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Silicon IP vendors size up China challenge

Posted: 02 Jul 2007 ?? ?Print Version ?Bookmark and Share

Keywords:Silicon IP business? China IC industry? fabless company?

In the silicon intellectual-property (IP) business, ARM Ltd may be gaining traction in China, but it remains a challenging landscape for most other pure-play IP companies, which can usually count design wins on a single hand.

Nevertheless, these players keep pounding on doors in hopes that dogged persistence will pay off in the long term because they believe that China will one day be an epicenter of chip design. "This is not about the business you are going to see next quarter or the quarter after. China for us is three, six, nine years out," said Carl Schlachte, CEO of ARC International, a core and media subsystem IP provider.

But today, smaller IP providers like ARC have to figure out a way to stay in the game. With ARM scooping up much of the early business, the next wave of IP providers is hustling to close deals in a country that has been notoriously miserly in the value it places on IP.

ARC, for instance, has waived its up-front licensing fees on its ARC Player platform. "After we made that announcement, we closed a deal immediatelyin what must have been record time," Schlachte said. But since then, ARC hasn't announced any more deals, although it says that a handful are in the works and should close soon.

Configurable-core provider Tensilica Inc. is also finding its way. It's a newcomer to the region, having opened an office in 2005. Since then, Tensilica has won two design-ins. That's not much, but the company is betting that things will improve. "China is maturing a lot faster than we had thought," said Steve Roddy, Tensilica's VP of marketing. "Five years ago, there weren't even that many companies that could integrate a hard core, and now you have a lot more that are able to integrate multiple soft cores in their designs."

Not really gravy
With 500 or more fabless companies to choose from in China, it should be gravy, right? Not really. Of that number, perhaps 50 appear capable of getting a product to market. And those companies usually play it safe, opting for project-by-project licenses instead of comprehensive (and more expensive) licenses that would allow them to do multiple projects. But numerous deals are where the real money is for IP vendors.

"If you look at the largest Chinese semiconductor companies, they are still very small. I don't even know if they would make the top-50 list of semiconductor companies," Roddy said. "So until some of those companies get big, we won't be able to really gauge the overall size of the IP market opportunity in China."

ARM, for its part, has spent more than five years wooing customers and seeding the supply chain and universities with its design tools and educational materials. In addition, much of the design work today in China is for mobile phone and portable devices, where ARM is particularly strong.

But it's the followers that have the more interesting story, because these organizations usually have fewer resources and are unknown to many Chinese companies. So it might take a few extra dinners, drinks and maybe a karaoke session to close a deal.

MIPS Technologies Inc., however, seems to be an exception to that rule. After two years in the market, where it has been a conservative presence, MIPS has built up about a dozen design wins. The company is increasing its engineering staff in China and is working with a few universities to familiarize students with its architecture, with the hope that they may become future users.

But MIPS still has to make up a lot of ground to catch rival ARM, which has more than 30 customers and has blanketed the universities. "I have very optimistic plans, so I wouldn't say we are ahead of that, but we're progressing at a good rate," said Jack Browne, VP of marketing at MIPS.

Virage's Potts: I don't have to take off my shoes' to count customers.

For most pure-play IP vendors, China will remain a tough nut in the near term. "We have a handful of customers. I don't have to take off my shoes to count how many," said Ken Potts, VP of product marketing at Virage Logic Corp. "But the opportunity in China is exploding. We actually have a couple of 65nm engagements."

Confident but careful
Many IP companies report that they are growing more confidentbut not fully comfortablewith the assumption their IP will be protected by Chinese licensees, even in soft-core format. "It's not something that we worry about too much," Potts said. "Just like the United States, China started respecting IP law when they had something to lose."

There is still some demand for flexibility in licensing in China, but most vendors insist that they are toeing the line and not offering any special deals. In general, the feeling is that most of the serious contenders in the Chinese design community are quickly recognizing the importance of the plug-and-play IP in chips that need to quickly move to market.

"We'll always see pricing pressure there," said Bill Martin, general manager of Mentor Graphics Corp.'s IP group, which mainly sells utility IP, such as USB, serial ATA and Ethernet cores into China. "Sometimes my sales team comes in and says the company wants a certain price, and I tell them no way. I tell them there is a lot more value that you aren't necessarily showing the customer. They usually come back with a better price. But we do have to let some go."

Mentor said it agreed to a request to offer a royalty model rather than upfront licensing at one Chinese foundry, but this hasn't been done since the model became available last June. "They said they wouldn't need that model all the time, but they wanted a fallback position. That card hasn't been played yet, but it's there if we need it," Martin said.

- Mike Clendenin
EE Times

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