Oak builds CE business target-1/3 revenues from consumer electronics

Electronic News, Nov 2, 1998 by Peter Brown

sunnyvale, calif. -- Oak Technology is placing a substantial amount of investment and importance in its consumer electronics (CE) business unit with the long-term goal that CE will account for one-third of the revenues generated by the company.

This strategy, coupled with other contributions from Oak's optical storage business unit and Pixel Magic subsidiary, should make up the bulk of the company's revenues and product focus for the foreseeable future, said Paul Vroomen, president of Oak's Consumer Group.

Oak will today begin making this CE push a reality by introducing two reference design platforms targeted at the consumer electronics set-top box and DVD markets. Dubbed the Atlanta and Access platforms, the designs are based on Oak chips combined with everything the company claims OEMs need to begin shipping digital television (DTV) set-top boxes and DVD player systems.

Laying Concrete

To make CE a considerable business for Oak, concrete business strategies had to be put in place to grow the business in the right direction. One of the plans is to introduce reference design systems for all of its products in the consumer space, a method that has been used extensively by others, including microcontroller/DSP maker Zilog.

This means developing almost all of the consumer applications to the point of production-ready status, said Mr. Vroomen. This also is a way for Oak to increase its margins without having to use BiCMOS or another non-standard manufacturing process.

These reference designs will include Oak chips as well as the necessary accompanying application software and microcode to minimize the time to market requirements for CE applications. This move would also be a way for the company to drive down system cost through continuous cost reduction of the reference designs.

"We looked at where the CE and DV markets are headed in five years and found that more and more OEMs are demanding high levels of support and integration," said Mr. Vroomen. "If we focus at the system level and bundle a reference design with everything that's needed to get a CE application up and running, this helps our support function and will help us increase our margins because what we are selling has more value."

One of the decisions that has been made by the CE business unit is that Oak cannot compete in the PC space due to Intel's decree to do everything in the microprocessor and to have software enable all CE applications surrounding it. That leaves very little room for any CE device to be integrated even as an add- in board, Oak said.

Only Optical In PCs

In fact, only Oak's optical storage division is developing products for PCs. This may be half the reason the company ended its development of audio and graphics earlier this year (EN, Feb. 2). Now instead of PCs, the company will focus on the very different, very competitive CE market where everything is not done in one chip, at least for now.

"It's not an easy market by any means but it has more potential than going against Intel," noted Mr. Vroomen. So Oak is concentrating on more complex chips that do more and last longer rather than creating chips that need to be changed every other year. With the correct portfolio and designs, companies will be staying with the same chip for a number of years given the programmability and complexity factors, said Mr. Vroomen. "That gives us an advantage over others who are just looking at the near term," he added.

However, Oak needs to pull its hinges up and regain its footing in the market first. The company has been wrought with product cancellations, business reformations and employee layoffs or exits. Industry observers agree the formation of the CE business unit and its strategy are good starts, but the follow up and execution of that strategy is what is needed for the company to regain (and retain) some of the OEMs it has lost due to the competition.

The consumer business unit was formed in January after pooling together various resources from within the company in April and May. Oak took resources from its audio, graphics and other fledgling businesses that the company had moved away from, and folded them into the consumer products business unit. This included the intellectual property gained from the Odium acquisition from Hyundai Electronics America (HEA), in April (EN, April 27). The business unit also includes the assets and resources from Oak's U.K. design center in Bristol, England, also acquired earlier this year.

Sparks From Odium

Under terms of the Odium deal Oak received a MicroSparc license, access to QAM and QPSK technology that the company had been wanting for a while, and a team of engineers that knew the technology.

From its subsidiary in the U.K. it was able to get VSB/COFDM technology and from Oak's optical storage business unit it got the DVD technology. This all added up to the company developing chips that were common in nature and only needed to change at the front end. The back-end for the most part was relatively similar. QAM and QPSK are used in cable and satellite set-top boxes, respectively, while VSB/COFDM is used in terrestrial set-tops.