ARC waives up-front IP fees in China

By Mike Clendenin
October 23, 2006 -- Courtesy of EE Times

Taipei, Taiwan -- A pricing experiment by ARC International could alter the way intellectual-property vendors operate in China. By waiving up-front licensing fees, the configurable-processor provider says it is catering to Chinese demand to use a product first and pay for it later. Other IP firms are skeptical.

"Maybe in the future this won't be necessary, because China will be like the rest of the world," said Dan Davis, a product-marketing manager at ARC, which is a relative newcomer to IP sales in China. "But now it has to be treated a little differently."

An aggressive Asian-market strategy has paid off for ARC, which saw its Asian revenue rise to a record high of 30 percent of sales for the first half, from less than 5 percent in the same period of 2005.

But ARC is not a big player in China. So to spur activity there, it is offering a deal to fabless design houses that manufacture its recently released ARC Player platform at Shanghai-based foundry Semiconductor Manufacturing International Corp. Design houses will pay royalties only after production starts. The chips may be sold only in China, and non-Chinese companies are not eligible for the program.

"We spent a lot of time coming up with this model, and it has gotten a very positive response," said Davis. "At some point, someone has to break through this conundrum with China and make it work."

As soon as ARC lifted the lid on the China-specific business model, competitors pooh-poohed the move as a necessary enticement for a relative latecomer. ARM Ltd.--which has about 30 licensees in China, the most of any IP core provider--said it has no intention of changing its requirement for up-front licensing fees, which can range into the hundreds of thousands of dollars for a single project license.

"The licensing fees are not the only barrier, so simply dropping them won't work," said Jun Tan, president of ARM China. "A few years ago, most of the [Chinese IC] companies were government backed, but today the majority of fabless companies have venture capital funding. Today the issue is time-to-market and risk. We can help them get to market with less risk."

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