a 4.0% gain in R&D funding, though that gain was primarily due to increased expenses associated with the rollout of 40-nm products.

European sales were particularly strong during the first quarter of 2010, increasing 25% sequentially. Consumer and automotive sales increased 5% sequentially, driven by strength in automotive and audio/video broadcast applications. Communications sales are up, driven by strength in wireline and wireless communications. Industrial and other is expected to increase, driven by defense and test and measurement.

Across the semiconductor industry, the customer demand side of the business has been very healthy. This improved end market outlook is encouraging, as the new 65-, 40-, and 45-nm yields are poised to grow significantly. Backlog is up as well, as Xilinx is seeing continued strength from its Virtex-5 family, in addition to strong growth from its new Virtex-6 and Spartan-6 families.  

With increasing frequency, advanced technology node PLD platforms are replacing application-specific integrated circuit (ASIC) and some selective application-specific standard product (ASSP) solutions.

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While the demand side has been very strong, the supply side of the semiconductor business has been constrained, primarily by very tight foundry capacity. This has constricted the sales growth of some of the high-demand Virtex products. Generally these constraints have affected the Virtex-5 line, though there has been some tightness also in the Virtex-4 family. Even at 90-nm technologies, there is some tightness with the foundries, as they juggle their tools around to do different things and maximize output.

Even with a two-foundry strategy, both of Xilinx’s foundries have been very tight. On the pricing front, no substantial increases in wafer prices are being seen across the board. Yet neither is Xilinx seeing the decreases it had planned on and had been able to previously negotiate, as the foundries are trying to bolster their prices to some degree.

Lead times have stretched out, but generally are 10 weeks or less, with some Virtex-5 parts extending beyond this range. The second quarter of 2010 has still challenged Xilinx’s ability to deliver, given the healthy demand, but the company expects to see overall lead time improvement in the third quarter of 2010.

Even though all the Virtex-5 devices on order could not be shipped, this family grew by double digits sequentially, establishing another new record. In the second quarter of 2010, Xilinx expects Virtex-5 to increase again. The Virtex-6 and Spartan-6 families will build upon the success of Virtex-5. Both of these families have achieved full qualification and are now shipping in volume production.

In the second quarter of 2010, several of the company’s 3G wireless customers will take significant deliveries of Virtex-6 devices. Xilinx has been designing with Virtex-6 and expects to have its end products shipping in the coming quarters. As a result, Xilinx expects to see sales from this product family increase significantly.

With respect to its 28-nm Extensible Processing Platform architecture PLD products, Xilinx expects to announce pricing and availability in early 2011. The ARM-based architecture combines an ARM Cortex A9 processor with integrated 28-nm, low-power, high-performance programmable logic. It is a key element of Xilinx’s overall growth. Target markets include automotive driver assistance, intelligent video surveillance, industrial automation, aerospace and defense, and next-generation wireless.

During fiscal 2010, the Virtex-5 became the industry’s most successful product offering in terms of quarterly sales. For the future, Xilinx is banking on production of the next generation of Virtex-6 and Spartan-6 families, which began in fiscal 2010, and focusing on improving profitability significantly through a number of proactive cost-reduction and efficiency programs.

Xilinx also sees a very strong June in its wireless business, driven both by its European customer base, as well as by the China 3G phase IV business, which is starting to really ramp up. North America and potentially Western Europe continue to upgrade to 4G over time. India is also building out its wireless infrastructure. There is an insatiable demand for mobile bandwidth, with all of the new smart phones driven by data and video. It’s putting a strain on the networks, which continue to roll out new deployments and upgrades.

Automotive has been strong for the last three quarters. Some of that is the result of a healthier auto industry and some of it is increased market share, as PLDs supplant ASSPs.

Customers do not appear to be buffering inventory levels, and sell-through of new products looks strong. But with the recent foundry tightness and difficulties in lead times, there may well be some buffering going on with some customers to cover future demand.

Xilinx feels no shifts going on in the market vis a vis Altera, its main rival. Altera typically outgrows Xilinx in the first half of the year, and then Xilinx outgrows Altera in the second half, so no market share erosion seems apparent.

As 45-nm and 40-nm products grow and the price and power consumption come down, Xilinx can aggressively pursue new markets where FPGAs can replace ASICs and ASSPs, such as military or communications infrastructure. A lot of the ASSPs were designed at 130 nm, for example, and even at 90 nm, companies can’t cost-effectively take them down to smaller scales.

Displays are another potential growth area targeted by the 45-nm Spartan-6 product. The network infrastructure business has also come back strong, as companies are buying more equipment such as routers and data switches and carriers continue to grow their bandwidth “pipes.”

A final example would be in the motor control and industrial area. Customers used to typically use ASSPs in solid-state storage device controllers. Now, with the greater need for custom algorithms to improve energy consumption and motor control, they are using FPGAs instead, which are configured by the customer after manufacturing.

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