LONDON Worldwide sales of semiconductor intellectual property grew 40 percent last year to $689 million, suggesting that the young, vigorous market is becoming established, according to a recent report from Gartner Dataquest (San Jose, Calif.). At the same time, the increased licensing of software with semiconductor IP is transforming the market. Software licensing grew from about $15 million in 1999 to about $36 million last year, for an annual growth rate of 146 percent, Dataquest said.
The software boom is reflected in the success of Parthus Technologies plc (Dublin, Ireland), which provides product-enabling platforms rather than single blocks or libraries. Parthus' licensing sales grew 264 percent in 2000.
Software IP is forecast to grow at well above the hardware IP rate over the next few years, although it is probably the conjunction of hardware and software IP, together with appropriate design services, that represents the m ost winning strategy.
Dataquest defines a semiconductor IP block as a predesigned function to be implemented in a semiconductor device such as an ASIC, ASSP or PLD. As in 1999, the top three semiconductor IP vendors last year were ARM Holdings, MIPS Technologies and Rambus Inc., with sales of $114.2 million, $91.8 million and 72.3 million, respectively. Their collective business accounted for 40 percent of the entire semiconductor IP market, compared with 51 percent in 1999.
"Overall market growth has accelerated. ARM, MIPS and Rambus still lead, but it's opened up a lot in the last year," said Jim Tully, chief analyst for Gartner Dataquest's Semiconductor Industry Worldwide group. "This is a difficult business in which to make money, particularly for block-based vendors. The uncertainty of success in this market is a big hindrance to market growth, as customers are concerned that a supplier of critical technology could go out of business. Vendor instability and uncertainty will take time to resolve. "
Some consolidation is looked for in the market, Tully said, but there is also a low barrier to entry. A number of companies previously cast as design-services businesses, such as Tality Inc. and Parthus, are testing the IP waters. Dataquest now tracks 140 IP companies.
Led by ARM and MIPS Technologies, microprocessor blocks dominated worldwide IP revenue in 2000, reaching $242 million. Bus-interface blocks were the second-largest category, reaching $129 million. Interface blocks for PCI, USB and IEEE 1394 have proved to be popular functions for third-party IP providers because of the ease of verifying a standard function.
Of software IP and its growth, Tully said, "Much of this software has previously been provided free of charge along with hardware IP blocks. This must change as vendors find ways to position the value of software more realistically.
"Vendors will increasingly offer specific system functions in hardware and software forms," Tully said. "That will allow the customer to make the choice based on trade-offs in specific system configurations."
The full survey details are available in the Dataquest Market Statistics report titled "Worldwide Semiconductor Intellectual Property Market Share Rankings, 2000."
The report shows companies ranked separately by license and by royalty revenue. In royalty revenue, MIPS continued as the leader despite a 19.2 percent year-to-year fall in license revenue, while second-ranked ARM more than doubled royalty revenue, with a 112.1 percent growth.
Consumer and communications applications continue to be those most likely to use licensed IP, while the United States remained the largest geographic market for IP in 2000, representing more than half of the worldwide market.