Electronics IP Industry – A June 2010 Update
by Dr. Russ Henke
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 EDACafe.com.
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”.
Accordingly, in this June 2010 Commentary, the financial performances of the "G6" Electronics IP vendors for the first quarter of 2010 will be considered.
In a slight format change from previous quarterly Electronics IP Commentaries, selected News Highlights accompany the vendor-by-vendor details, rather than bunching news highlights at the beginning of the Commentary.
Current Group-of-6 ("G6"):
For the “G6” companies above, it is assumed that all of their revenues are Electronics IP sales and/or directly related IP services. While other companies and vendors play roles in the IP industry; the G6 has been chosen as representative. (Note: For the second half of calendar 2009, the G6 total revenues represented 80.5% of the Semiconductor IP (SIP) revenues reported by the EDA Consortium).
For the most part, the electronics IP niche is hardly two decades old, with only MIPS having been founded before 1990. (While MIPS was founded in 1984, it focused for many years on building a RISC processor within Silicon Graphics before moving toward the IP game). The current incarnation of MIPS, called “MIPS Technologies, Inc.”, was founded in 1998.
Below are listed the founding dates in chronological order of the pre-acquisition members of the original Group of 8 IP vendors:
Historically, UK-based ARM has been dominant, often claiming almost two-thirds of the total G6 revenue in any given period. But even this picture is changing, as other vendors execute their own expansion strategies.
How did the Electronics IP G6 perform in the Q1 2010?
Table 1 below shows that the combined G6 total revenues ballooned to $362 million in Q1 2010, up sequentially 63.6% compared to their total of $221 million in Q4 2009, and fully 91.6% higher than the year-over-year Q1 2009 total of $189 million. While all 6 vendors grew sequentially from Q4 2009 to Q1 2010, an unusual occurrence in itself, the 425.6% Q4 to Q1 Rambus revenue growth anomaly was primarily caused by payments from Rambus' Q1 settlement of a long-running dispute with Samsung (as explained in detail in the Rambus-only section in the sequel). The same Samsung deal allowed Rambus to overtake ARM for the most revenue in Q1 2010, a feat that will be difficult to duplicate, since normal Rambus quarters have been in the $30 million revenue class.
As it did in the previous quarter, Virage Logic claimed third place in the Q1 2010 revenue race among the G6, with its $25+ million. MIPS delivered double digit percentage sequential growth in Q1 2010, but MIPS could not match its year-over-year Q1 2009 $17.7 million performance, with both figures after the MIPS Analog Business Group business unit is subtracted. The other three vendors manage sequential growth Q1 2010 over Q4 2009.
Only MIPS among the G6 in Q1 2010 did not exceed its year-over-year Q1 2009 revenue mark; ARM, CEVA, and MoSys delivered double digit percentage growth year-over-year, and of course Rambus' Q1 2010 was way better than its Q1 2009 revenue number.
Relative to Earnings, Table 2 reveals that three of the six vendors (CEVA, MIPS, and MoSys) delivered slightly less profit in Q1 2010 than in Q4 2009, quarterly sequential behavior that is classic between the change of years. But the ARM, Virage Logic, and of course Rambus' improved Q1 2010 profits easily overwhelmed the others' modest sequential reductions, such that the profitability of the G6 overall improved slightly more [$175,313,000] in Q1 10 vs. Q4 09 than the improvement generated by Rambus alone [$174,192,000].
Indeed, four of the six covered vendors were in black ink in Q1 2010, vs. three in Q4 2009 and only two in Q1 2009. But Rambus' Samsung deal allowed it to deliver nearly 80% of the year-over-year $212,173,000 improvement in G6 profits Q1 2010 vs. Q1 2009.
Q1 2010 Results of Individual G6 Electronics IP Providers:
On April 27, 2010 ARM Holdings plc announced its unaudited financial results for the quarter ending March 31, 2010, and said Q1 2010 demonstrated continuing ARM progress against its strategy with its highest ever unit shipments leading to record royalty revenues, profits and net cash generation.
Q1 2010 total revenues were $143.3 million, up 2.4% sequentially over Q4 2009 revenue of $140.0 million, and year-over-year up 18.5% over Q1 2009 revenue of $120.9 million.
Total license revenues in Q1 2010 increased by 6% year-on-year to $43.0 million, representing 30% of group revenues. License revenues comprised $34.2 million from PD and $8.8 million from PIPD. Total royalty revenues in Q1 2010 increased by 33% to $77.5 million, representing 54% of group revenues. Royalty revenues comprised $66.7 million from PD and $10.8 million from PIPD.