LONDON ARM and Motorola pushed chip makers deeper into system-level design territory in separate announcements this week aimed at the huge but staggering cellular-handset market.
ARM Holdings plc (Cambridge, England) said it will deliver three to 10 system designs over the next 18 months that combine its cores with other hardware and software elements. And Motorola's Semiconductor Products Sector said it plans its first merchant-market releases of designs previously provided only to Motorola's cellular division, including baseband processors built around ARM cores for next-generation cell phones.
Although ARM is starting with a wireless platform, chief operating officer Warren East indicated that the company has broader intentions spanning multiple system sectors. "We want to own the definition of the platform at the architectural level," said East.
"First we offered processor cores, then we added [th e] Amba [on-chip bus], then peripherals and then platforms," said Robin Saxby, chairman and chief executive officer of ARM.
While some observers welcomed the moves, others said ARM risks alienating its top semiconductor licensees, which themselves build platforms around ARM cores. And analysts said Motorola could face a long road winning over top-tier cellular OEMs in its gambit.
The decision by Motorola Inc., the world's leading provider of components to the wireless industry, to open up the full range of its technology to outside vendors for 2.5- and third-generation terminals was a long time coming. Some 80 percent of Motorola's digital signal processors now go to the internal handset business.
"The semiconductor division's main goal was pleasing people in Schaumburg, Ill. [Motorola's corporate headquarters]," said Will Strauss, president of research firm Forward Concepts. "This is something they should have done five years ago. In the long run it will pay off, although in the short run, over the next few years, it will be tough going. Motorola, like the rest of the chip sector, is in a slump. Too bad they weren't doing the right thing a year ago, when the market was going up."
Motorola has been debating the idea of opening its cellular phone technology most notably, its crown-jewel baseband for the last several years. A turning point came last year, when the company's handset division started cutting deals with contract manufacturers as a way to reduce costs. Motorola gave its chip division the go-ahead last year to come up with a plan to sell to outside customers, said Roy Druian, marketing manager for Motorola Semiconductor's wireless and mobile products group.
"A chunk of [the semiconductor sector's] market is going from a captive arrangement to an open-market arrangement, and in order for them to have a chance to hold their position, they had to open their business to these OEMs and ODMs [original-design manufacturers]. The only solution is to go to open competition," said Stan Bruederle, a wireless-industry analyst at Gartner Dataquest.
"When we looked at the cellular phone business, we saw a migration of the value," said Ray Burgess, corporate vice president and director of strategy, marketing and communications for Motorola's Semiconductor Products Sector. The value, he said, lay both within the customer's experience, as defined by factors such as styling and brand, and from the silicon expertise located inside the handset. "There is significantly greater value on these embedded solutions that go inside the phone," Burgess said.
As part of its platform package, Motorola will provide chip sets, reference designs, protocol software (up to Layer 3), user-interface development software, and manufacturing and test tools.
But some observers believe the company may find it hard to crack top-tier cellular phone makers, which may balk at helping one of their chief competitors. Motorola, however, says it has a big opportunity getting des ign wins with lower-tier ODMs many of them in Taiwan whose engineering resources are limited.
The company estimates that some 30 percent of cellular phones will be outsourced to these ODMs by 2005, based on the assumption that users will replace cell phones more often and manufacturers will try to keep up by churning out new designs at a faster pace. "Today, there are a number of manufacturers that can build phones," said Druian.
Ironically, Motorola Semiconductor is a Johnny-come-lately in the cellular phone chip set merchant market. Its first chip set and reference design, intended for 2.5-generation GSM phones, won't be ready until the first half of next year. Companies like Analog Devices, Infineon Technologies, Philips, Qualcomm and Texas Instruments already have offerings on the table. However, many 2.5G designs are still in their early stages, giving Motorola ample opportunity to get design wins.
Meanwhile, ARM announced its first platform, the WPS, as part of a licensing d eal with Agere Systems Inc. (Allentown, Pa.) Monday (July 23), on the same day it announced better-than-expected second-quarter and interim results. Agere plans to build a series of chips for the wireless market from this platform.
The WPS comprises the ARM920 processor core, the Amba on-chip hardware bus and Prime-Cell peripheral cores. The licensee adds its own intellectual property (IP) to complete the platform.
ARM will license platforms in much the same way it now licenses cores, East said. "Sometimes, the royalty is driven to almost zero. With the platform, it is [worth] more than just the license fee surrounding the IP [cores]. There is the value of tying them together, making sure that all the OS ports run on the platform."
The selling of full-blown reference designs is not new in the industry. Texas Instruments Inc. last year rolled out its Omap cell phone platform, which uses ARM cores. Parthus Technologies plc (Dublin, Ireland) and Tality Inc. (San Jose, Calif.) have separately deliv ered platforms based on ARM processor cores for such markets as wireless handsets and Bluetooth terminals, and say they could do the same with other cores. And MIPS Technologies Inc. (Mountain View, Calif.) is said to be making progress with platform vendors.
Kevin Fielding, president of Parthus, said that ARM's platform strategy could be complementary to his own company's offerings. "There is overlap there [between ARM and Parthus], but the majority of the things they want to do have significance for software components," Fielding said. "Their impact in analog and RF is virtually nil. So we see it as not so much a competitive threat as a help."
ARM sold its stock holding in Parthus the same day it launched the platform initiative with Agere, saying the volatility of the stock market made it too risky for a publicly traded company to be exposed to the risk of holding shares in other companies.
John Bourgoin, chief executive officer of MIPS, acknowledged the growing signi ficance of platforms but said ARM's approach risked alienating the customer base.
"There's multiple classes of customers we sell to the likes of Infineon, Micron, LSI Logic; they do their own platforms," he said. "There is another class of customers, second-tier customers who just want to get into business quickly. Five years ago they would have gone to an ASIC vendor. Today they can benefit substantially from platforms. That's why we've announced we're working with Tality."
ARM is making its move from a position of strength. The company reported second-quarter revenue of about $51.5 million, up 56 percent from theyear before. The pretax profit was $17.5 million, up 46 percent.
Six days earlier, MIPS Technologies reported "disappointing" financial results for its fourth quarter and fiscal year ended June 30. Revenue for the final quarter was $17.6 million, a 21 percent decline from $22.4 million for the same quarter a year ago. Net income was $2 million, against $5 million for the final quarter of fiscal 2000.
For its part, Parthus is still effectively in startup mode as it transitions from design-services company to licensor of platform IP. As expected, the company had a net loss of $8.2 million on revenue of $19.9 million in the first half. The loss was reduced from $10.2 million for the year-ago period, while revenue rose 42.5 percent, from about $14 million. Fielding said Parthus was on a path to return to profitability by the middle of 2002.
Additional reporting by Will Wade and by Chris Edwards, the editor of Electronics Times, EE Times' sister paper in the United Kingdom.