LSI has a 2-pillar focus, storage and networking

DQI Bureau
New Update

Abhijit Y Talwalkar, president and CEO, LSI Corporation spoke

to Dataquest on the companys strategy post the Agere merger. Abhijit, born in

India, took over this role in May 2005, succeeding Wilfred J Corrigan, LSIs

founder. Talwalkar joined the company from Intel Corporation, where he served as

VP and co-general manager of the Digital Enterprise Group. He also served as VP

and GM for Intels Enterprise Platform Group. Talwalkar has more than twenty

years of experience in management and engineering in the semiconductor industry,

with positions in research, product development and marketing. Talwalkar

received his bachelors degree in Electrical Engineering from the Oregon State



What is the state of the transformation initiatives carried out

at LSI post the Agere merger?

The first significant change in LSIs strategy came in 2006 when we
announced that we are going fabless. We have been changing the companys

dimensions in the last 18-24 months as an overall strategy to become more

market-led and to establish sufficient scale in the growth markets. But, that

period is over. Now it is all about executing the new strategy in continuing to

drive our storage business. We aim to deliver consistently the needs of the

market, and grow.

The merger with Agere was a major step in the overall evolution

of the company and to enhance our positioning in the storage business. The other

objective was to enter the networking space considering the synergies between

networking and storage, in terms of base level technologies and the market. This

commonality will increase as more and more storage becomes IP or packet-based.


The other idea behind combining these two companies was

economies of scale. The semiconductor investments have been increasing in the

last ten years and companies are spending much more in R&D as the percentage

of sales goes up. We are now being asked to do more and more of systems. It just

does not stop at siliconfirmware, software, and architecting the systems is

also important. In some of the segments, we are developing the entire system.

Our R&D has also gone up in turn driving some of the consolidations that we

see. This has been very motivating.

Why did you choose to exit the consumer and mobility businesses,

considering that they are growing?

We have a two-pillar focus. The decision to exit mobility was made to make
sure we could participate in the market and have the scale. The mobility

business has a large market growing very rapidly, but there is a minimum level

of R&D scale, and the revenue scale had to be competitive. It was critical

for us to address that issue and it was also critical for Infineon to address

the same.


As for our existing consumer businesses, like the electronics

business, they were focused on segments associated with media processors and

other building blocks. We felt that we did not have the scale to stay in the

market. This market is highly volatile and unpredictable, and it is difficult to

say which consumer product would be successful. I am a firm believer in being #1

or #2 in the market place and having sufficient market scales. We have very good

scales in our storage business.

If you look at companies that sell either chips or other forms

of building blocks to the OEMs for storage, we are the biggest players in the

industry. We are ahead of our nearest competitor by two times and have the

widest range of product portfolio. We do everything from systems (for companies

like IBM) to very complex technology that goes into hard drives. Seagate, IBM,

and Samsung are some of our biggest customers. We sell to almost every single

hard drive OEM vendor. Our storage market continues to grow in every possible

segmentconsumers, enterprises, as well as service providers. We see storage

driving our growth in the next 5-7 years.


What is your strategy for the networking market?

Our networking business is mainly focused on enterprise connectivity, mostly
around the LAN and SAN. Most of it is custom silicon in nature and this supports

modular switches, larger director class switches and routers. Cisco, Huawei, and

HP Procurve are some of our customers. Enterprises are going through another

major upgrade cycle. Data traffic within an enterprise is growing and the amount

of videos used in enterprises is also increasing due to training needs and other


The other area of our networking focus has to do with the next

build out that will happen in the service provider space. The last build out was

the Internet to wireless. Before that, in the 60s and 70s, it was analog to

digital. And, now, it is all the carriers focusing on replacing their declining

voice-based revenues and delivering new services based on IP packets and high

bandwidth which converge services based on data. Most of the telecom equipment

vendors are our customers in this space.

We are involved in the premises level, especially on small and

medium businesses. As these service providers deliver converged services, there

is a need for a platform which brings services into the premises, as well as

allow service providers to manage services and be able to differentiate those

services based on customer requirement.

I am a firm believer in

being #1 or #2 in the market place and having sufficient market scales. I

felt that we did not have the scale to stay in the market for mobility and

consumer businesses

For example, Nortel is doing trials in twenty cities in the US

with Verizon, based on a converged platform gateway called the Media Services

Business Gateway. This is a box that has a lot of silicon and software and costs

around $600-1000. This box will provide everything from voice, video, and data.

So, in the core of the service provider network these services will have to be

created. The other area of our networking focus is the continued growth of the

access network, both wireless and wireline. I believe that we have a winning

recipe. We have the custom silicon with the LSI expertise and we also have a

high level of building block.


What are some of the new product lines you are looking at?

We introduced a completely new SAS technology, and we led and defined the
SAS (Serial Attached SCSI) standard, replacing the 25 year old standard SCSI

standard which LSI played an important role in inventing. Not only are we

shipping the SAS component into servers but also the storage systems being

shipped by companies like IBM. This is an entirely new product line from LSI.

This is delivering enterprise class level external RAID capability in entry

price points.

You have gone fabless, but you have fabs by virtue of the Agere

acquisitions. What is your manufacturing strategy then?

We announced the deal to sell that capability in Thailand to STATS ChipPAC.
We have an assembly and test operation in Singapore, which is going to wind

down. We intend to move out of systems manufacturing capability and outsource

the same to companies like Sanmina and Solectron. We now have a 51% financial

stake in a fab and we dont employ any people.


What is the state of your operation in India and what kind of

work is done out of here?

We have about 660 people and growing. Majority of who are for product
engineering. They contribute in many ways across all our products from doing the

complete chip design to working closely with some of our customers on the

systems side. There is also a software development expertise here. Some of the

teams do a complete chip design working with customers directly.

Sudesh Prasad