Monday May. 07, 2007
New Business Models for IP
Up to 60% of an SoC designed today consists of purchased IP. As that number pushes towards an asymptote somewhere near 100% the inevitable question is whether the business models we know today will breakdown.
There are 3 fundamental business models that are in play today:
• License fee + Royalty. In this classic model practiced by leaders such as ARM, the customer pays an upfront fee for the rights to use the IP and then pays the IP owner a royalty based on the percentage of the value of the chip it's used in.
• Subscription model. This is typically a royalty-free model practiced by leaders such as Synopsys that treats IP like an EDA tool. The customer can use the IP freely as long as they have the license needed to implement or simulate the IP. No more license, no more IP.
• Foundry subsidized model. This is typically practiced by the foundries who will provide certain IP to their customers as long as they use their fab. This effectively is a royalty-only model.
With so much IP being needed to produce a commercially interesting SoC, the question are:
• How much engineering budget is going to be set aside to pay for IP?
• How much stacking of royalties from all the various IP titles is going to be possible before making the cost of the chip non-competitive?
Recently here in Silicon Valley, a panel of IP companies (Panelists cite pitfalls of silicon IP business) spoke about new business models being required for IP. The panel was moderated by Intel's Ken Tallo, who kicked off the session talking about the need for IP companies to provide more than just IP blocks (lumber and nails) and to offer full solutions and platforms (prefab kitchens). While the panel couldn't agree on much of anything, especially any new business models, they all remained bullish on the IP market.
However, I think there is some ring of the future in Mr. Tallo's comments. Imagine chips that are not assembled one block at a time, but one subsystem at a time. Such large IP block represent even greater value to customers and should command a higher price and participation in the end customers profits. Time will tell.
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About the Author
Warren Savage, President and CEO of IPextreme, is a well-known and published authority in the field of semiconductor intellectual property.
He has a long history of pushing the envelope of design methodology from his work in fault tolerant computing at Tandem Computers in the 1980's and driving reliable design metholologies into commercial practice at Synopsys for its DesignWare IP product in the 1990s.
Much of his thinking became embodied in the seminal book on IP reuse, the Reuse Methodology Manual. Warren is taking his vision to the next level with his latest company, IPextreme, which is focused on enabling broad commercialization of IP captive in large semiconductor companies.
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