Infineon, Intel set to spar: two competitors go after communications ICs - News

Electronic News, June 10, 2002 by Gale Morrison

ATLANTA--The field of established, smaller communications IC players around the world can only hope Intel and Infineon wipe each other out in their quest for communications dominance because, judging by their stated intentions during last week's Supercomm show here, they are serious.

"We're a quiet giant in communications," said Thomas Seifert, senior VP and general manager of Infineon's Communications business group. "We've got a different momentum than any other company in this space because we've aligned ourselves with the leaders ... with Cisco, with Alcatel, with Huawei and ZTE in China. We're a one-stop shop and our internal capacity is a very strong selling point. Once volume picks up, we can assure supply, and the others can't."

Referring to Intel, Seifert said the microprocessor giant needs to watch out for Infineon. "We're preparing a very serious move this year deeper into communications," Seifert said. He and other executives, Cherie A. De Lacy and Christian Scherp, sat down with Electronic News at the show.

Infineon is manufacturing on 300mm wafers in Dresden, Germany, and Taiwan and is ready for 300mm in Richmond, Va., and Singapore, he said. This capacity will turn out CMOS and silicon germanium (SiGe) transceivers for speeds up to 40Gbits/sec. and reams and reams of xDSL silicon, he said.

De Lacy is Infineon's new VP of business operations for communications products in North America. She has 22 years in the industry, most recently with Texas Instruments and with Mitsubishi, where she concentrated on Cisco. Scherp is VP of marketing at Infineon's optical networking business unit and helps run Infineon's optical network R&D in San Jose.

This year Intel got very serious about optics, too, with acquisitions and key venture investments. That put Infineon on notice. "We're not dismissing Intel," Seifert said. "They are a dangerous competitor, and we take them very seriously. Anybody with $50 billion in cash you have to take seriously.

"But are they established? Not yet," he added. "We are watching PMC-Sierra, AMCC, Broadcom, Globespan, Agilent and, on the fiber optic side, Agere. Intel has what we call a 'me too' strategy, and that's not going to work."

Intel will tell you different. The company is definitely putting its considerable money where its marketing is. "It's like a bike race," said Anthony Ambrose, director of marketing for the Intel Communications group. "You gain position going up the hill. And Intel is going to do that. Now, we've got a couple of years of heavy climbing ahead of us; we're clearly in a heavy-lifting phase in the industry right now, but we'll pass the other riders," he said. "We're the guy in the yellow jersey. Watch him," he added.

Intel is obviously intense in its determination to rule communications, even if it lags behind Infineon. Last week the company talked up its 90nm process technology and its plan to see that Intel can engineer-design and manufacture -- all manner of communications-ready megachips of 50 million transistors and more.

The company sees this manufacturing node giving it the transistor budget for communications interfaces, essentially for free. "There are thousands and thousands of people touching this program," said Eric Mentzer, VP and CTO of the Intel Communications group. "Ninety nanometer represents the merging of computing and communications ICs. This will be the unifying technology for us," he said. R&D is working furiously, he added, to see that Intel can design and manufacture digital and analog, including their different voltage requirements, on the same huge single die.

The company estimates it has spent $20 billion on its current logic capacity, and it is loudly promising excellent return on investor capital from its devotion to communications. Communications accounted for 17 percent of 2001 revenue, which was an aweinspiring $27 billion dollars, or about three times the size of its next-largest competitor. There has been some question of whether the inclusion of Intel's flash memory products in that figure makes for a fair comparison, but, still, the presence is substantial. Infineon's sales figures totaled about $1.3 billion on communications products last year, or about a third of its overall revenue.

Certainly, the communications IC dynamics are going to change for all involved as Intel and Infineon--with high-end manufacturing capacity and huge engineering organizations -- get more and more serious about the space. That is already happening. Investors are hammering pure communications players who don't own their fabs, with their stock prices wobbling in the single digits.