Audio chip makers' hopes tied to digital music rollouts
By Margaret Quan
EE Times
(04/06/01, 3:53 p.m. EST)
MANHASSET, N.Y. — Top suppliers of chips for the digital music player market hope the rollout of online music services aimed at boosting the availability of digital music on the Internet will have a positive impact on portable digital music player sales this year.
They expect the added content to increase second-half 2001 sales over what turned out to be a disappointing first quarter for chips of all types, including those designed into portable music players, according to anecdotal reports.
However, some believe the limited availability of digital music content and the uncertainty over digital music copyrights is not the only thing that prevents consumers from purchasing the devices.
Rainer Hoffmann, president of Micronas Semiconductors (San Jose, Calif.), a subsidiary of Micronas Semiconductor Holding AG (Zurich, Switzerland), thinks the portable music player-only devices are still too expensive at prices of $199 and up.
"The major holdback [to growth of the market] is still the cost," said Hoffmann.
He suggested player prices "must come down to $149 and below" before they become a mainstream consumer purchase.
Nevertheless, three top chip suppliers, Cirrus Logic Inc. (Austin, Texas), Texas Instruments Inc. (TI; Dallas) and Micronas see as positive developments this week's launch of several new music services: the MusicNet music subscription service platform by Real Networks and three major record labels; Microsoft Corp.'s introduction of a beta version of its free streaming radio service on its MSN network; and plans by MTVi Group and music application service provider RioPort to offer paid song downloads through MTVi's Web site. (MTVi is a unit of MTV Networks owned by Viacom Inc.)
They believe the services will generate greater consumer demand for digital audio devices.
"Anything that helps the flow of content so that it's easier to get to is going to help," Scott MacDonald, vice president of marketing for Cirrus Logic's Embedded Processors Division told EE Times.
Jorge Kittl, TI's Internet Audio business manager, called the introduction of online music services] "key."
Both companies are leading suppliers of chips to the MP3-type Internet audio portable player market, according to research firm Forward Concepts (Tempe, Ariz.). That market totaled 3.5 million units shipped in 2000 and is forecast to reach 7 million units this year, the firm reported. By 2004, shipments are projected to reach 42 million units.
But reports indicate first-quarter sales of chips into this market may have been flat to disappointing. Thus there are expectations that having more music available online, combined with new MP3 device categories set to debut later this year, may help jump-start growth later in the year.
Cirrus Logic is the top supplier of chips into the digital audio player market, according to Forward Concepts, but in recent weeks retail store inventory of players that use its Maverick embedded processors has been light. That's expected to change in the second half of 2001, when the company expects to see new Maverick-based players on the shelves, MacDonald said.
The players will include a new generation of digital audio decoder-equipped CD players known as "spinning media" devices that are larger than MP3-only portables and play downloaded digital audio as well as compressed audio files stored on CDs that hold 650 Mbytes of music. These spinning media devices, along with a new class of digital audio streaming players that stream music and store it on a local server network rather than locally, are expected to contribute to growth for Cirrus Logic's Maverick chip sales this year.
Texas Instruments, the second-largest provider of chips for digital audio players, according to Forward Concepts, reported that it received new design wins from consumer electronics manufacturers Sanyo, Thomson Multimedia, Digisette LLC and Richfield Innovations Pte. Ltd. (RFI) during the first quarter. The devices represent a range of different form factors, including the Digisette Duo player, which functions as a stand-alone digital audio player and cassette-emulation device, and the RFI JazPiper player, which stores music on an Iomega PocketZip drive.
Texas Instruments' Internet Audio business manager, Jorge Kittl, declined to reveal digital audio player-related DSP sales figures for the first quarter and would only say that TI shipped over 2 million units into the digital audio player segment since the beginning of 2000.
Hoffmann of Micronas Semiconductor, the third-largest provider of chips for MP3-type players, believes the addition of new music services will help drive sales of players, but said he thinks the device price is also a barrier.
"Once you are above the $149 price point, you are getting only 10 percent of the consumer market," he said. Hoffmann called the market small for a consumer electronics device, even if it hits 7 million units.
Most MP3 players cost $199 and up, and though companies have been working to get the price point down, one of the stumbling blocks, the high cost of flash memory, is beyond their control.
As flash prices move down, the industry may see a new wave of market potential for MP3-only devices. Until then, Micronas expects sales of chips into stand-alone MP3 player devices to be flat this year, but predicts growth to come from sales into MP3 combination devices such as cell phones, said Hoffmann.
The company sells chips designed into a Samsung cellular phone that Sprint deployed in field trials in San Diego and an Ericsson accessory for the T28 cellular handset.
In addition to the launch of new music services, chip makers were encouraged this week by efforts in Washington to hash out the controversy over online entertainment and copyright law, which they believe could be hurting the MP3 player market.
On Tuesday (April 3), representatives from the music and technology industries, including InterTrust Technologies Corp. founder and chief executive Victor Shear, whose company develops digital rights management technologies for online content and commerce, testified before the U.S. Senate Judiciary Committee. Shear called for a remedy to the complexity surrounding copyrights and licensing in digital entertainment and suggested the government endorse the use of digital-rights-management (DRM) technologies.
MacDonald said Cirrus Logic remains "supportive" of secure music initiatives, as evidenced by security features added to its Maverick embedded processors in the form of MaverickLock hardware and MaverickKey protection technologies. The company also supports InterTrust and Microsoft Corp.'s Windows Media Audio DRM solutions.
Likewise, TI's Kittl said the company "clearly understands the needs of copyright owners" and built support for security features into DSP products such as the DA250, which supports major digital rights management technologies and is set to ship in volume by midyear.
Hoffmann agreed that clearing up uncertainty around digital music copyrights might have a positive impact on the market for digital audio players, but said Micronas must remain flexible about its chip-solution offerings. He said some customers support the use of DRM today, while others are not interested in adopting proprietary solutions until there is a DRM standard.
