Suppliers couple IP with design services to add value

The IP industry grew 25 percent to $892 million in 2001, when the semiconductor industry itself and most other industries saw negative growth, Tully said.

But a trend is emerging this year in which companies are offering not only their own IP blocks to system customers, but a combination of hardware and software IP along with other vendors' IP cores plus design services, Tully said. This trend, practiced by traditional IP vendors and by design services companies, will spur further growth of the IP market, Tully said.

"We believe platforms developed by design services houses will become a very common t heme of the IP market because they offer the value that people really want," he said.

Only a few players have built successful businesses using a business model of offering customers standalone silicon IP blocks, Tully said. These companies, such as ARM Holdings Ltd. and MIPS Technologies Inc., have differentiated themselves by offering "best in class" cores to customers, Tully said. Many other early players in the silicon IP market offered cores that could have easily been created by a system house's own engineers or by other IP vendors, and thus could not sustain a viable business, Tully said.

Design services have similarly proven to be a tough business, especially in the economic downturn, Tully said.

But companies that don't offer "best in class" IP have found that they can add value with a combination of platforms and design services, he said. Parthus Technologies plc and TTP Communications plc were cited as having successfully deployed this model. Each has established itself a s a leading player in the silicon IP market by offering platforms along with design services for the cellular phone market, he said.

Companies in all segments of the IP market have adopted platforms, Tully said. Even library companies are offering specialized blocks of I/O with their libraries to differentiate themselves from competitors, he said.