Chip capacity tight; No DSL shortages

"Right now our capacity is all taken up, and we don't have enough," Jiang Shangzhou of SMIC tells Reuters. Ulrich Schumacher at Grace Semi has been operating at 100 percent capacityLantiq_logo since September. Mark Lapedus in EE Times writes "Not long ago, chip makers could not buy an order amid the terrible downturn. Now, amid the upturn, there are widespread reports of component shortages in the supply chain." Memory chip prices are actually going up, with Samsung doing particularly well.

My checks across the industry suggest things are not nearly that intense. Don't panic. Everyone has to carefully plan, but it's rare that an order that ordinarily would be filled in 30 days is delayed. Demand for DSL chips is good but not enough to seriously strain supply. Chip demand is ultimately driven by sales of the product that include chips; the world economy simply hasn't expanded that much. It's far more likely the industry situation was caused by companies in previous quarters conserving cash by keeping inventories low and now catching up. John Pitzer of Credit Suisse is strongly optimistic about semiconductor stocks, but also notes "there is double ordering in the current environment." Digitimes reports wafer prices are up, but we're talking perhaps a dime a chip, not huge price increases that need to be hedged. broadcom_logo

Several times I've watched forecasts of chip shortages become self-fulfilling prophecies. Companies double and triple order "just to be safe." The splash of orders creates a real bottleneck and then chaos when things catch up. I call it the "Johnny Carson" problem. The TV host made a joke about toilet paper shortages on the east coast of the U.S. The next day, everybody bought all they could and there (temporarily) was a real shortage.

DSL net new subscribers are down, but most of the chip demand comes from customers switching to a new carrier and getting a new modem. Wherever competition is strong, modem chip sales are likely doing well. In addition, several very large networks, starting with AT&T and BT, are upgrading from ADSL to VDSL Written by Dave Burstein


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Finally: AT&T femtos

femtooysterRandall Stephenson will put 10M AT&T femtocells across the U.S., I reported in 2008. He told Wall Street that a half-billion dollar investment in femtos would save him the equivalent of $3B in spectrum. They've now officially launched, but at a high price ($100-150) to limit early demand. Cisco is selling femtos to AT&T for about $50 (very large quantities). They save bandwidth (think reducing iPhone problems) and make customers happy, so T's logical strategy is to include a femto in most bundles. 2Wire, part owned by AT&T, discussed a gateway with a femto included three years ago.

Checking with parts suppliers I'm finding that including a femto will only add $20-30 to the cost in the near future, and be a natural to include with every U-Verse order. T has invested in their chip supplier, picoChip, rapidly introducing integrated chips that bring down the cost. Randall has a powerful incentive to move quickly after they resolve the last few bugs; wall street is downgrading for reputation issues due to iPhone problems,

4-10 devices can connect via each femto. Think several phones, the meter for the smartgrid service, electric appliances to switch on or off for automatic energy savings, and others not yet dreamed of. No one is doing it yet,

but the range of 50-250 feet (typical) is enough to allow others nearby to log on and each call only requires 16-32K, only a minor imposition. AT&T will have a cloud across the country. So will Vodafone SFR in France and Softbank in Japan. Ivan Seidenberg gave me an encouraging smile when I asked whether Verizon will do similar, but no official comment. Stephen Lawson of IDG expects Verizon to wait on femtos until LTE in 2011 or 2012.

Femtos are incumbents' not-so-secret weapon to knock out wireless only carriers like O2, Sprint, and T-Mobile U.S.. Incumbents selling wired broadband can easily include a femto in the package, one more reason most people expect Verizon and AT&T to become even more dominant.

Kittur Nagesh of Cisco is enthusiastic about what's coming next. "Our femto is more than just for phones. Our customers will be able to connect smart electric meters, baby cams, health alert systems, and up to ten devices. The home security system can send you an sms if it detects anything."

Femtos still have technical problems, Bill Ray at The Register finds. �The joy of having coverage where there was none is hard to knock. Except when it's not working, of course. Our own Sure Signal box has been playing up for the last day or two, and Vodafone's forums are now awash with users complaining of intermittent connection failure.� It's still a new technology.
Separately, Ubiquisys put out a press release claiming a breakthrough by reducing the price to under $100, well above the $50 price I've previously reported AT&T was offered. The price to AT&T is a special bid for quantity millions, and I'm told is little more than the current price of the parts in more common quantities. Cisco and Cisco's suppliers made the choice to �forward price,� winning the crucial customer and hoping to make money over time. Alcatel did that with DSLAMs in the 1990's, winning the Bell orders by undercutting other bids by 50% and selling below cost. It worked out well, as the high Bell volumes quickly brought down the cost and produced a profit. 15 years later, Alcatel remains #1 worldwide in DSLAMs.Written by Dave Burstein


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2009: China up 22M to 104M and domination

Point_Topic_2009China added three times as many broadband subscriptions in 2009 than the U.S. and the 18M subscriber gap is almost as many as the total broadband customers in France or Britain. The ever-invaluable Point-Topic figures show Mexico and India surprise third and fourth. Argentina, Russia and especially Brazil are doing better than many realize, and Vietnam added almost as many subscribers as Italy or Britain.

China, India, and Russia all grew by over 20%. The U.S., Germany, France, Spain, Sweden, Belgium, and Italy all grew 7-10%; Britain and Canada were a little lower.
Japan, with 80% fiber availability, has the best built Internet in the world but only grew 3%. The 65% household penetration is comparable to Germany or Spain. Effective prices have gone up substantially in the last few years as the government has allowed NTT fiber to dominate after some of the most vigorous DSL competition in the world early in the decade. Japan has long had the most advanced mobile data devices; I suspect what's going on is that many Japanese are content with mobile.
Taiwan's 1% growth rate probably has a similar cause.
Many thanks to Point-Topic for allowing me access to their comprehensive data and their extremely easy to use tools. Compared to other market researchers, their prices are very reasonable. Written by Dave Burstein


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