As with DSPs and analog products, TI has long led in logic sales, but it now faces a stiff challenge from Fairchild Semiconductor International Inc. and perhaps ON Semiconductor Inc. as well.

TI's logic revenue plummeted from $884 million in 2000 to around $400 million in 2001. But despite the precipitous decline, the company's commitment to logic remains strong, according to Steven Hanke, director of worldwide marketing at the Standard Linear and Logic (SLL) business unit in Sherman, Texas.

"If you look, TI supports almost every [logic] product line, and we have either market leadership or a very strong position in each," Hanke said. "The overall logic market took a beating in 2001 and will likely be about half of 2000, down from $3.2 billion to around $1.6 billion. It really hurt us, and we definitely lost share. It's definitely got the attention of TI."

According to Insight Onsite, San Jose, TI controlled 37% of the logic market in 2000, while its main competitor, Fairchild, held 15% and claims to have increased that in 2001 to around 20%.

"Our goal is to be number one in logic," said Brent Rowe, director of marketing for Fairchild's logic business in South Portland, Maine. "When we broke out of National Semiconductor in 1997, we had about 13% share in logic, so the data would indicate we're on the right path."

History of commitment

TI has supplied logic devices for 25 years and offers about 20 families.

The company says its commitment to logic has been manifested in providing the broadest portfolio, a vow to remain the last supplier of any given logic product line, and expansion of its manufacturing capacity.

"You'll be hard pressed to find any other logic supplier that's investing as much in these product families," said David Hoover, TI's worldwide product marketing manager for SLL. "We remain committed to being the last logic supplier in each of these families."

Meanwhile, the logic market could be headed for a shakeout. Both TI and Fairchild point to ON, which last year discontinued its LS logic family and has been mired in financial difficulties.

"I think there's [going to be some] consolidation going on and both Fairchild and TI are the guys that are really putting some emphasis on this stuff and winning," Fairchild's Rowe said. "There are certainly some changes afoot."

Charlotte Diener, vice president and general manager of ON's standard component division in Phoenix, said the company "is in the logic business to stay." ON holds more than an 80% market share in ECL devices and is increasing its investment in mini-gates, VHC, and LCX, she said.

"It's been a rough year for us," Diener said. "When a market goes off the cliff, sales go with it. LS is an old technology and a shrinking market, and we had to figure out where we will invest our resources for the future. TI is absolutely the market leader in logic, and they may be able to afford to have older technologies in a shrinking market. We want to invest in growing areas."

Logic is a market requiring significant investment in various technologies to maintain individual families over decades, Hoover noted.

"I'm routinely asked how long is the average lifecycle of a product family," he said. "My answer is always, 'When the first one dies out, I'll let you know.' TTL has been around for 30 years and some of those devices are still some of the highest-volume products."

Obsolescence is among logic customers' primary concerns. OEMs fear having to shut down an entire production line because of the unavailability of a logic device costing pennies, Hoover said.

But TI will supply a logic device "until basically no one is buying the product," he said, and the company has established a two-year obsolescence process. Annually TI reviews each logic product line's revenue during the past two years, and determines which strategic customers may be using a device being considered for discontinuation.

When a decision is made to cut a device from production, notice is sent giving customers six months to place lifetime buys, and an additional six months to place all orders. TI then generally maintains some inventory for an additional year, Hoover said."We then work with them on transitioning to another product," he said. "With multiple products moving across the grid in voltage, drive, and speed, there's usually considerable overlap."

Good decision gone bad

The contraction of TI's logic business last year was fueled by an earlier decision that had paid strong dividends. Several years ago, the company decided to concentrate its efforts on developing and supporting its newer BiCMOS-based families such as ABT and LVT, which are used heavily in telecom infrastructure equipment.

"You could sell an ABT octal for 50 cents or an HC octal for 13 cents," Hanke said. "The costs to make those devices are not much different, so we concentrated on the 50-cent market. But the who's who of the telecom industry are on their butts right now and aren't selling any boxes. There was a bunch of ABT and LVT in those boxes and we had 80% to 90% market share."

A considerable amount of those logic devices remains in the hands of companies like Cisco Systems Inc., he added. "Cisco has written off billions of dollars of inventory, but they didn't throw it in the trash," Hanke said. "The best hope we have in that area is that the technology changes fast enough that they can't use the [logic] they wrote off when they begin building again."

EMS providers also accumulated excessive logic inventories in 1999-2000 through overly aggressive production estimates and acquisition strategies that left them with inventory some are still trying to fully account for, Hanke said.

"Step one to recovery is when they get rid of that pile of inventory and actually start ordering at their true consumption rate," he said. "That will be a great day. I do believe that by the end of the first half of the year, we will be well done with all inventory and will begin to see an increase in demand."