Is IP the next Fabless? Kilopass’ Charlie Cheng thinks so.

The first time I met Charlie Cheng, he was CEO of processor IP startup Lexra. Now he’s CEO of memory IP vendor Kilopass. No surprise, Cheng thinks that IP is the future for semiconductor revenues in the US and he tells us that in an article published yesterday on EETimes.com. (see “Transforming the U.S. semiconductor business model.)

Cheng writes:

“Here, in the Silicon Valley, the semiconductor industry is very much yesterday’s news, ignored by venture capitalists, talented employees and trade publications. That makes industry pundits wonder what’s happening to the U.S. semiconductor industry, especially the startups who aspire to become another Atheros, Marvell or NVIDIA.

In my opinion, 2011 will be the year that transforms the U.S. semiconductor business model from fabless companies designing chips and building them off-shore, to focusing on just licensing the core technologies to chip companies worldwide. This model is formally called the semiconductor intellectual property (SIP) licensing business, and after its meteoric rise in the mid-1990s and much neglected due to a lack of success, is finally making a comeback again.”

The EDA360 view is that Cheng is absolutely right about the importance of IP. This is not a revolutionary idea. Not even close. Commercial IP is already a done deal. Think ARM, MIPS, Rambus, Tensilica, etc. There are successful IP companies already. You cannot design Gigagate ASICs without commercial IP. You just can’t and there’s no use arguing about it.

What you can argue about is how many IP companies the electronics industry can support. Dozens? Hundreds? Three? There’s no pat answer, so you can argue this one ‘til the cows come home.

I’ve worked for two successful IP companies in the past decade myself: Tensilica and Denali. Both succeeded on the strength of their products and their superlative marketing. There’s not much new here, either. All companies succeed or fail based on the strength of their products and on their marketing (or lack thereof). One or the other alone isn’t sufficient in IP, or any other market for that matter.

As Cheng notes, Cadence recently acquired Denali. Cadence had already signaled its new focus on IP with the publication of the EDA360 vision in April, 2010. It put the company’s money behind that vision when it acquired Denali for $315 million, as announced in May, 2010. You don’t need to ask Cadence its opinion about IP—it’s there in the acquisition press releases for all to see.

Cheng concludes his article by saying that he’s optimistic about IP’s future. Ditto.

About sleibson2

EDA360 Evangelist and Marketing Director at Cadence Design Systems (blog at https://eda360insider.wordpress.com/)
This entry was posted in EDA360, IP, SoC Realization. Bookmark the permalink.

5 Responses to Is IP the next Fabless? Kilopass’ Charlie Cheng thinks so.

  1. Steve,
    I read Charlie’s EETimes article. I agree, the IP model makes sense….. it refocuses the company up the margin curve.

    However, the billion dollar exits (ARMH, TSRA and RMBS) that investors like to see are rare.
    So I wonder, are silicon valley investors receptive to funding IP start ups?

  2. I read Charlie’s article on EETimes. Agree with his points. The IP model makes sense.

    But I wonder, are Silicon Valley investors supportive?
    Will they invest in semiconductor IP start ups they way they did in fabless start ups in 1990’s?

  3. Michael Gardon says:

    What does this then say about large companies snapping up smaller IP start-ups? The big boys can obviously innovate, but is that enough? Many smaller players have great IP, but lack some of the marketing channels that the big boys can provide.

  4. Charlie Cheng says:

    Hi Mr. Gardon;

    Quite right about IP start-ups’ lack of channel. But this problem is pervasive in other industries as well, software and telecom. So M&A is a natural solution to this issue. What I think is more interesting is whether ARM will jump in and become another channel provider. With three or five viable channels of distribution, IP vendors have more choices of partnership, and I believe ultimately it’ll also serve the semiconductor companies (customers) better to have multiple choices.

  5. Meenu Sarin says:

    I share the optimism on IP’s future.

    However, a biz model of focusing on just licensing the core technologies to chip companies worldwide, in my opinion, is incomplete – IPs are moving into the realms where one needs to not just provide the technology (sell their IPs) but also the services required to get the system/product out to the market. Facilitate in getting the product, with your IP inside, to the market; as compared to the earlier limiting your focus on just getting your IP inside a chip.

    Snapping of niche IP start-ups by the bigger players is part of the trend of these big players trying to retain/increase their lead by integrating all these in their portfolio.

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