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Freescale re-commits itself to embedded systems market

Posted: 01 Jul 2005 ?? ?Print Version ?Bookmark and Share

Keywords:embedded? consumer? analog?

Michel Mayer and his Freescale Semiconductor staff had something of a premature coming-out party here last week. Although the once-stodgy chip maker emerged last year from Motorola Inc.'s bureaucracy, its growing pains were still evident at the first Freescale Technology Forum.

The company could not avoid sporting blemishes, with the event coming hard on the heels of news that Apple Computer will sever its longtime relationship as a high-profile user of Freescale's top microprocessors. It also continues to struggle with a long-overdue corporate makeover.

Still, with $2.35 billion in cash in hand, some managers at Freescale are embracing the company's new embedded-only status, shopping at the electronics industry's three most popular malls: consumer, analog and Asia. Freescale's transformation reflects the changing times of an industry increasingly focused on agile, lean design partnerships that cross all company and country boundaries.

At the top of his keynote here, CEO Mayer discussed the pending loss of Apple's business, which represents 3 percent of Freescale's $5.7 billion annual revenue. "We are committed to our PowerPC road map and are going to continue our investment in the architecture," he said.

"At the end of the day, Apple does not represent a growth market for us," Mayer said during an interview with EE Times, "so you have to question how much you invest to compete with Intel on its home turf when we have so many other untapped opportunities. The argument that you have to have the baddest, fastest CPU is difficult to rationalize now that everyone is moving to [multicore] processing and a balance of power and performance."

Putting silicon behind its stance, Freescale launched the PowerPC 7448 at the forum. The chip contains an e600 core that hits 1.7GHz at 18W in a 90nm silicon-on-insulator process. The company will follow up by year's end with its first dual-core PowerPC, the 8641, featuring two e600s, four Gigabit Ethernet MACs and PCI Express links. It is aimed at midrange routers, storage-networking gear and other embedded systems.

Growth in clock frequencies is slowing from 40 to 12 percent a year, said Dan Bouvier, the PowerPC's architecture manager. But he predicted a slow transition to embedded multicore and multithreaded CPUs. In the next phase, embedded processors will be distinguished more by the peripherals and memory subsystems they integrate than the speed or number of their cores, he said.

In terms of markets, Mayer said that Freescale's wireless, transportation and networking groups are appropriately targeted, "but there is plenty of work to be done transforming this company into a good athlete in each segment," he said.

"We haven't done a good job branching out to new opportunities in the last four to five years." Specifically, he said, "it's clear we haven't leveraged enough of the consumer electronics opportunity."

Push into consumer

Consumers outstripped corporations in technology spending last year, even as consumer electronics replaces the PC as the innovation driver, Mayer said.

"You will see Freescale become more active in consumer electronics," said Sumit Sadana, vice president of strategy and business development and the executive responsible for mergers and acquisitions.

The company has a significant war chest for such transactions, with $2.35 billion in hand, several hundred million in cash generated each quarter and only $1.25 billion in debt in the form of five- to 10-year bonds. "I don't feel limited," Mayer said.

Acquisitions to foster growth may come this year, Sadana said. Besides consumer electronics, Freescale is targeting analog technology. On a somewhat parallel track, it also wants to build up its presence in Asia and its capabilities as a provider of system-level designs. "I do believe this industry is quickly moving to selling at the subsystem level," said Mayer.

"I am personally driving an initiative to get us more strongly established in Asia," said Sadana. "We will use partnerships with local design companies, software companies and ODMs." The effort reflects a shift for both Freescale and the industry, he said.

Traditionally, Freescale sold silicon to large, vertically oriented OEMs like Alcatel and Cisco, which handled system design and integration internally. But an expanding group of OEMs in Asia, including some of Japan's giants, is increasingly focusing on consumer products with short, nine-month cycles. These OEMs want full-fledged system designs so they can concentrate on differentiation via software, content and branding.

"They don't want just reference designs, but form factor and BOM [bill of materials] - accurate prototypes that meet the needs of the markets they are going after," said Sadana. "We have been strong selling silicon to the [former group of vertically integrated OEM] companies, but now we have to get more into the other end."

In a significant step in that direction, the Metrowerks brand will disappear as that subsidiary fully aligns with Freescale, "to focus on the enablement of developers. It's all about selling Freescale silicon now," said Tim Tumilty, director of marketing and operations for Metrowerks. Metrowerks was founded in 1985 and is best-known for its CodeWarrior integrated development environment. It was acquired as an independent subsidiary of Motorola Semiconductor Products Sector in 1999.

Since Tumilty joined Freescale a year ago, he has led the team responsible for shedding such noncore businesses as MDP and Symbian development tools. "Our competitors now are Intel, Microchip and Texas Instruments," he said. "The emphasis will be on CodeWarrior with the sole purpose of making it easy for developers to evaluate, optimize, integrate and deploy Freescale silicon."

The still-unnamed group will be part of Freescale's effort to partner with local companies serving the Asian OEMs. "That's part of our Asia strategy," Sadana said - "this combination of ODMs and independent design houses that are moving up, trying to intercept the design chain at the highest levels."

"Innovation has become less of an individual effort and more of a team sport, so it behooves us to build a healthy ecosystem," said Mayer, referring to the trend in his keynote.

Battling the Bolsheviks

Freescale's internal changes are part of an overall effort to remake a Motorola division once known for its insular technology focus. Now, the goal is to stress responsiveness and teamwork, two points that scored lowest in a recent internal evaluation of the company by its 22,000 employees.

"The culture must change and take on a sense of urgency," said Mayer. "But in every culture, there are some Bolsheviks.

"A lot of people don't want to accept that [the industry is] becoming commoditized with a capital C, and we have to become more sophisticated," he said.

- Rick Merritt

EE Times

- Additional reporting by Patrick Mannion

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