A big year with more integration

Electronic News, Jan 5, 1998 by Will Wade

Mountain View, Calif.--Communication is what powers the information revolution, and it is computer networks that are driving communication. The typical office computer can access a server across the country via the Internet almost as easily as it can download from a server in the next room. Sometimes, an average user isn't even sure from which server the information arriving on his desktop originated. And usually, he doesn't really care as long as the files arrive quickly.

The world is becoming increasingly wired. Corporate networks are linked to the World Wide Web, home systems dial up to the 'Net and wireless devices keeps people hooked up to the system even when they are not wired in. And this is what makes networking and communication one of the fastest growing segments in the semiconductor industry. This year will be another big year for companies that can come up with innovative ways to move more and more data across the global network faster and more efficiently.

"'The Internet has introduced a whole new mindset," said Vincent Schmidt, strategic marketing manager for network products at AMD. "People think they are only a click away from anything."

Mr. Schmidt says that only a few years ago, some 80 percent of data traffic stayed within workgroups of a company's local area network (LAN), and about 20 percent of the traffic was sent out to other destinations through wide area networks (WAN). Today, that pattern is reversed, and some 80 percent of data now winds its way across a WAN. Part of this trend is due to a wider range of information available to the public on the Internet, while another reason is that more employees are working on projects together from different sites.

However, it is clear that the line between the LAN and the WAN is growing fuzzy, with more corporate traffic being directed at some point across the public Internet, or through dedicated connections provided by third party carrier services. Gary Smerdon, marketing director for network products at AMD, says that one of the most exciting areas in the networking industry is addressing this convergence.

He predicts that edge switches--devices that direct data between the LAN and the WAN--will be a hot application in the next few years. However, these are tricky systems to design because they must follow several different network protocols. While the vast majority of LANs use some type of Ethernet architecture, moving beyond the LAN often means using ATM or some other high-speed format. And with more and more traffic sent through the Internet, IP switching is going to be very, very hot.

Mr. Smerdon says to look for chips and systems that combine different formats this year, along with higher levels of integration for the standard components of routers, switches and hubs. In the not-too-distant future, he also says to expect silicon to support data streaming, which will allow real-time video and voice over the computer networks.

Bandwidth Remains An Issue

Steve Perna, marketing director at PMC-Sierra, notes that bandwidth will remain a major issue this year. Not only will Fast Ethernet continue to rapidly become an important part of the LAN environment, he says the enormous installed base of Ethernet-based systems will help make Gigabit Ethernet a reality. A standard format for Gigabit Ethernet could be achieved toward the end of this year, which will go a long way to promote the high-speed system. "Bandwidth will always be in demand, either more bandwidth or more efficient use of the available bandwidth."

Mr. Perna says that Gigabit Ethernet may be fast, but it still has its limitations, especially for applications that demand data streaming. "The hype was that Gigabit Ethernet could do everything the ATM could do, with an Ethernet format at a lower price," he says. "The reality is that Gigabit Ethernet functions are more like a subset of ATM."

Mr. Perna also has observed the fuzzy line between the LAN and the WAN, and predicts that hybrid systems that work on both ends of the pipe will be a promising application this year. "This is really where the action is," he says. "Ultimately we will see order come from chaos."

Cost is also an issue for the networking industry. The fastest and most efficient routers and switches cost upwards of several thousand dollars. While large corporations could afford this, such prices have in the past deterred smaller offices from linking their computers. But in the past year, prices for both switches and hubs have nosedived, making networking an option for even the most limited budgets.

Higher integration of the basic switch and repeater components, along with extremely hot competition, have pushed prices for switches down low enough to nearly force repeaters from the market. "There's money in corporate networks, but there's a lot of discussion about helping the SOHO market," observes Robert Pepper, president and CEO of Level One Communications. "That's an untapped resource."

Mr. Pepper has followed the technology migration of repeaters, and now switches, as both have moved closer to the desktop and especially now, closer to the desktop at small offices. Small switches and repeaters with minimal management capabilities and designed for easy installation are becoming a big market, and even though they carry lower price tags and generate smaller profits, they gobble up a lot of silicon. They are also one site where chip manufacturers are pushing hard to integrate more functions into a single chip because it helps keep prices even lower.