Commentary: Electronics IP Industry – An August 2010 Update


Electronics IP Industry – An August 2010 Update

by Dr. Russ Henke
Henke Associates


Attention Loyal Readers of the Electronics IP Industry & the EDA Industry Commentaries presented here quarterly since 2003:

Don’t worry – they aren’t going away! They will each continue to appear quarterly, but the latest EDA and IP information will be combined into one quarterly document that will be published as part of the EDA WEEKLY collection. The first edition in this new format will appear in late December 2010 or early January 2011, cleverly entitled, "EDA & IP Industry Commentary for Q3 2010." Subsequent EDA and IP information will likewise appear each subsequent quarter in this fashion.

Content-continuity with previously-posted IP and EDA data will be fully preserved, as follows:

  • The last stand-alone Electronics IP Industry Commentary for August 2010 covered the G5 IP vendor revenue & earnings results, etc., for Q2 2010.

  • The last stand-alone EDA Industry Commentary for July 2010 covered the G5 EDA vendor revenue & earnings for nominal Q1 2010.

  • Subsequently, the G5 EDA vendor revenue & earnings for nominal Q2 2010 were contained in the EDA WEEKLY issue of September 13, 2010, entitled, "Whither EDA?"

  • All previous Commentaries and EDA WEEKLIES, including those referred to above, are immediately available to readers by clicking on the “Archived Commentaries” or “Archived Weeklies” URL’s that appear in their respective identity boxes on the main front page of

In each of the previous twenty-eight (28) quarterly issues of the Electronics IP Industry Commentaries, Henke Associates examined the recent financial histories and future outlooks of the remarkable phenomenon of Electronics Intellectual Property (IP) providers, a niche that had emerged in its own right by 2003 to claim a substantial amount of revenue in the world of Electronics Design Automation.

Henke Associates had arbitrarily selected eight (8) publicly-traded companies originally (called the "Group-of-8" or "G8"), as representative of the then-current financial state of the Electronics IP industry. At the end of 2004, ARM completed its acquisition of Artisan Components, Inc., thereby reducing the "G8" to "G7". In August 2009 Mentor Graphics completed its acquisition of LogicVision, thereby reducing the “G7” to “G6”. Then on June 10, 2010 Synopsys and Virage Logic announced that Synopsys would soon acquire Virage Logic. This transaction is proceeding apace, with one result already evident; namely, there will be no Q2 2010 financials released by Virage Logic.

Readers may also be interested in reading the latest EDA WEEKLY dated August 16, 2010, entitled, “The State of IP”:

In the following August 2010 Commentary, the financial performances of the remaining "G5" public Electronics IP vendors for the second quarter of 2010 will be considered:

The slight format change from previous quarterly Electronics IP Commentaries adopted last quarter will also be used in the current issue; namely, selected Vendor News Highlights will accompany the vendor-by-vendor details, rather than bunching all the IP news highlights at the beginning of the Commentary.

We will however begin with some general news:

General Electronics IP related News Highlights:

On August 2, 2010 the Semiconductor Industry Association (SIA) reported that global sales of semiconductors in the second quarter of 2010 grew to $74.8 billion, an increase of 7.1% from the first quarter total of $69.9 billion. However, June 2010 sales of $24.9 billion were just 0.5% higher than May 2010 when sales were $24.8 billion.

“Sales in the first half of 2010 were exceptionally robust, driven by strong demand from a broad range of end markets,” said the new SIA President * Brian Toohey. “Worldwide semiconductor sales of $144.6 billion for the first half of 2010 were more than 50% higher than the same period of 2009 when sales were $96.1 billion. We expect that sequential growth rates will moderate in the coming months, with the result that year-on-year growth for the industry will be in line with our mid-year forecast of 28.4%.”

The SIA noted that the extraordinary year-on-year sales growth reflects not only strong demand from key end markets but also the effects of the industry slowdown in the first half of 2009.

“Macroeconomic factors such as consumer confidence, job growth, and overall economic growth continue to bear watching for their possible impact on sales in the second half,” Toohey concluded.

About the SIA Global Sales Report and the SIA itself:

The SIA Global Sales Report (GSR) is a three-month moving average of sales activity. The GSR is tabulated by the World Semiconductor Trade Statistics (WSTS) organization, an independent, non-profit organization established by the global semiconductor industry to compile industry statistics. The moving average is a mathematical smoothing technique that mitigates variations due to differences in companies' financial calendars. The SIA itself is the voice of the US semiconductor industry, America's number-one export industry over the past five years. SIA seeks to continue US leadership in this critical sector that employs 185,000 people in the USA, and provides the enabling technology for America's $1.1-trillion high-tech industries with a US workforce of nearly 6 million people.

* Brian C. Toohey took office on July 19, 2010 as president of the Semiconductor Industry Association (SIA). Toohey, 42, succeeds George Scalise who has led the association since 1997. Prior to joining SIA, Toohey served as senior vice president of the Pharmaceutical Research and Manufacturers of America (PhRMA). He has also held senior management positions at DEKA R&D Corporation, AirCell, Inc., and the US Department of Commerce.

“No industry has done more to advance the frontiers of science and technology than the U.S. semiconductor industry,” said Toohey. “For more than 60 years, leadership in technology has been the foundation for enhancing the productivity of American workers, driving economic growth, enabling advances in medical science and health care, improving our standard of living, and ensuring national security. It is a great honor to succeed George Scalise as president of the association representing this industry. We will continue to advocate policies and programs to maintain and expand U.S. leadership in semiconductors.”

George Scalise will remain with SIA as president emeritus through the end of 2010. However, the SIA will complete a relocation of its headquarters from San Jose, California, to Washington, DC in September 2010.

Comments from Outside Observers:

In a separate article, on August 2, 2010 Benjamin Pimentel of MarketWatch reported that some analysts have already warned about a potential slowdown in the chip market. In an August 1, 2010 note, Wedbush analyst Patrick Wang counseled caution (in dealing with chip market stocks), saying, "While cycle fundamentals appear intact thus far, we see increased risk of downside." He cited several warning signs, including slower growth in China and Europe and below-seasonal "second-half build forecasts" for PCs and handsets.

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