Here are some interesting comments from Semico's overview of the new report.
Network Processors: A Dose of Reality
Network processors perform an important role in intelligent packet processing and this is indeed a high-growth segment of the semiconductor market. However, some of the "irrational exuberance" of the heyday of the communications explosion, as Alan Greenspan so famously framed it, has been tempered in the last two years. Our forecast is significantly reduced from previous ones in this segment and is in fact rather conservative even as compared to other contemporary forecasts. This report will delve into the reasons for the Semico Research viewpoint.
There has been a tremendous amount of consolidation in this market segment and it's not over yet. A number of companies previously studied have failed. Acquisition became a desirable and successful exit strategy for several start-ups but many simply closed their doors. We expect that both acquisition and failure will continue for the next couple of years as this market matures.
The winners of the network processing unit (NPU) market share battle are largely the usual suspects - AMCC, IBM, Motorola, Intel, and Agere. It is no coincidence that these are the heavyweights of the NPU world in terms of being broader line semiconductor suppliers. AMCC and Agere are probably the most specialized of the group although they certainly have broader offerings than simply NPUs. The inability of start-ups to succeed in this market is both a reflection of the investment needed to sustain a market presence - estimated to be around $50 million annually - and the reality of supplier consolidation by the communications systems OEMs. This leaves little room for start-ups, except in the occasional case of a particularly compelling technology.
One of the most visible trends emerging in the last year in network processing, and in communications processing overall, is the integration of security, including cryptography, into the processor itself. While this was previously an adjunct function handled by a security processor, more designers are bringing security onboard the primary processor. Security functions are used not only in the sense of a nations or a corporations security, which in the current environment may come immediately to mind, but also in virtually every transaction that takes place electronically. The increasing pervasiveness of electronic transactions is perhaps the single most important driver of the development of demand for network processing. We also expect that coprocessors, classification engines, and other specialized processors will increase their share of the total revenue.
Copyright 2003 Semico Research Corporation. All rights reserved. Reproduced by WindowsForDevices.com with permission. 
