Warren Savage On: Beyond The Naught Decade - Part 3

Warren Savage

Monday 01 February 2010 11:00

In last week's Part 2 of this series I continued commentary from Part 1 on how the last decade marked a transitional period between the 20th and 21st century tech eras, with a discussion on how the shift of venture capital, private equity, and the globalization of companies has affected our industry.

In this final segment, I'll wrap up the look backwards with changes in the IP market and then take my chances with predictions about what the next decade will bring.

IP Grows Up

As semiconductor companies disaggregated and supply chains developed to allow new semiconductor companies to be formed quickly and cheaply, the market for 3rd-party IP opened. As the decade began, the IP market was not unlike the cottage industries of the 17th and 18th centuries. It was primarily a services business with many players and uneven quality. Bad companies died of natural causes (unhappy customers) and good companies rode the wave of double-digit growth.

While the number of IP companies remained very high to service the huge number of vertical niches in the semiconductor market, a few players rose to the top based on some unique differentiation that took advantage of the market structure to gain a sustainable competitive advantage. Let's talk about some famous examples.

ARM Ltd., without doubt the king of IP, achieved that position by having superior technology that was not locked to any particular foundry or customer. That portability gave customers the safety to know that their software investments would be protected and sent the message to software developers and ecosystem providers that supporting the ARM architecture provided them the largest possible TAM. Such win-win-win business models are almost always successful, and ARM was among the first to recognize that.

Artisan Components was among a sea of silicon library providers that provided the cell level IP needed by all semiconductor companies. Artisan's innovation that separated them from the also-rans was that selling libraries to individual design projects at hundreds of customers all over the world was a futile act of hand-hand combat. Instead they recognized that the natural point of distribution of IP libraries was with the foundries - not the customers. Provide the libraries free of charge to customers, and get your money from the foundries was a breakthrough in efficiency for all concerned. Again, a win-win-win model when customer, IP provider, and foundry all benefit from an efficient structure.

Finally, Synopsys also achieved success in IP by taking advantage of its long held power position in EDA to get its DesignWare offering into the market through its vast sales channel. Synopsys' twist on success was to create a product that could be packaged and sold like an EDA tool - not a traditional IP license like one would expect from ARM or Artisan. By building a product that is fit to a successful channel versus building a channel to fit the product, all the benefits of scalability could be brought to bear at virtually no expense.

In the decade we saw ARM rise to be head and shoulders above the crowd, acquire Artisan in 2004 for nearly $1bn, and Synopsys zoom to the #1 position in EDA and #2 (behind ARM) in IP. I am firm in the belief that there are numerous other opportunities for similar success in the coming decade.

Conspicuously absent from any success stories in the decade are service companies with an IP business line. Like the industrial revolution of the 19th century wiped out the cottage industries, the Naught decade similarly put hard economic pressure on these companies to keep up with product oriented companies, as I've frequently mentioned in speaking engagements and noted in my column last summer.

Moving on to the "Tens"

I like the sound of the "tens" as a description of the coming decade. It's positive. On a scale of 1-10, ten is the best (please no emails, I know 11 is even better). And who among us is without fond memories of Bo Derek in "Ten" from 1979, kicking off the golden age of semiconductors in the 1980's.

Seriously, there is a lot to look forward in the decade ahead. The entire industry has completed a lengthy and painful restructuring during the last decade, effectively clearing the bramble and setting us up for a new era of growth and innovation.

Such growth will provide opportunities for new companies to be founded in semiconductor, EDA, IP, and even services. Like the winners in the last 2 decades, the winners in this new era will find new ways to differentiate themselves from others.

Once again the wheels of entrepreneurialism will start moving, attracting capital to the best business ideas that have learned from the successes and failures of the previous generations of companies.

It's an exciting time, and I can't wait to see what happens next.

Warren Savage, President and CEO of IPextreme,is a well-knownand published authority in the field ofsemiconductor intellectualproperty.

He has a long history of pushing the envelope of designmethodologyfrom his work in fault tolerant computing at TandemComputers inthe 1980's and driving reliable design methodologiesintocommercial practice at Synopsys for its DesignWare IP productinthe 1990s. Much of his thinking became embodied in the seminalbookon IP reuse, the Reuse Methodology Manual.

Previous columns

(Nov07) Warren Savage On: Making the CaseforInventedHere

(Dec07) Warren Savage On: Swiss Cheese Solutions

(Jan08) Warren Savage On: CollaborationNeededforSuccess

(Feb08) Warren Savage On: Knowing Your No

(Mar 08) Warren Savage On: TheNextBigThing

(Apr 08) Warren Savage On:GummingUpthe Works?

(May 08) Warren Savage On:WaitingforGodot

(Jun 08) Warren Savage On:OurVirtualFuture

(Jul 08) Warren Savage On:BeingPluggedIn

(Aug 08) Warren Savage On: TheDogDaysof Summer

(Sep 08) Warren SavageOn:Samurais,Sedans, and Semiconductors