Surfing the Digital Consumer Wave in Technology

Atiq Raza

Chairman and CEO

Raza Microelectronics, Inc.

atiq@razamicroelectronics.com

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“There’s wind and then there is a typhoon,

there are waves and then there’s a tsunami!

Such a strategic inflection point [is] characterized by a ‘10X’ change …”

Andy Grove

Waves, Tides and TsunamisThere is a tide in the affairs of men,

Which, taken at the flood, leads on to fortune;Omitted, all the voyage of their life

Is bound in shallows and in miseries. On such a full sea are we now afloat,

And we must take the current when it serves, Or lose our ventures.

William Shakespeare

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Surfing the Technology Waves is Not Easy

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Digital Transformations

Broadband Communication and Information Processing

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VCR to DVD: Digital Transformation

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Digital TV Shipments in Japan

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Cameras: Analog to Digital Transformation

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Digital Consumer Market

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Makimoto's Waves - Sony View of Technology

• Simplified Atiq plus original graphic

ComputeProcessors

Next GenerationProcessors

• Compute processors drove the first wave• Running out of steam for the second wave

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Digital Consumer Lifestyle

StudyMaster Bedroom

Kids Bedroom

TV Gateway

Family Room

Kitchen

Copyright© 2004. MIPS Technologies, Inc. All rights reserved.

Home

Minivans and SUV

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The Digital Consumer and the Digital Home• Entertainment

– Passive with Higher Quality Experience – Television, Music, Radio

– Interactive with Premium on Gratification – Games, Browsing on the web

• Information Access– Work Related

– Unrelated to Work

• Comfortable and Safe Living – Environmental Control

– Security

– Remote control and management

• Minivans and SUVs gain Home Attributes– Television, Music, Radio

– Gaming

– Cell Phone with rich features

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The Digital Home - Future

Home Network• Wireless (802.11 a/g/n/e, UWB)• Wired (Ethernet, phone line, power line)• Digital (DVI, HDCP, USB, 1394)• RF (broadcast)

Entertainment & Information

Broadcast (RF)

• Multimedia content• Rich experience

Internet

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Consumers and Home Network

• Home is primarily a Languorous Interactive Environment

• Digital Content is much more Important than Home Automation

• Distributed Control – TIVO, Environment, Security Systems

• Limited Automation and Autonomy in Home Controllers

• PC penetration in US Homes is 65%

• PC as Central Controller for Digital Home is less than 5%

• Driver for Home Networking is connecting multiple PCs

• Wireless Connectivity will be ubiquitous when it can deliver HDTV

• Ideal Control for Home will come through Learning Tools

• Global explosion in Digital Consumer Product Demand

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Global Economic Transformation

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Globalization – Emerging Markets

CHINA

INDIA

RUSSIA

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China’s and India’s Growing Middle Class

The Ansal Plaza shopping mall in New Delhi featuresa McDonalds and Nike, Reebok, Burberry's and Gucci brand products.

This advertising-filled Shanghai street exemplifies the growth from China's economic reforms.

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Semiconductor Revenue Shipments by Geography

15%

20%

25%

30%

35%

40%

1999 2000 2001 2002 2003 2004

Asia Pacific

Americas

Europe

Japan

Source: SIA

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• Richness of Experience Drives Customer Demand• Content sustains Customer Demand• Standards propel proliferation – MP3, MPEG, 802.11, VHS, etc.• Standards enable multiple Vendors and Brutal Competition• Consumer Products have enabled Affordable Usage Model

– Digital Camera chips, 802.11, Bluetooth

• Overall winning model is the Razor-blade model– DVDs, Digital Gaming Systems, Digital Cameras, Inkjet Cartridges, Cable/Sat TV

• Consumer Content and Services create Profits as Dessert– EBay, Google, Sony, Movies, Music, Games

• Opportunities for Start-up wins in Consumer Products– Atheros, Cambridge Silicon Radio, Portalplayer

Digital Consumer Market Economics

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Market Segments defined by Product or Service, Technology, Sales Channels, Customers

Large Companies “Goliaths” have Franchises but cannot react rapidly to Market Changes

Start-ups have to offer “Disruptive Products” that are Aligned with Emerging Market Requirements

Start-ups can only be Successful by Product and Sales Execution in Target Segments

Start-ups Grow by expanding to Adjacent Segments

Market Segments defined by Product or Service, Technology, Sales Channels, Customers

Large Companies “Goliaths” have Franchises but cannot react rapidly to Market Changes

Start-ups have to offer “Disruptive Products” that are Aligned with Emerging Market Requirements

Start-ups can only be Successful by Product and Sales Execution in Target Segments

Start-ups Grow by expanding to Adjacent Segments

Start-up Opportunities and Market Segments

Goliaths with Franchises

NewProduct

Emerging Market Directions

AdjacentSegment

AdjacentSegment

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David and Goliath

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Nasdaq Tsunami was Followed by UndertowNasdaq Tsunami was Followed by UndertowJanuary 1983 - Present

Doubles in 8 yearsDoubles in 4 years

Doubles in 2 years

Doubles in 1 year

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Venture Investments

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Waves and Riptide Co-Exist

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Where VCs are Investing

Forbes• Nanotechnology• PC-TV-Web Convergence• Open Source Software• Medical Devices• Software-Hardware Integrated

KPCB Focus• Personalized Medicine• Consumer Devices and Services• Wireless Devices and Services• Clean Power, Water and Transportation• The “New Enterprise”

Sequoia• Components• Systems• Software• Services

Benchmark• Enterprise Software and Services• Communications and Security• Semiconductors• Mobile Computing• Consumer Services• Financial Services

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Innovation + Rapid Execution = Success

Improvements Breakthroughs

Goliaths

Start-ups

Rapid Execution

Innova

tion

Focus

Creativity

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Sources of Technology Innovation

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Cost-Effective Innovation on a Global ScaleManagement

InnovationEducationResearch

InfrastructureDiscipline

Organization

Integration

ManagementInnovationEducationResearch

InfrastructureDiscipline

Organization

ManagementInnovationEducationResearch

InfrastructureDiscipline

Organization

ManagementInnovationEducationResearch

InfrastructureDiscipline

Organization

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Recipe for Success• Identify Emerging Opportunities

– WiMax, UWB, HDTV, Enhanced Media over WiFi, etc.

• Develop Jaw-dropping Value Proposition through Innovation

• Develop a Strategic Base of Support for Product– Large Customers, Major Technology Partners

• Place emphasis on low Cost-of-Goods

• Cost-effective Product Development

• Global Markets

• Flawless Execution to intercept Emerging Opportunity

• Price the Products to enable Rapid Growth

• Surf the Huge Digital Consumer Wave

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Technology Waves – Successful Surfer