Since the early days of the system-on-a-chip, third-party IP vendors have struggled to sell their wares to systems companies that, for the most part, are already sitting on a wealth of internally developed technologies.
Now those same OEMs have begun to mine their caches and license IP to other companies. In one example, a Fujitsu Ltd. subsidiary-Fujitsu Digital Technologies-last week began trading its communications-centric analog blocks on the Virtual Component Exchange, an online IP catalog.
Does this spell the end for the hundreds of fledgling
IP companies out there? Probably not directly. But how much opportunity is left to go around depends on whether you believe that, one, merchant IP is an enabler of infinite new ASIC designs, or, two, the number of ASIC design starts logged in the past year is lower than anyone guessed.
Certainly the high-volume SoC designs that produce steady, long-term revenue streams for a couple of lucky IP vendors are fewer and farther between than in the heady days of past semiconductor boom cycles.
For OEMs, on the other hand, recycling IP by selling it to noncompetitors may be a sensible way to help offset development costs, which can reach into the millions of dollars for a single interface, signal processor, or codec that might otherwise be used just once. Reputation alone could help open doors to design sockets that would remain closed to lesser-known IP vendors.
According to Gartner Dataquest, some OEMs-as well as some integrated device manufacturers-have begun to embrace the concept and are quietly licensing their home-grown technologies to noncompetitors, usually on a one-to-one basis. For Fujitsu to go further and place its IP in the open market is a sign that the third-party licensing model is alive and well, though it continues to take new forms.
Yet the evolutionary process seems to bring the IP market no closer to realizing its potential. The same three players dominate the field as they did five years ago. ARM Ltd., MIPS Technologies Inc., and Rambus Inc. serve as the models for a seemingly endless parade of IP start-ups, but few, if any, will ever achieve their level of success.
In 2000, the troika claimed more than 40% of the IP revenue of $690 million. Dataquest currently tracks more than 450 IP vendors. While the market research firm projects compounded annual growth of 35% for the IP market over the next five years, that still leaves room for little more than a niche play. For a bigger long-term payoff, IP vendors would do well to consider taking a fabless semiconductor approach.
In the interest of survival, some already have. But for companies with a solid foundation elsewhere in the market, selling slightly used, proven IP could turn out to be a decent sideline business.
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