Xilinx participates in the $7 billion complex CMOS logic market. The programmable logic portion constituted 11% of the total in 1994. Today, Xilinx's offerings are able to meet the speed and density needs of nearly this entire market. The greatest impediment to our capturing a larger portion of the total market is price. Programmable logic can cost customers two to seven times more than a comparable gate array because gate arrays require comparatively less silicon. As costs decline, programmable products will capture a larger share of the existing gate array market.

The programmable logic market is very price elastic. Advanced submicron process technology and new architectures have enabled Xilinx to reduce product prices at rates of up to 40% per year, while increasing unit volumes. Some argue that gate arrays will go down the same cost curves and therefore will continue to have a price advantage. For programmable logic. the silicon portion often represents as much as 90% of the total cost. Gate arrays, on the other hand, are smaller in die size, with typically less than 30% of the total product cost in the cost of silicon. The cost disparity between programmable logic devices and gate arrays narrows considerably as programmable logic devices reduce the silicon area by moving to smaller, more advanced process technologies.

More powerful software is as important to cost reduction as improved silicon efficiency. If a customer must purchase a higher density device because the software does not route efficiently, the customer pays a significant premium for the unused silicon. Consequently, Xilinx concurrently develops new architectures and the enabling software. The role of software in reducing cost and improving performance is crucial to expanding the use of Xilinx integrated circuits.

Who benefits the most from these cost reduction strategies? Obviously, our customers.

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