In 2005, the market for semiconductor intellectual property (IP) grew by 16 per cent to reach $1.4 billion. While patent-related IP revenues accounted for a large part of this growth, 2006 is turning out to be a strong year also for non-patent revenues. The IP market has consolidated over the last three years as traditional product categories are maturing and penetration of digital IP sockets is reaching saturation.
Looking forward, however, the demand for IP is evolving — mirroring the increasing complexity of the system-on-chip (SoC) devices that the IP is used in. The evolving IP industry will present new opportunities for the Indian semiconductor design services industry.
Semiconductor IP is crucial for the continuing progression of Moore's Law, especially for the design of more integrated SoCs. To keep up with Moore's Law, SoC designers require larger, more complex IP blocks. At present, these complex IP blocks tend to be designed by semiconductor vendors' in-house teams, though they will often be made up of simpler IP blocks acquired from the third-party market. But as semiconductor vendors shift their attention to the system-level challenges of designs with very large gate counts, they will also need third-party solutions for the more complex IP blocks. Gartner forecasts that the semiconductor IP industry will grow at a compound annual growth rate of 14 per cent over the next five years, to reach $2.7 billion by 2010. This forecast assumes that the IP industry will be able to meet the demand for more complex IP blocks.
Complex IP provides greater opportunity for differentiation than does simpler IP, which is often based on industry standards. Complex IP will include a programmable core and possibly some degree of configurability to achieve flexibility across multiple applications. Application expertise is required to optimize interactions between the compute core, peripherals and memory. Much of the differentiation will lie in the way functionality is partitioned across hardware and software and in providing SoC designers with streamlined interfaces that hide the complexity.
However, greater differentiation increases the demand for customization. Companies offering highly-differentiated, complex IP will need to adopt business models that can support fewer customers with higher-value IP deals. This brings the IP business model closer to that of design services—and poses the same challenges in terms of scalability.
(source: Christian Heidarson, Gartner Group EE Times Europe 08/17/2006 6:41 AM)