Keeping track of the global race in semiconductors once was easy. Japan dominated memory chips, and America had a lock on microprocessors. Then, electronics makers dreamed up an array of new products from digital high-definition TV and videophones to multimedia technology, which merges computers, TVs, and phones. Bringing these to life requires a new breed of powerful chips that capture, compress, and display moving images. "The need for chips that process images is going to become universal," says Masataka Hayashida, Texas Instruments Inc.'s worldwide consumer strategy manager in Tokyo. And the battle lines are being drawn in what could soon be the industry's fastest-growing sector.
The chipmakers are tackling one of the biggest engineering challenges of the decade. It takes blazing speed and vast amounts of memory to handle color video in a computer or digital TV set. In the digital language that computers use, a single still color picture takes up about four megabytes, or 32 million bits of data, more than the main memory capacity in most PCs. To create a realistic moving image, 30 such frames must be scrolled across the screen each second. Even powerful disk drives that can store months' worth of spreadsheets would be swamped by just a few minutes of full-motion video.
IN A FLASH. To cope with such demands, semiconductor makers are perfecting an array of different chips (chart). Specialized memory chips, called video RAMs, store images in the machine's main memory. Others use mathematical tricks to compress the image, manipulate it on the display screen, or transport it across a network. It all has to happen so fast that the human eye sees a smooth, moving picture.
The rewards for achieving such magic will be huge. Analysts foresee a giant market for chips that, working together, produce stunning results: videos that mix images, data, and animated special effects, or digital TV sets that make teleconferencing a living-room pastime. Sony Corp. Managing Director Masahiro Takahashi says chips could account for 30% of a $160 billion global multimedia market by the end of the decade.
For most chipmakers, this market is taking off just in time. Battered by the global recession, Hitachi, Toshiba, and Fujitsu have slashed capital spending for conventional memory chips, or DRAMs, and even idled some factory lines. But they're ramping up production for new video RAM chips, which store segments of whole images, rather than handling information bit by bit the way conventional memory chips do. Invented by Texas Instruments in 1983, VRAMs--used in workstations, high-powered game machines, and some PCs--will be a $636 million market this year, says Akira Minamikawa, a Dataquest Inc. analyst in Tokyo. And when HDTV takes off, he says, VRAM growth rates are bound to outstrip those for DRAMs.
Meantime, the need for complex chips to manage digital HDTV and advanced videoconferencing systems could play into America's strengths. American Telephone & Telegraph, Texas Instruments, and Motorola pioneered the hot-growing sector of digital signal processors (DSPs)--used to convert analog signals into digital and then compress them for storage and transmission. Last year, the U.S. companies grabbed 66% of the $328 million DSP market. "Japan's strength is in electrical engineering and physics," says David A. Hytha, a managing director at AT&T Japan Ltd. But with digital signal processing, "the core is mathematics, where American companies do much better."
Indeed, American chip houses are a hotbed of innovation. Cirrus Logic, Chips & Technologies, Brooktree, and Sierra Semiconductor have designed the best digital video processors for mixing recorded images and graphics on a computer screen. They have also come up with hybrid circuits--especially good for engineering workstations--that store digital color information on one part of the chip, while another part converts the data to analog so it can be displayed.
TAKING AIM. Such innovations may be a profitable edge. Sales of digital video processors should balloon from just $20 million in 1990 to $346 million in 1996, according to Dataquest--a 52% compound annual growth rate. In a few years, "almost every PC and workstation on the market will combine video, audio, text, and computer graphics into one integrated environment," says James H. Clark, chairman of workstation maker Silicon Graphics Inc.
Asian electronics powerhouses have jumped on each new development from Silicon Valley. NEC and Fujitsu Ltd. are coming on strong in DSPs. Consumer-electronics giant Sony Corp. has taken aim at specialized graphics processors. And the chip houses of South Korea and Taiwan have targeted some of the same niches. The winners may depend on how the multimedia revolution shapes up. "If it is mainly an audio/video movement, that could benefit Japanese companies," says Shizuo Eguchi, a senior chip manager at NEC. "But if the main products turn out to be PCs, American companies will be stronger."
For now, in fact, companies such as Sony and Matsushita Electric Industrial Co., stretched thin by their recent investments in Hollywood, are far from a sure bet. At Sony's semiconductor headquarters in Atsugi, Managing Director Takahashi wants to increase the company's diverse chip production--now at $1.6 billion a year--by focusing on graphics controllers based on a design it licensed from Silicon Graphics Inc.
But Sony won't be alone. Fujitsu makes graphics controllers based on designs by Sun Microsystems Inc. And two Taiwanese chipmakers, Winbond Electronics Corp. and Macronix International Co., have signed similar pacts with Hewlett-Packard Co. and Silicon Graphics.
As the competition heats up, mounting development costs are sparking numerous alliances. American leaders LSI Logic, VLSI Technology, Texas Instruments, and Motorola Inc. have signed on with Japanese consortiums that are trying to streamline the number of chips in Japan's analog HDTV sets. Although that market hasn't taken off, these partnerships offer U.S. chipmakers a chance to design advanced chips into Japanese consumer-electronics products--a longtime goal of U. S-Japan trade talks. Two years ago, TI unveiled a chip that improves color and speeds up positioning of video signals on the screen, a key to picture-in-picture displays for TVs. TI has also joined an HDTV consortium that includes Sony, Fujitsu, and Hitachi Ltd. Now, Sony and TI may collaborate to develop a second generation of TI's chip, which Sony could build into high-definition TVs.
IN THE POCKET. Meanwhile, with Philips N. V. in Europe, Motorola is working on new methods for compressing and decompressing video images. Using mathematical formulas, or algorithms, that squeeze unnecessary information out of moving pictures, Motorola thinks it can slim down each image by a factor of 150 or more. If all goes well, says Ray Burgess, a top Motorola chip executive in Europe, "we'll have a pocket videophone by the end of the decade."
By then, some analysts say, microprocessors may do graphics jobs now handled by separate chips. Even as Intel Corp. has poured millions into DVI, a compression chip, its top engineers are working on a new "superchip" with four processors, 100 million transistors, and a peak performance of 2 billion instructions per second.
Such powerful microprocessors could compress and decompress live video signals, control the display and disk drives--and at the same time serve as the computer's main processing unit. If Intel can pull it off, declares Yutaka Karasawa, marketing manager at Intel Japan, "the current generation of video chips won't exist in another five years."
Other chip executives disagree. Such all-in-one processors, they contend, will match specialized video chips neither on price nor performance. Either way, one thing is abundantly clear: If multimedia, HDTV, and other electronic wonders arrive on schedule, chips that deliver digital images will be where the action is.