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National rolls out new chips
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September 18, 2000: 3:50 p.m. ET
New multi-function devices aimed at market for 'information appliances'
By Staff Writer Richard Richtmyer
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NEW YORK (CNNfn) - After two years in the making, National Semiconductor Corp. on Monday released a new family of semiconductors that integrate the functions previously handled by several chips onto a single piece of silicon.
The Santa Clara, Calif.-based company is targeting the new "system-on-a-chip" devices at the burgeoning market for "information appliances," a term used to describe computing products specially designed to access the Internet or other information networks.
The new chips are the latest in National's "Geode" product line, which was first unveiled in July 1999.
Since he took the helm as National's president and chief executive in 1996, Brian Halla has been heralding the coming of an information appliance revolution and steering the company in that direction.
Toward that end, National in 1997 acquired Cyrix Corp., a supplier of PC microprocessors. While the Cyrix buy turned out to be a costly one for National, putting them squarely in the cut-throat PC processor market, it also provided the company the foundation for its Geode chips.
National, which has its roots as a supplier of pure analog integrated circuits, sold off the Cyrix business in August 1999, but kept the rights to its Media GX microprocessor design, around which the Geode chips are built.
 The company has posted a strong recovery since it sold off the Cyrix business, which executives have attributed largely to strong sales of analog semiconductors.
So far, National has 120 information appliance customers for which it provides both system design services in addition to supplying chips, according to Michael Polacek, vice president of National's information appliance division.
"That's a pretty staggering number if you think about it," Polacek said in an interview with CNNfn.com Monday. "It's a statement of how broad the acceptance of this kind of technology is."
To be sure, the market for semiconductors used in information appliances will be heating up over the next couple of years. Technology research firm International Data Corp. recently said it expects U.S. unit shipments of information appliances to outnumber consumer PCs by 2002.
Although it has not yet made much headway into the information appliance market, the company currently is working on a chip code-named "Timna," which is expected to be targeted in part to that market.
Transmeta also is a rising contender in the information appliance market. The Silicon Valley startup this summer said its "Crusoe" chips will power the Internet access devices PC maker Gateway is developing in partnership with America Online.
But for National, the opportunity for growth in the information appliance market is two pronged, according to Xavier Pucell, semiconductor analyst at technology research firm International Data Corp.
"National is also a major supplier of analog chips," Pucell said. "This is going to drive their analog business because with each of these processors, you have to use other analog chips."
As a whole, National's information appliance division accounts for roughly 10 percent of the company's total business, according to Polacek. However, for each $1 of information-appliance silicon that division sells, about 50 cents worth of analog components are sold as well, he said.
"The best news would be if it stayed at 10 percent over the next few years," Polacek said. "That would mean the rest of the business is growing just as fast."
National (NSM: Research, Estimates) shares were down 25 cents at $42.50 in late afternoon New York Stock Exchange trade Monday. Meanwhile, the Philadelphia Stock Exchange's semiconductor index fell 20.34 to 954.25, a 2.1 percent decline on the day. 
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National Semiconductor
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