Freescale Semiconductor’s Memorable Achivement

Remember MRAM, the memory technology that was going to rule the market? It has moved out of the lab and into a commercial product, finally. The award for being the first company to mass-produce MRAM goes to Freescale Semiconductor, which began cranking out MRAM chips last week at its Arizona plant.

MRAM, or magnetoresistive random access memory, has some fabulous qualities, including faster read and write speed than dynamic RAM (DRAM) and flash memory. Yet it’s able to hold the data when the power is turned off, something that static RAM (SRAM) can’t do. Erase and re-write data over and over without limits? MRAM can do that, too. “This is a significant technical accomplishment for us,” says Saied Tehrani, director of the MRAM business at Freescale.

That’s why when various semiconductor companies, including IBM, began developing MRAM technology more than a decade ago, they aimed to create something that could replace other types of memory. The DRAM market alone is worth roughly $26 billion.

But MRAM hasn’t hit the market as quickly as expected. That’s partly because of the usual development hurdles, such as making sure the chips could be reliably manufactured in large quantities. It’s also because advancements in other memory technologies have curbed the need to introduce an alternative.

Freescale’s chip is more expensive than DRAM or flash, both of which are found in computers and portable gadgets like MP3 players and cell phones. It’s not cheaper than SRAM, either, but it can compete in speed and doesn’t need a battery to keep the data in storage.

Freescale, based in Austin, Texas, is marketing its 4-megabit chip, MR2A16A, to makers of storage and network equipment, game players, and printers. The chip maker won’t name its customers, which are expected to begin selling products in the next few months. The company, which is a major player in the automotive business, also plans to improve its chip design for that market. Its chip runs on 3.3 volts and has a read and write data speed of 35 nanoseconds.

Freescale’s success at selling MRAM will help to determine whether this new technology can find a broad market acceptance. Cypress Semiconductor sold its MRAM business last year, and its CEO T.J. Rodgers said MRAM would remain a niche product because it could not compete with SRAM in pricing. But hopeful MRAM advocates remain, including Crocus Technology, a French startup that raised $17 million from venture capitalists such as Sofinnova Ventures and Ventech last month. While it can no longer hope to be the first to crank out MRAM chips, Free-scale’s achievement will create a market for its products.

Contact the Writer: UWang@RedHerring.com

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Sun Serves It Up

Everyone loves an underdog. And in the market for the networked computers that power the Internet, there’s been no bigger underdog for the past five years than Sun Microsystems. It finally looks like there’s some fight left in the old hound. In a report last week, Sanford Bernstein analyst and longtime Sun skeptic Toni Sacconaghi upgraded Sun’s shares to “market perform” from “underperform,” noting that “positive change is afoot at Sun.”

The biggest change: three new servers that offer something fresh in the fast-growing market for servers based on “volume” servers, which are sold in large quantities. Now, rather than playing catch-up, Sun is looking to solidify what could be the start of a turnaround. After losing market share to IBM, Hewlett-Packard, and Dell for years, Sun experienced 5.8 percent year-over-year revenue growth and increased its overall market share to 10.8 percent from 10 percent in the first quarter of 2006, according to market research firm IDC.

Sun seems to have done this by finding a way to exploit the trend that has plagued it for years: cheap chips and cheaper software. Sun’s latest effort to push into the low-cost “volume” server category long dominated by HP and Dell came in September of last year, when Sun introduced a fresh generation of servers built around AMD’s Opteron processors, dubbed Galaxy. That injected Sun into a slice of the server market that has grown 6.3 percent year-over-year even as overall server sales declined.

Now, Sun has gone from joining the trend to amplifying it, looking to add more power and flexibility to designs built around AMD’s processors and its own free, open-source operating system. Sun’s new X4600 can pack in as many as eight of AMD’s dual-core chips at a time. Add AMD’s upcoming quad-core chips to the mix, and Sun asserts that the X4600 can tackle some very toughs tasks. Sun is also jumping back into the thick of the market with its new blade server, a category where sales have grown 43.4 percent year-over-year, according to IDC. And then there’s the Sun Fire X4500, which mixes heavy-duty storage and computing capabilities. Ideal for serving up video.

Sun’s competitors, of course, say they’re ready. In a statement, HP said it doubted there is a market for systems like Sun’s eight-processor server, questioned the quality of Sun’s blades, and said Sun’s Solaris operating system is not as popular as Linux and Windows.

Sun, however, finally seems to have some answers. While Linux is growing fast, Sun can now boast that it has distributed 5 million licenses to its free Solaris operating system over the past year. Plus, Sun’s machines are as capable as anyone’s at running Linux. And Sun—long known for being big on bluster—already has a heavy-duty reference customer for its new machine, working with AMD to build a supercomputer at the Tokyo Institute of Technology. The machine has already been named Asia’s fastest computer.

Contact the Writer: ECubarrubia@RedHerring.com

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Feeling Chipper

Call it the ultimate leading indicator. When electronics firms feel bullish, they buy more semiconductors. And when semiconductor companies feel bullish, they buy equipment.

Global semiconductor equipment sales will grow 18 percent in 2006 thanks to strong demand for consumer electronics, Semiconductor Equipment and Materials International said last week. Revenues could reach $38.81 billion, which represents a sharp contrast from the 11.3 percent decline in 2005, when sales hit just $32.98 billion, according to SEMI.

Growth in China and demand for memory for cell phones and consumer electronics are driving much of the upsurge. Japan continues to be the largest chip equipment market—its chipmakers are expected to invest $8.90 billion in machinery in 2006. Taiwan, North America, and South Korea ranked second, third, and fourth, respectively. But the award for the fastest-growing market goes to China, which is expected to increase its equipment purchases by 78 percent. China remains a small fry in the chip-making world, however, representing only 6 percent of the equipment market.

Consumer electronics is another trend. Equipment to make memory chips, particularly DRAM and NAND flash, is driving growth in 2006, according to Gartner. Strong demand for consumer electronics has boosted memory chip sales. Increasingly, consumers want to store more of their favorite songs and videos on their portable music players, personal computers, and cell phones.

Those trends have led to a boomlet for companies selling gear to manufacturers throughout the semiconductor supply chain. The SEMI forecast showed that the wafer-processing equipment business would see sales increase by 20 percent to reach $27.4 billion this year. Assembly and packaging equipment makers can expect their revenues to increase 11.6 percent to $2.4 billion. Test equipment manufacturers should experience 14 percent growth to $6 billion.

The rosy forecast has some analysts worried about chipmakers building too much capacity, which could lead to idle production lines and a buildup of inventories next year if market demand weakens. Equipment makers expect sales to be flat next year, said SEMI. Gartner, on the other hand, is predicting a 4.5 percent drop in 2007. So what is this leading indicator telling us? Enjoy the party while it lasts.

Contact the Writer: UWang@RedHerring.com