CEVA Inc. (CEVA): CIBC Says an “Extremely Attractive Risk/Reward Profile”
Written by: Zack Miller | June 14, 2007
By Zack Miller
CIBC launched coverage of CEVA Inc. (CEVA), a leading DSP-core licensor and innovator. While many investors abroad may not know what DSP is, Israel has a long tradition in furthering DSP technology.
For Luddites like us, CIBC has included a DSP Industry primer. Outtakes are below:
The DSP Industry
What are DSPs?
Digital Signal Processors, DSPs, are specialized processors designed for standalone use, most often used for real-time processing of digital signals in a range of devices. DSPs are at the core of next generation personal communications, audio and video devices. They are fast, easy to program, extensively libraried and inexpensive.
What is driving their growth?
These devices will continue to drive high performance applications such as mobile handsets, digital cameras, IP set-top boxes, wireless communication devices, wired communication devices, digital portable audio and video players, and smart handheld devices.
In-house or Outsource?
With more complex designs and shorter design cycles it is no longer cost efficient, and becoming progressively more difficult, for most semiconductor companies and designers to develop the technology in-house. Therefore, companies increasingly rely on licensing other intellectual property, such as DSP cores, from third parties such as CEVA.
DSP Industry Revenue Growth
Driven by handset unit growth (as mobile technology moves to 3G and beyond)
and by increased usage in consumer electronics and automotive applications, revenues from DSP sales are expected to grow at a 14% CAGR through 2010, rising from $7.6 billion in 2005 to $14.8 billion in 2010.
DSP Market Share
The DSP market is highly concentrated, with five players controlling over 90% of the market in 2005.
- TI held the No. 1 position in 2005 with 58% market share, with its leadership position in GSM, GPRS, and UMTS baseband chips and its strong ties to handset leader Nokia.
- Freescale was No. 2 with 14% share in 2005, much of it derived from its relationship with its former parent company, Motorola.
- Agere fell one spot to No. 3 as NEC discontinued Agere-based 3G platforms in 2004.
- Rounding out the top five were Analog Devices
- NXP/Philips, both with 6% share.
Other vendors include Toshiba, NEC, Cirrus Logic, Sunplus, and Fujitsu.
DSP Segmentation by Application
By end market, 75% of all DSP revenue is derived from the wireless market,
both from handsets and base-stations. Six percent is derived from the consumer
market, primarily for portables such as digital cameras, camcorders, and MP3
players as well as high-end consumer devices such as DVD recorders; 5% sell
into wireline, mostly broadband modems; 4% into computing applications; and
3% is derived from the automotive market.
Disclosure: The author’s fund currently holds no position in any of the companies mentioned here. That may change at any time.
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Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC. and a former equity analyst for a leading multinational hedge fund. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email zack@profile-financial.com
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