IP Revenue to Climb 25% in 2006

Staff Reporter -- Electronic News, 8/14/2006

Demand for semiconductor intellectual property (IP) is growing and benefiting chip vendors as it shifts from simple IP to complex IP, according to Gartner Inc.

According to the firm, worldwide IP revenue is projected to total $1.8 billion this year, a 24.9 percent increase from 2005 revenue of $1.4 billion. By 2010, worldwide semiconductor IP is forecast to surpass $2.7 billion.

“The semiconductor IP industry has matured considerably during the past five years,” said Christian Heidarson, senior research analyst for Gartner’s semiconductor group, in a statement this morning. “However, the next five years will bring major challenges to business models as demand for IP shifts from standard functions to more complex specifications.”

Gartner predicts that IP reuse will become even more important to chip design going forward, especially in the context of Moore’s Law. By boosting the productivity of design teams, IP reuse fuels one of the main trends in the chip industry: device integration, the firm said, noting that Moore’s will still apply in 2010, making IP reuse crucial if chip makers are to achieve the large-gate-count chips required by future electronic products.

“For design teams to keep pace with Moore’s Law, the IP in these complex designs has to get even more complex,” Heidarson said. “Also, new types of IP are required to meet the demands of the most complex devices, for instance, IP blocks to support network-on-chip architectures

“Vendors of highly differentiated IP will need to adapt their business model to pursue large deals with fewer customers. However, this will be a risky strategy for small vendors who may not survive if there are delays in market developments or a key customer fails outright,” Heidarson continued.

Gartner analysts expect a significant number of complex IP solutions to be supplied by fabless semiconductor companies to complement their chip revenue.

“The implication for the semiconductor IP industry is that it will become more segmented. There will be firms that focus on smaller IP blocks,” Heidarson said. “We expect vendors of highly differentiated IP to themselves become significant customers of smaller IP blocks, and that many of these firms will be semiconductor vendors. We advise players in the IP industry to prepare for a market landscape where, by 2010, at least two semiconductor vendors are found among the top 10 IP vendors.”