In their September 2003 and December 2003 Electronics IP Industry Commentaries, the authors examined the recent history and future outlook of the remarkable phenomenon of electronic Intellectual Property (IP) providers, a niche that has emerged in its own right to claim a substantial amount of revenue in the world of Electronics Design Automation (EDA). We had arbitrarily selected eight (8) publicly-traded companies (hereinafter known as the "Group-of-8" or "G8"), as representative of the current state of the IP industry. In this February 2004 commentary, we look at the performance of these same vendors during the fourth quarter and the calendar year 2003.
Group-of-8 (G8):
For the G8 companies above, we will assume that all of their revenues are IP and directly related IP services.
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. The value proposition for prospects is faster time to market, less technological risk, and lower development and testing costs.
Customers of IP providers include independent manufacturing facilities or foundries, integrated device manufacturers, application specific integrated circuit manufactures, system manufacturers and fabless integrated circuit companies. IP vendors offer non-exclusive licenses, while retaining ownership of their design intellectual property, including that developed under contract engineering services. The sources of revenue are licensing fees, maintenance and support fees, engineering services and royalties. Royalties can be on a per-integrated circuit or per-wafer basis. A typical royalty might be 8 cents a chip. Since chips containing IP are found in PCs, cell phones, consumer entertainment and so forth, the volume can be in the tens of millions. Royalties are received when chips incorporating IP are actually manufactured. Consequently, there can be a considerable time lag between the time the IP is delivered and the time royalties are received, if at all. Royalty revenue is recognized in the quarter in which a report is received from a licensee detailing the shipments of products incorporating intellectual property components, which is typically in the quarter following the sale of the licensee's product to its customer. Up front fees including non-cancelable pre-paid royalties are included in licensing fees. How did the G8 perform in the fourth quarter of 2003? On the revenue front, the combined Q4 2003 performance was up 12.4% sequentially and 16% year over year. The percentage winners year over year were Ceva, Artisan Components and Rambus. Ceva is an anomaly because the company was formed in November 2002 by combining two entities, only one of whose revenues contributed during the fourth quarter of 2002. Q4 2003 decliners were led by MoSys, followed by LogicVision and Virage Logic. MoSys suffered a major drop in royalties from Nintendo's Game Cube. On a sequential basis, only MoSys had a drop in revenue, while only ARM and Rambus had increases over 10%. See Table 1 and Figure 1.
Table 1 Quarterly Revenue of the Group-of-8 (G8) IP Providers  Be the first to review this article
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