In any game whether it is a sport, market competition, or war, the players often start the game with their best move, watch the actions and reactions of the competing players, and then adjust their next action accordingly. So, each player takes the actions in the sequence: act, learn, and adapt. It is assumed that players are rational and they take actions within their constraints.
Game Theory offers excellent perspective to analyse market competition. One of the classic cases that can be modelled by Game Theory is entry by new firms into a market. The theory can be useful to explore the likely actions of both incumbents and entrants. It is expected that the players are rational, so the actions of each player can be predicted; they will both stick to respective actions that offer each of them the most optimal payoff. Under market conditions, payoff can refer to revenue, market share or both. Incumbents will be mostly inclined to gather market share aggressively, so as to shrink the addressable market for the entrant. They can pursue this objective with reduced pricing, complementary offerings, etc. Entrants do not have either market share or cash piles, so often they focus on business-model innovation or target a niche segment within the addressable market. In my view, the reaction of a dominant incumbent to entrant’s actions, justifies whether the entrant has some market potential or can poses a threat to incumbents.
RISC-V is a revolutionary attempt to democratize chip design. It is an open-source and royalty-free CPU ISA, which can be used to design SoC based on your requirements. You can fine-tune performance, power and price of the SoC, as per your needs. Some challenges are still there for this open-source ISA to achieve mass-adoption; however, I believe it is going in the right direction by creating an ecosystem of both hardware and software around the ISA. With RISC-V, you can design custom SoCs with very low investment.
The existing market dynamics has created a renewed interested in custom SoCs, mostly driven by frugal cost-sensitive IoT nodes and questionable Moore’s Law. So, the timing of RISC-V entry would not have been better. In case you are interested to know more about Custom SoCs, then please take a look at my post Why, How and What of Custom SoCs.
Currently there are multiple options for CPU ISA, including ARM, MIPS, Andes, Tensillica, ARC, and few more. Most of these ISAs are available with standard and custom options. Among these, ARM is the dominant player with extensive offerings that addresses from low-end to high-end applications. RISC-V, with its open-source ISA, has pursued business-model innovation that challenges the existing licensing models pursued by most other companies.
Is RISC-V really a threat for the incumbents?
To answer the previous question, let us take a look at actions of the dominant incumbent ARM in the last few years.
In the last 2 years, ARM has shown renewed interest in enabling custom SoC design at low cost. ARM DesignStart program enables chip designers to build custom SoCs at low cost and fast time-to-market, by offering proven CPU IPs, along with associated peripheral IPs and subsystem. Pre-2010, ARM DesignStart program was limited to free evaluation access to Cortex-M0. In 2015, a fast-track license for Cortex-M0 was released, and the following year, an ecosystem around the program was offered with EDA partners and design partners. Recently, the program is extended to include Cortex-M3, along with zero upfront license fee and a success-based royalty fee to minimize risk for commercial custom SoC development.
Exploring the reasons
I am not aware of the exact reasons of ARM’s renewed interest on low-cost custom SoCs; however, it may be attributed to the following:
It may be a combination of both as well. However, based on the timing of renewed focus on DesignStart and then followed by some improvements to the program recently, I am more inclined towards RISC-V entry as the major reason.
In the RISC-V website, I noticed that their first public event was mentioned as “RISC-V at HotChip-26” on 12th Aug, 2014. Further, I checked some archives of leading online journals, and I found that RISC-V started getting public coverage during early second-half of 2014. And as noticed above, there is an array of updates to the DesignStart program from 2015. Read a piece on relaunch of DesignStart posted on 14th Oct, 2015. Is it a coincidence? I don’t have a concrete answer; maybe you can share your views.
To further substantiate my view, I encourage you to take a look at the EIU The Internet of Things Business Index 2013. The report is sponsored by ARM. The report highlights the business applications of IoT-based products in various industries and revenue potential of enabling new business models with IoT sensors. One of the prime erstwhile reasons for IoT adoption was mentioned as the falling cost of underlying technology, which consists of sensors and actuators. If it was already known that low-cost is one the major drivers of IoT adoption, then why it took ARM around 2 years from 2013 to 2015, to amend the existing DesignStart program and further reduce entry barrier for designing custom SoCs that can be used to build application-specific sensors?
The post does not intend to question the strategies adopted by ARM. It is my humble attempt to apply the theoretical framework of Game Theory into a real-life business case. I strongly believe that all competitors, irrespective of their potential, should be taken seriously. Companies should aggressively devise counter-strategy to pre-empt competitors’ actions.
Irrespective of the rationale behind the updates and improvements to DesignStart, it is more important to note that the industry is benefitting from the competition. Now, start-ups and small companies have CPU ISA options to design custom SoCs based on their budget and performance requirements. Competition spurs innovation in terms of business-model and technology.
I strongly believe in the democratic business model of ARM, in which all the stake- holders of the fabless ecosystem makes money. In my earlier blog posts, I have shared my insights on why Intel, although having huge cash flow, failed to penetrate the smart phone SoC market. I believe the primary reason is that it was a competition between ARM’s ecosystem and Intel (with its vertically integrated business model).
Ecosystem enables network effects to take place, and it is difficult to challenge incumbents who hold important positions in the over-all value chain. Currently, ARM occupies such a position in the embedded and IoT market. For RISC-V to challenge ARM, the former must create an extensive ecosystem around its ISA. With an open-source ISA, RISC-V has opened up the value-chain further by going one step back from ARM, which earns revenue from licensing its ISA. So, RISC-V has more potential to create a symbiotic ecosystem. Read more on this competition in my blog ARM vs RISC-V: Beginning of a new era.
I believe there are lacunae in the post, as it attempts to stitch together articles from public domain and arrive at a conjecture. If you would like to share your views or you believe that the post is just a work of my vivid imagination, then I would love hear from you.