Analog Devices Seeks Israeli Partner

Wall St The goal: to develop new products based on Israeli software and Analog Devices components, now in the pre-release stage.

Analog Devices is the most recent in a long series of semiconductor and component manufacturers to set up planning centers in Israel. The new development center, located in Herzliya, employs 20 persons at this stage, and recently received "Approved Industry" status.

How do things here look from the American point of view? This and others questions, were answered by recently appointed company president Jerald G. Fishman, who arrived in Israel for the opening of the new Herzliya development center.

Globes: What brought your company to Israel?

Fishman: "Mainly the Israeli people, know-how and reputation in the field of components."

Have you succeeded in hiring the necessary workforce?

"Its hard to find experienced manpower in Israel but we had connections with local industry, created over the 15 years our company has been active in Israel. At this stage we have 18 employees and plan to increase to 25-30 engineers during the coming year. Weve invested about $3 million in the new center."

What will the Israeli center do?

"We have located excellent people here, with a great deal of experience in Digital Signal Processing (DSP), a field in which Israelis are very practiced. We are developing what are our most complex DSP products to date in Herzilya and plan to launch them on the market within a year and a half. They will be independently produced at factories we have established in cooperation with other entities."

"Up to this point, Analog Devices activities have focused on development and sales of analog and digital components, with the analog side being the more dominant. But in the future we intend to balance out our activities, between digital and analog components."

Which components are we speaking of?

"This is the Super SHARC, the most advance DSP processor in the SHARC line. This is an advanced, very fast component, capable of processing complex mathematical calculations in addition to ordinary processing. We expect to complete development here within 18 months, then begin mass production."

Will production be via an outside manufacturer or at one of Analog Devices plants?

"A semiconductor foundry requires a vast amount of investment. We own this type of plant and know how expensive it is to maintain. We have chosen to cooperate with a number of major manufacturers who wished to establish a US presence. Manufacturing will be done at a plant set up in conjunction with TSMC (Taiwan Semiconductor Manufacturing Company) and another manufacturer. We have invested some $500 million in this joint venture, as well as another $200 million in upgrading our existing production lines."

What is the demand for these products?

"We estimate our market share at some 12%. SHARC is considered one of the most advanced processors for floating-point applications."

Where do you envision you primary market in the future?

"Our ability to provide both analog and digital products reinforces our portfolio in the cellular communications market, primarily in the GSM field which is flourishing in Europe. The combination of our component line with the right program can turn every electronics equipment manufacturer into a cellular telephone manufacturer."

What were Analog Devices Israeli sales last year?

"Last year, we sold $20 million in components to Israels communications industry, primarily to ECI Telecom, Orckit, Metalink and the defense electronics industries. We estimate that in the future, 60% of our Israeli activity will be focused on civilian industries. Sales to the defense sector will remain stable but their relative share will be smaller."

The cooperation between Analog Devices and Smart Link of Netanya recently produced an advanced integrated product which combines, on one card, a wide range of sound, fax, and modem functions that can run concurrently. The product can support many popular PC-based signal processing functions, including 16 kilohertz SoundBlaster applications, 28.8 kilobytes per second (V.34) modem for Internet access, fax and telephony applications.

According to Fishman, this cooperative venture is a model especially suited to those companies interested in the Israeli market. Analog Devices will try to repeat the process again this year with other Israeli companies.

"Smart Link also serves as a good example of a deal that combines know-how and financial investment in a product based on Smart Link software and our hardware," says Fishman.

What is the relative advantage to an Israeli partnership?

"Access to the most advanced technology which is not available to the competition. Smart Link, for example, developed a module that integrates a standard modem and sound card. The product is based on our new modem, which is only in the sample manufacturing stage. This product is not yet complete but Smart Links ability to use it, at this stage, gives it a relative edge for future competition."

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