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OEMs skipping design firms, licensing chip IP themselves

Posted: 11 Oct 2013 ?? ?Print Version ?Bookmark and Share

Keywords:OEMs? SoC? chip design?

Traditional semiconductor companies must respond to the rapidly changing industry dynamic or risk being on the losing end. Current market competition involves OEMs taking the driver's seat in chip design, not content on letting design firms call the shots, says Arteris VP Kurt Shuler in this piece for EE Times.

System OEMs in the hottest areas of technology are hiring their own chip designers in droves. It used to be a leverage play for these companies but the evolution is relentless: OEMs are now gearing up to produce their own chips.

The stakes are high and game-changing dynamics are in play. In a bygone era, chip companies used to control the feature definitions of the devices they produced. Now it is consumer mobility OEMs and box vendors that play a bigger role in calling the shots. Companies like Apple, Amazon, Microsoft, Google, Facebook, and others are increasing their leverage in this game by hiring teams of SoC design experts to shape the next category-defining device like the iPhone, iPad, Xbox, or Google Glasses. Even companies such as Lenovo are hiring semiconductor staff to raise their game against the smartphone competition.

The industry has evolved to the point where chip design has been demystified. The era is dawning where OEMs license semiconductor IP themselves, use their own team to layout the design in RTL and then deliver the GDSII files directly to a leading foundry. The trend has already taken hold in the server space where one industry insider believes that Facebook and Google will eventually bypass traditional chip vendors.

Chip companies that want to play in this market had better learn the new rules quickly and provide the cutting-edge feature sets that define these new markets. That means a greater ability to adapt, turn new designs, and deliver new system-on-chip devices with the specific features that enable OEMs to innovate.

Times have changed dramatically since semiconductor companies ruled the roost. Chip vendors used to control 99 per cent of the chip design talent in the industry, but those days are past. In today's world, perhaps 75 per cent of the top silicon design engineers work for chip vendors and the remaining 25 per cent are being snapped up by OEMs. That's because the SoC design determines competitive advantage now more than ever, and software differentiation is not enough.

Apple, Microsoft, and Google started this trend

This trend raised eyebrows when Apple Inc. acquired P.A. Semi in 2008 and Intrinsity in 2010 which helped them bypass Samsung as a vendor and develop their own ARM-based A5 and A6 application processors. Apple started down this road when it demanded touch screen capability, low-power dissipation and small form factors that the merchant silicon industry would not provide. Instead of waiting around for silicon suppliers to come around, Apple created its own SoCs for iPhone and iPad devices and the OEM-chip vendor relationship was changed forever.

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