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Valuing serdes intellectual property

Posted: 23 Apr 2002 ?? ?Print Version ?Bookmark and Share

Keywords:serdes ip? interface protocols? backplane? ip licensing? interconnect ic?

Companies designing chips with high-speed serial links face a classic choice: develop this IP in-house or license it from a third party.

Jeremey Donovan of Gartner Dataquest
Recently, the communications industry has seen an unprecedented proliferation of high-speed interface protocols. Though these interfaces differ in many ways, nearly all of them use similar serializer/deserializer (serdes) intellectual property. Companies designing chips with high-speed serial links face a classic choice: develop this IP in-house or license it from a third party.

Like any intellectual property make vs. buy decision, the decision to make or develop serdes IP rests on factors including IP licensing costs, IP development costs, strategic value of owning IP and integration costs of IP cores. Many of those factors rest on the topic of this column: valuing serdes IP.

A simple way to value serdes IP is to use merchant silicon pricing as a proxy. Serdes IP exists in its purest form in off-the-shelf backplane interconnect ICs. Though there are multitudes of backplane interconnect devices on the market, let us use the Mindspeed M27211, which is an 8x3.125Gbps with 8B/10B encoding that sells for $119. This implies a price of $4.76 per 1Gbps. Taking 50 percent out for gross margin and another 25 percent out for manufacturing, the actual value of Serdes IP probably hovers around $1.25 per 1Gbps.

So then, what is the total value of serdes intellectual property in the communications semiconductor world? To help answer that, I turn to Gartner Dataquest's port-based system and semiconductor model.

Aggregating every kind of portfrom T1/E1 to Gigabit Ethernet to OC-192there was approximately 16.2 petabits of line interface bandwidth shipped last year. Sounds shocking, but consider that there was 22.4Pb shipped in 2000. This 16.2 petabits of line interface traffic was probably supported by another 24.3Pb of backplane bandwidth.

Here, I assume 50 percent extra backplane capacity to support redundancy and overspeed. A total of 40.5 petabits at $1.25 per 1Gbps yields a total Serdes intellectual property market value of $50 million. This represents a reasonable upper bound to the third-party Serdes IP licensing market on an annual basis.

? Jeremey Donovan

Gartner Dataquest

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