Altera, Xilinx planning major strategic shifts

A significant part of the forecasting error stemmed from the fast rise to prominence of EMS providers, which happened without much thought to the new layer of complexity they added to the process of forecasting demand, Sarkisian said.

To make inventory levels transparent to customers and suppliers, all parties along the supply chain must act in concert, he said. “If we can achieve that model, it will reduce, but not eliminate, the volatility of the semiconductor cycle,” he said. “To get to that level, we need to change the nature of the business relationship.”

That entails a major commitment of IT resources to create a Web-based system to provide supply and demand data in real time, he said. Altera hopes to leverage standards such as RosettaNet and other XML -based data-exchange methods, he said.

Forecasting retooled

Xilinx's efforts to improve forecasting and inventory control are taking a similar direction, with a focus on deeper ties in the EMS community and an investment in online tools, said Kris Chellam, chief financial officer of the San Jose company.

Beyond its relationships, Xilinx is working on a new way of forecasting and has hired a consultant to develop a methodology that looks both at macroeconomic leading indicators and data that is more specific to the PLD industry, Chellam said. In tandem, the company is developing internal metrics on its top 15 customers to track activity in their end markets and get a reality check on demand forecasts.

Additionally, Xilinx plans to reduce its inventory to 100 to 120 days, about 30% to 40% lower than the historical average, Chellam said.

To maintain this level, the company is working with its foundry partners to compress the manufacturing cycle by transitioning next quarter to 300mm-wafer production. 300mm wafers yield about twice as many die in an eight- to 10-week cycle, compared with the 14-week cycle of 200mm wafers, Chellam said.

More efficient yields will in turn support a BTO model, under which Xilinx intends to hold a certain amount of prototype inventory, with the rest in wafer form to be packaged and shipped only when the customer places a volume order.

A similar model was also recently advanced by Altera, signaling an end to the off-the-shelf convenience they've come to expect from PLDs.

“Through time we will have different lead times than we've had in the past, which will affect the forward thinking of most of the end customers,” Sarkisian said.