IP99: Opportunity beckons, but few can follow

IP99: Opportunity beckons, but few can follow
By Richard Goering, EE Times
March 24, 1999 (5:13 p.m. EST)
URL: http://www.eetimes.com/story/OEG19990324S0026

SANTA CLARA, Calif. — New consumer applications open an era of tremendous opportunity for providers of silicon intellectual property (IP), said John Bourgoin, chairman and chief executive officer of MIPS Technologies Inc. (Mountain View, Calif.), in a keynote speech at IP99. But it has already become very difficult for newcomers to follow in the footsteps of successful IP firms such as MIPS, ARM and Rambus, Bourgoin said.

In a speech entitled "Opportunities and challenges in the post-PC era," Bourgoin argued that a new level of computing power opens many consumer opportunities that are not based on PCs. Specifically, he said that the 32-bit and 64-bit processor market, where MIPS is focused, will experience rapid growth through such embedded applications as video games, set-top boxes, handheld devices and cellular phones.

But it takes a high level of investment to tap that opportunity, Bourgoin said. "IP should be sustainable for some comp anies, but it will be difficult for new companies to reach the necessary levels of volume, value and protection," he said. "In my view, a small number of semiconductor IP companies will make it over the hump."

The mantra of "volume, value and protection" resonated throughout Bourgoin's speech. Volume is important, he said, because royalties comprise such a small percentage of individual unit sales that high volumes are needed for profitability. And that makes life difficult for startups, he said.

The need for value is "deeper than for any other product or service," Bourgoin said, because IP providers must offer something that's not easily obtainable, yet must charge an attractive price.

Protection is crucial, he said, because an IP company's sole value is in its IP — not in inventory or manufacturing. Bourgoin noted that it's possible for competitors or customers to copy a processor architecture without a license.

For a processor company, Bourgoin said, there are unique challenges, such as the need to provide a tool chain that includes compilers, debuggers and operating systems. That results in a "chicken and egg" situation, he noted, because third-party providers want to wait until a processor architecture is successful before introducing such tools — yet customers need the tools to get started with the processor.

"Processor designers are particularly hard to hire and retain," Bourgoin said. "The designs are among the hardest. The project times may be measured in years."

But external IP will become increasingly important, Bourgoin said, because it offers "access to world-class solutions at a shared cost model. It's a little like the open-source software model."

Bourgoin noted some recent discussion of the open-source model as it pertains to IP. But the open-source software model doesn't directly apply, he said, because there is no reasonable way for an individual user to build and test modifications to hardware. Also, any hardware changes may require changes to compilers and debuggers, which may not be open.

However, Bourgoin said that the MIPS business model is "surprisingly close" to the open-source model, in that licensees can change the instruction-set architecture. These changes may later be incorporated into the product, he said, benefiting future users.