Electronics IP Industry View - How important is the Intellectual Property market?

In a May 2003 EDA Commentary by Russ Henke (published on EDACafé.com),the then-current yearly and quarterly financial performances of a select group of publicly traded Electronic Design Automation (EDA) companies were analyzed and compared. Expectations with respect to the future financial performances of these same EDA entities were documented as well.

Then in August 2003, a second EDA Commentary was published by the same author that examined how prescient those EDA industry predictions were back in May and discussed the outlook for nine EDA vendors for the rest of 2003 and beyond.

In this Electronics IP Industry Commentary, we examine the recent history and future outlook of the remarkable phenomenon of electronics Intellectual Property (IP) providers, a niche that has emerged in its own right to claim a substantial amount of revenue in the more general world of electronics design automation. Dr. Henke offers his thoughts on the subject.

"FASTER - BETTER - CHEAPER - SAFER -- will the pressure never cease? It would seem not! Every business enterprise faces accelerating change and aggressive competition. High-Technology companies may be the most challenged of all! Rapid growth - shorter product life cycles - fewer people - stretched management resources - increased security "all push both vendors and users to the ragged edge."

Familiar words, to be sure. But those who have toiled in high technology for decades argue that these competitive challenges are not recent trends at all; they applied equally in the 1950's and 60's! During the last third of the 20th century, the emergence of automated software and graphics tools to help improve designer productivity across the entire electromechanical spectrum are without doubt direct responses to these ongoing competitive challenges.

Moreover, clever designers and engineers have always sought to reuse previous, successful designs and components when confronted with a fresh design challenge. If a solution worked before, why re-invent the wheel? During the early years in electomechanical engineering, when existing designs were still archived on paper, blueprints, or microfiche - whether for an engine connecting rod or for a radio's printed circuit board - design reuse was somewhat awkward. Nevertheless, reconstituting an existing design was still beneficial in terms of both time savings and improving the odds that a new design would actually work the first time. In general, the greater the level of reuse, the better, even if total innovation were occasionally mitigated.

Then and now - to be reused, of course, a valid previous design needs to be easily retrieved. With early automated software, however, many designers would often opt to do a fresh design for a new component completely from scratch, rather than endure the hassle of laboriously searching for old design files whose correspondence to the actual part might be in doubt. The emergence of modern automated mechanical CAD/CAM and electronic design automation software systems not only adds speed and efficiency, but also provides convenient part data management tools to track older designs and the multiple versions of the current design under development.

Indeed, many of today's mechanical assemblies and electronic circuits are so complex that they cannot be designed at all without design automation tools. Accordingly, the benefits of improved time-to-market via reuse become even more important.

Clearly, electronic systems manufacturers who most successfully leverage their own in-house designs for reuse possess a compelling advantage over competition. The existing designs often become so valuable that these assets have been termed, "Intellectual Property" (IP), a moniker borrowed from the legal profession.

Not unexpectedly, electronics entrepreneurs quickly identified a market opportunity to license their in-house IP to other companies, creating brand new revenue streams and helping to speed greater numbers of new electronic products to a worldwide market.

Today, electronic ASIC, IC, MCM, board and systems designers nearly always face tight time-to-market windows. To meet their development schedules, designers often have no competitive choice other than reuse of their own and/or third party intellectual property! This is especially so when designers seek to place an entire complex system on a single chip (i.e., when SoC designers integrate the functionalities of previously discrete IC's onto a single silicon die). Thousands of successful designs testify to the fact that the extra costs of IP license fees and/or ongoing IP royalties paid to third-party IP providers, are well worth it.

IP providers today supply an incredible array of hard and soft reusable cores, design blocks and "integration platforms" for a broad range of digital applications, such as DSP processors, encoders/decoders, bus interfaces, micro-processors, memories, micro-controllers, and related data communication cores. Moreover, soft cores are usually available in Verilog and/or VHDL, which can be synthesized and targeted to almost any semiconductor foundry process. Most available soft cores and IP blocks are fully documented, pre-tested and verified, and support the software tool flows from most leading EDA vendors.

Not surprisingly, sizeable consulting opportunities materialized to assist systems designers with the entire complex process. The professional services divisions pioneered by EDA vendors Mentor Graphics and Cadence in the early 1990's, are good examples. Such outside assistance is especially important when SoC designers encounter the often-deleterious physical effects and design rules of technologies that are approaching nanometer scales.

How important has electronics IP become? How are the public IP providers doing financially?

Electronics IP has become a sizable niche unto itself in recent years. As one indication, just check out the list of some 100 or more current partners on the Design & Reuse e-portal ( http://www.us.design-reuse.com/partners), a global collaboration network founded in 1997 in Grenoble, France for sharing design resources in the electronics SoC industry. Another sign of growth and acceptance is the existence of the VSI Alliance and its 4-year-old initiative on Quality Intellectual Property (QIP). See Peggy Aycinena's lead article in the August 25, 2003 EDAcafe Weekly Magazine.

In 2000, according to Dataquest/Gartner Group news releases, the worldwide semiconductor IP market totaled $689 million, up 40 percent from 1999 revenues of $492 million. (see Figure 1) The top three IP providers in 2000 (ARM, MIPS Technology and Rambus) represented 40 percent of the worldwide semiconductor IP market that year.

In April 2002, Dataquest stated that worldwide semiconductor IP market growth had "slowed" during 2001 to 25%, advancing to $892 million in 2001 compared to $713 million in 2000 (adjusted from the $689 million figure previously reported). ARM, MIPS Technology and Rambus again led the IP market niche in 2001, but by then the three market leaders had begun to yield some market share to smaller IP providers, said Dataquest.

For the record, the Top 3 EDA Vendors overall - Cadence, Mentor Graphics, and Synopsys - who also provide IP along with their other major software and services offerings, were not among the top three IP providers in the 1999 through 2001 period, according to Dataquest.

Finally, in June 2003 Dataquest reported that the worldwide semiconductor IP market had barely eked out a 5 percentage points growth figure in 2002, from $892 million in 2001 to $934 million in 2002. While ARM and Rambus continued to win and place, respectively, Dataquest estimated that Synopsys' IP revenues allowed Synopsys to claim the "show" position among the top three IP providers for 2002.

1999 2000 2001 2002
Total Electronics IP Market $492 $713 $892 $934

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