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Chip industry gets a break in intellectual property

Posted: 18 Dec 2008 ?? ?Print Version ?Bookmark and Share

Keywords:intellectual property? semi IP? chip market?

Despite the economic downturn, the semiconductor intellectual property (IP) market is growing, making it an active, creative and capital-efficient part of the electronics landscape.

Jim Tully, VP and chief of research for semiconductors at Gartner Inc. delivered a forceful message to the IP 2008 IP-based Electronic System Design & Reuse conference earlier this month in Grenoble, France. The gist was the downturn will end and intellectual property and design services will emerge stronger than they were before. Although 2008 has not ended yet, Tully said he expects the semiconductor IP market will exceed $2 billion this year and show about a 7.7-percent y-on-y growth.

Microprocessors, as usual, stand ahead of anything else with revenues of about $582 million and more than a quarter of the market, said Tully. A significant amount of activity and growth, estimated at 22.4 percent, also comes from analog and mixed-signal products with ADCs, pure analog and power management functions.

A closer look at the years 2007 and 2008 indicates that ASIC, ASSP design starts continue to fall. Tully said this contrasts sharply with FPGA design starts where figures continue to increase, particularly for FPGAs containing microprocessors.

"If we add up the ASSP and ASIC design starts in 2008, there will be 7500 of them and if we add up the different types of FPGA design starts, that is about 90,000. There is a considerable difference," he said.

Long drought
With reference to the consensus forecasts of economists and market analysts, Tully said an economic recovery should start around the third or the fourth quarter of 2009. Up until then, they predict a continued falling market, with the design activity continuing to fall, renegotiations of contracts, delays and more cost cuttings.

Predicting the 2009 evolution of design activity, Tully declared: "As we enter 2009, we are on a downward trend so things are getting worse. We expect that chip design activity will gradually go down until evidence of an upturn. The design services and IP situation is currently worse than the chip design situation. However, if you look at the situation as we leave 2009 those three lines are reversed compared to what they were when entering 2009."

The tricky part, Tully explained, is that people start designing things before, or in anticipation of, demand for products that will appear some time later. Therefore, the resources to design these things need to be in place before the upturn starts.

Chip companies, OEMs, IP companies and design services companies will have to pay a great deal of attention to the various indicators that will give them clues about when the upturn is about to start, said Tully. And so closely is electronics connected to the general economy that they must look beyond their industry. Some of those clues are notably the bottoming out of housing market, a stock market upturn, company investments and reducing inventory levels.

Focus on core business
In the current downturn, Tully said he expects companies to focus more on core business, on core strengths. One of the trends he identified in the IP sector was that semiconductor vendors, OEMs and IDMs are releasing their own IP, generating a certain amount of revenue for themselves. This, however, is not their core business. Thus, that trend is going to slow down for one year or two, until the situation stabilizes.

With the state of today's economy, it is more important than ever for system companies to look for third-party IP solutions. When adopted smoothly that leads to a lower cost alternative than when companies develop the IP internally, indicated Tully.

"A lot of companies will tend to go through a thinking process where they will say 'Hey, our engineering team is not as heavily loaded as it was. Why don't we get IPs done internally rather than acquiring them from the outside market?' A number of them will seriously think about that and then dismiss the idea. So, we certainly think that it continues to make sense to acquire IP from reliable outside sources."

Tully said that as the downturn bites, companies should be preparing the messages "we can help you cut costs" and "we can help you innovate" for their customers. It is not only a question of talking about prices but also of working with other IP companies in partnership to prove certain functions work together and offer pre-verified solutions of multiple blocks because that is going to help customers save money.

Change in foundry strategy
A new trend is also emerging at foundries as TSMC, UMC and many others now have to provide a lot of basic and not so basic building blocks for their customers. These chip companies do not want to have to source them separately and then struggle to integrate them. Then, they want their foundry to almost give them a chip with working peripheral circuits to which they bring an added value.

Tully explained: "Chip companies will look to all the suppliers, not just the foundries, to help them do more for them. That reduces the amount of work that semiconductor vendors need to do." He continued: "We have been seeing that foundries have been providing more physical libraries. The foundries will provide more IPs, more design services, and they will continue to do whatever they can to minimize the amount of efforts that the customers need to do."

Nonetheless, Tully stated, it is not easy to integrate IPs. For instance, integrating just software or hardware functions tends to be easier than doing complex system-level integration with lots of blocks. The integration of purely digital logic is easier than the integration of analog, mixed-signal, RF functions.

The bottom line, Tully noted, is that it is never going to be easy but it can be made easier with good documentation, good support and good communication between IP buyers and sellers.

- Anne-Francoise Pele
EE Times Europe

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