Logical outcome: PLD maker Xilinx has gained market share in a down market, but the future remains hazy - News - Interview

Electronic News, June 3, 2002 by Ed Sperling

Electronic News sat down with Wim Roelandts, president and CEO of Xilinx, to discuss everything from the state of the economy to why a down cycle favors outsourcing and where programmable logic fits into the equation. What follows are excerpts of that interview.

Electronic News: Are you seeing any signs of a recovery?

Roelandts: At the moment, what we're getting is a mixed signal. We had a very strong quarter last quarter. Our bottom was reached in September [2001]. We grew 2 percent in December and 20 percent in March. There were some special circumstances that explain this 20 percent. But even without those special circumstances, we would have grown 10 percent. So from that point of view, we are pretty happy. And it's pretty typical that programmable is the first out of the chute. The thing that worries me is that our customers' business is still weak.

Electronic News: Is that largely the communications market?

Roelandts: It's in general. I just spent time in Europe with 15 customers. Their business isn't going down anymore, but it's not improving. That's worrisome because long term our success is based very much on our customers' success. But I'm not especially worried yet because our success is based on customers developing new designs. My hope is that these products will go into production and generate revenue over the long term.

Electronic News: Let's break apart your business a little bit. How much of your business is in Europe, how much of it is in Asia and how much is in North America?

Roelandts: Just over 50 percent is North America, which is the United States plus Canada. Europe is 24 percent. And the rest is Asia/Pacific, and it's roughly evenly split between Asia and Japan.

Electronic News: How about from a market segment standpoint?

Roelandts: About two-thirds is communications. For us communications is a whole spectrum, including everything from optical transmission to home networking. High-end computers, which is servers and mass storage devices, is about 15 to 20 percent. The remainder is industrial electronics, which is measurement equipment, robotics, medical electronics and also a little bit is military--roughly a couple percent.

Electronic News: Given the fact that two-thirds of your business is based on communications, what will spur this market back to life?

Roelandts: There are several pieces. Today, probably the least bad is wireless, although wireless is also weakened. But it's not doing as badly as optical transmission, for example. The trouble with wireless is we're still in this 2G to 3G transition, and we're in the early stages. You sell some equipment, they build some parts and test them, and then you don't sell anything for awhile. But our impression is that it is accelerating. There are more and more trials taking place and new products coming out. I still believe that 3G is going to be an important part of our business.

Electronic News: Isn't that largely confined to Europe?

Roelandts: No. What I call 3G is actually CDMA. There are CDMA networks in the United States also. I call it 3G because it's really the same technology. CDMA, wideband CDMA, CDMA 2000--these are the three standards used in the world. It's largely the same technology. In fact, Europe could lose the lead it has today in wireless. If you go back to the first generation of wireless, the first generation was in the United States. Because it has a big installed base, the United States didn't make the change to digital at the same rate. Europeans jumped on GDSM, which is second-generation wireless. I think it could be that Korea or Japan will be the leader in third-generation wireless.

Electronic News: So will they be the leaders in implementation or manufacturing?

Roelandts: I think it's both, but certainly in implementation. Japan has already deployed a 3G network by DoCoMo. Korea has used CDMA. That is deployed already. They have the phones. With these first deployments you get the expertise. You know what works and what doesn't work. The Japanese and the Koreans are gaining that expertise at the moment, and the Europeans are not.

Electronic News: Does that leave Xilinx at risk from competitors in Japan and Korea?

Roelandts: Not really. Our competitors are American companies. There is really no Japanese company doing programmable logic--or European company, for that matter. The real competition for us is when these guys move to ASICs down the road, which they probably will do with real high-volume sockets. For us, it's just part of the normal way to do business.

Electronic News: So what other segments are doing well in communications?

Roelandts: Home networking, cable modems, DSL modems and also wireless communications in the home. There's a lot going on in that market, particularly here in the [Silicon] Valley where most homes have more than one computer and are linking them together. There's also activity in using the power lines for data. The third area that's doing relatively well is in the area of metropolitan area networks, which are what I call the middle mile. This is some-thing that businesses need, and they're willing to pay for it, and it's something that you have to do for every metropolitan area. I think this is an area with an oversupply at the moment.