Clash of Chip Titans Moves From Courtroom to Market
By ANDREW SIMONS
Orange County Business Journal
Broadcom Corp. may have settled its court fight with Intel Corp. last year, but the market battle between the two is set to hit high gear.
Santa Clara-based Intel, hungry for new sources of business beyond its core computer processor market, has spent the past year unveiling new chips for markets where Irvine-based Broadcom dominates.
Broadcom now will be duking it out with Intel in the chip markets for wireless networking, servers and corporate networking. Consumer electronics is another potential battleground.
“I would expect that these two formidable competitors will be seeing each other more and more with each passing year,” said Albert Lin, an analyst with Greenwich, Conn.-based American Technology Research Inc., which advises institutional investors.
Broadcom and Intel already are butting heads in the market for wireless fidelity, or Wi-Fi, chips. Those allow laptop computers and other portable devices to link to a network or to the Internet via airwaves.
The market for Wi-Fi chips is pegged to grow at a 13 percent compound annual growth rate through 2007, according to market tracker International Data Corp. The Wi-Fi chip market could be worth $1.1 billion annually in three years, IDC says.
“The next several years are going to witness rapid development, which in turn will generate considerable demand for (wireless) semiconductors,” said Ken Furer, an IDC chip analyst.
Broadcom Corp. on Jan. 27 reported a fourth-quarter profit of $6.1 million, a dramatic turnaround from its net loss of $1.76 billion a year earlier. Revenue for the quarter ended Dec. 31 was $479 million, a 62 percent increase from the year-earlier quarter.
Intel’s visibility
Broadcom has spent the past year pushing its high-end wireless chips based on so-called 54g technology. The 54g chips allow for faster access to data than older ones based on 802.11b technology. According to IDC, Broadcom holds 78 percent of the 54g chip market.
So far, Intel hasn’t come out with a wireless chip as fast as Broadcom’s 54g. But what Intel’s wireless products lack in speed could be made up for in exposure and packaging.
Intel rolled out its Centrino chipset last March. The combination of a processor and networking chips, based on slower 802.11 technology, has been big with computer makers, who have it shipped with their machines.
Broadcom plays up its speed edge and also counters that its chips use less power than Intel’s Centrino offering. Dell Inc., for one, offers both Broadcom’s 54g and Intel’s Centrino as options for laptop buyers.
Besides, Broadcom officials say, there’s more to wireless networking than laptops. They contend Broadcom has the edge in consumer electronics and handheld devices.
An equally contentious battleground: servers. Here, Intel is looking to take away the market for server chipsets from Broadcom’s ServerWorks business. Chipsets work with Intel’s processors to help link servers to other computers on a network. ServerWorks holds about 80 percent of the server chipset market.
But new Intel server processor boards can handle functions that used to be dealt with by server chipsets. And big server makers such as Hewlett-Packard Co. and Dell are signing on.
All the while, Intel has stymied ServerWorks by withholding critical design details for its server processors, citing competitive concerns.
Patent battles
The two companies weren’t always rivals. Intel was even an early Broadcom investor. At one time, Broadcom was the only game in town when it came to communications chips. The company made a name for itself by unveiling a broad array of chips for everything from modems and set-top boxes to servers and wireless phones.
Until 1999, Intel had been a virtual no-show in the communications market. The company bought about a dozen companies in 1999 to bolster its position in networking and digital-signal processing chips, a stronghold of Broadcom and Newport Beach-based Conexant Systems Inc.
Others also have joined the fray. Texas Instruments Inc., STMicroelectronics NV and Agere Systems Inc. also compete with Broadcom.
But the competition with Intel has been particularly fierce. In 2000, Intel sued Broadcom for alleged infringement of five patents covering the bulk of Broadcom’s products. Henry Nicholas, Broadcom’s brash former chief executive and cofounder, vowed to fight Intel in court.
Broadcom fired back with a suit of its own, accusing Intel of trying to stifle competition. The case was broken into two parts. Broadcom prevailed in the first half of the case in 2001.
Nicholas stepped down in early 2003 and was replaced by Chief Executive Alan E. “Lanny” Ross, who took a more conciliatory tone with Intel and others suing Broadcom. The company agreed to pay Intel $60 million to settle the second half of the Intel case in August. As part of the pact, the two chipmakers promised not to sue each other for five years.
Broadcom vs. Intel
Once distant rivals, the chipmakers now face off in several markets.
Wireless Networking
Intel is muscling onto Broadcom’s turf the surging wireless fidelity, or Wi-Fi, chip market by putting wireless into its laptop chipsets. Landing them in other wireless devices is the challenge.
Servers
Intel, which makes competing chips for linking servers to networks,
has hamstrung Broadcom’s ServerWorks business by not providing design details on its next generation of server processors.
Networking
After a big push, Intel has the edge in controllers – chips that go in servers and other computers – but Broadcom rules in routers, switches and hubs.
Digital Television
Broadcom and Intel introduced chips that could co – exist inside digital televisions at last month’s Consumer Electronics Show. But is competition for video processors – Broadcom’s offering-far behind?
