Microchip in PLD market with ATS buy

Electronic News, July 1, 1996 by Peter Brown

Chandler, Ariz.--With one fell swoop, Microchip Technology launched itself into the programmable logic marketplace by signing a purchase agreement last week with ASIC Technical Solutions (ATS).

The cash agreement required that Microchip pay $2 million up front and, after the turn of the century, pay an amount that is based on the sales and revenue ATS generates for Microchip.

"ASIC Technical Solutions represents another critical step in expanding Microchip's product breadth for embedded control applications," said Steve Sanghi, president and CEO of Microchip. "Utilizing ATS' superior process expertise and proven integrated circuit knowledge of masked ASICs, Microchip can effectively take advantage of this market opportunity."

ATS manufactures the QuickASIC array family that replaces field programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs) with a masked application-specific integrated circuit (ASIC) at a reduced price, making them cost competitive with CPLDs and FPGAs, said Microchip.

"As the marketplace for programmable logic increases and customers start targeting designs that use FPGAs and CPLDs, this option will become attractive, " said Joyce Putscher, In-Stat senior analyst.

Kash Johal--former CEO of ATS, now director of Microchip's ASIC product division-- said: "Joining forces with Microchip significantly expands the integral infrastructure required to meet the technical features, speed and process technology for programmable logic devices."

The purchase of ATS allows Microchip to enter the gate conversion programmable logic marketplace and into direct competition with Orbit Semiconductor and Chip Express. According to Microchip, the agreement will give customers the opportunity to combine Microchip's RISC-based PIC16/17 microcontroller core with configurable gate arrays, which the company says will provide a wide range of functionality to the customer.

"You always are going to see competition out there and we feel that we (Orbit) will continue to grow because of the services that will keep us in the limelight in that type of business," said Gary Kennedy, president and CEO of Orbit. "I am sure ATS and Microchip will have strengths for them, as we do. One will just have to keep abreast of it and come out with new products to service their customers."

A spokesman for Chip Express said the entrance of Microchip into the marketplace "will not impact our market share or advantage in the industry." Chip Express said that with its one-mask applications and laser technology, it has a firm grasp in the industry and does not see Microchip "posing any threat to us."

Microchip said they will announce a product roadmap in 3Q of this year as well as introduce new members to its QuickASIC family. ATS will continue its relationships with its customers, Microchip said, including Analog Devices, Hewlett-Packard and Xerox.

Mr. Sanghi claims the company can roll out prototypes in approximately two weeks and depending on customer approval can be in full-volume production in four weeks. Microchip estimates the FPGA and CPLD market will grow to $5 billion by the year 2000, and is currently near $2 billion. The gate conversion market is said to be approximately $100 million of that amount growing to what Microchip claims $1 billion by 2000.

"We are going after the jugular of the FPGA market. We are going after quick prototypes and quick time-to-market," said Mr. Johal. "We feel we can become the dominant supplier in this marketplace by delivering better price-performance point along with Microchips' fabs and worldwide sales force."

Previously, ATS relied on Asian fabs to produce its QuickASIC designs and had a sales force predominantly in northern California, said Mr. Johal. Microchip has two fabs in Tempe and Chandler, Ariz., that ATS will use for its technology

There will be no personnel changes to ATS besides Mr. Johal's new title. ATS personnel will remain working out of San Jose in ATS' facility, said Microchip.

"We are a very fast-growing company," Mr. Sanghi said. "We have the capability to produce up to $800 million in sales out of our foundries."

Microchip had sales of more than $286 million last year and has grown in revenue for the last four years, according to Mr. Sanghi. For the last two years, Mr. Sanghi said the company has grown 50 percent in sales. ATS' sales were approximately $4 million last year.