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In Corrigan's wake, whither LSI Logic?

Posted: 02 Jun 2005 ?? ?Print Version ?Bookmark and Share

Keywords:asic? intel? fpga?

As Wilfred J. Corrigan handed over the titles of president and chief executive officer of LSI Logic Corp. to his reportedly hand-picked successor, Intel's Abhi Talwalkar, last week, industry watchers were assessing Corrigan's legacy even as they pondered the future of the company he founded 24 years ago.


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Talwalkar, who was co-general manager of Intel Corp.'s Digital Enterprise Group, takes the reins of the ASIC maker at a crucial moment. LSI Logic helped create the ASIC industry and spawned many imitators. But some question whether the Milpitas, Calif., company has changed enough with the times.

"A big integrated manufacturer may have differentiating technology, but it has humongous overhead," said Naveed Sherwani, president and CEO of fabless ASIC house Open Silicon. "In the old days, you could finance that overhead with excellent margins on things only you could design and build. But today, there is price pressure even on sole-source design wins."

LSI alumnus Ronnie Vasishta, now vice president of marketing at eASIC Corp., said that Corrigan's style was authoritative without being micromanaging. "I would say he is one of the best strategic thinkers I have ever worked with," Vasishta said.

Corrigan, who last week was named nonexecutive chairman of the board, "keeps it very clear who is in charge in the boardroom," Vasishta continued. "He is very detail-oriented - you can't get anything by him. But he didn't impose his view. He made sure you had thought through the details and could convince him."

Over the long term, that style has served LSI well. In 1981, LSI had $6 million in venture capital, no customers and a new business model: designing custom circuits that would distinguish a customer's end product. Over two decades Corrigan grew the company to $2 billion, forged a technological giant and helped create an industry.

"There are good startup managers and executives who are good at growing medium-size companies," Vasishta said. "And there are good large-company executives. But you rarely see one manager who has taken the same company successfully through all these stages."

Some critics say LSI has responded poorly to competition from less costly FPGAs and structured ASICs, and allowed commanding positions in markets like networking and telecom to slip away, leading to years of uninspiring growth. And the company has been slow to control costs: Gross margins are estimated at around 42 percent, with operating costs at 34 percent of revenue. One analyst called such numbers "inexcusable."

"A company has to live on 30 or 35 percent margins now," said Sherwani of Open Silicon. "You have to have an open model in order to have the cost structure to thrive on those kinds of numbers."

In fact, LSI did cede powerful market positions to upstarts wielding application-specific standard products or programmable alternatives. "LSI was in an excellent position in networking ICs, but Broadcom came along with an absolutely peerless MAC [media-access control] design," said Daniel Mahoney, president and CEO of Renesas Technology Corp.'s U.S. subsidiary. "Broadcom's MAC got them into Cisco [products], and they learned precisely what Cisco was thinking. It was a case of excellent product definition."

LSI Logic has also been criticized for maintaining its own leading-edge fabrication facility. Vasishta agreed that LSI had perhaps been too slow in transitioning to a foundry model. But he said that for a chip company working on advanced system-level ICs in advanced processes, control of the fab by one means or another was essential. "High-end ASICs are different from the garden-variety ones," he said.

- Ron Wilson

EE Times





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