Gartner Says Semiconductor IP Companies Trying to Find the Business Model to Succeed

2002 Results Show Revenue Continued to Grow in Emerging Semiconductor IP Industry

EGHAM, UNITED KINGDOM, June 18, 2003 -- The semiconductor intellectual property (IP) market continued to outperform the semiconductor chip market in 2002, as worldwide semiconductor IP revenue grew 5 percent in 2002, with revenue of $933.8 million, according to Gartner, Inc. (NYSE: IT and ITB). By comparison, the worldwide semiconductor chip industry grew by 1.9 percent in 2002.

The top two vendors, ARM and Rambus, accounted for more than 30 percent of the total market (see Table 1). Some of the strongest growth rates were by Synopsys (block library), TTPCom (platform), Artisan Components (varied) and Monolithic System Technology (memory). Despite this growth, vendors are still trying to determine the best model for success.

"Business models for IP vendors are a topic of much discussion, with a large amount of experimentation taking place," said Jim Tully, vice president and research director for Gartner's emerging technologies and semiconductor group. "Even among the top 10 vendors, there are narrow-focused vendors, broadline players, vendors of commodity products, differentiated product vendors, library suppliers, block vendors and platform/solution providers. Some companies focus only on IP, while others are primarily in a different business."

Table 1
Top 5 Worldwide ERP Software Application New License Revenue Market Share Estimates for 2002

Company	2002 Revenue	2002 Market Share (%)	2001 Revenue	2001 Market Share (%)	Growth (%)
ARM	184.9	19.8	168.0	18.8	10.1
Rambus	97.4	10.4	107.3	12.0	-9.2
Synopsys *	73.2	7.8	45.0	5.0	62.7
TTP Com	58.0	6.2	39.5	4.4	46.8
ParthusCeva *	51.2	5.5	40.9	4.6	25.2
Virage Logic	47.5	5.1	34.8	3.9	36.5
Artisan	43.7	4.7	27.8	3.1	57.2
MIPS Technologies	43.1	4.6	70.2	7.9	-38.6
Mentor Graphics	25.7	2.8	30.4	3.4	-15.5
Monolithic System Technology	24.9	2.7	9.5	1.1	162.1
Others	284.1	30.4	318.1	35.7	-10.7
Total Market	933.8	100.0	891.5	100.0	4.7

Note: 2001 revenue for ParthusCeva and Synopsys represents those of Parthus Technologies and Synopsys, respectively. Parthus Technologies changed name in 2002 to ParthusCeva after acquiring the Ceva IP business from DSP Group. In 2002, Synopsys acquired InSilicon, RIIC and Lateral Sands, IP companies previously covered in this study. 2001 revenue for DSP Group, InSilicon, RIIC and Lateral Sands are included in "Others," while revenue for 2002 have been consolidated in the acquiring company.
Source: Gartner Dataquest (June 2003)

Royalty revenue was hit harder than license revenue because of poor semiconductor conditions. However, royalties remain the major way forward for the industry.

"Vendors must develop business models that will build royalty revenue for the benefit of vendors and users," Tully said. "But, the royalty percentage should not be allowed to grow over 50 percent as this would expose vendors to the relative volatility of the semiconductor market."

IP vendors are often blinded by their technology and give too little attention to value. Gartner analysts said profitable business models will only emerge once the value proposition is clearly understood and addressed.

"Value can lie in unique technology, applications expertise, support services or simply making it easy for customers to evaluate, buy and integrate the product. Wherever it lies, value must be at the core of a successful business model," Tully said.

Gartner defines a semiconductor IP block as a pre-designed function to be implemented in one or more semiconductor devices, such as application-specific integrated circuits (ASICs), application-specific standard products (ASSPs) or programmable logic devices (PLDs).

Additional information is available in the Gartner Dataquest Market Statistics report Semiconductor Intellectual Property: Worldwide, 2002. This report provides vendor revenue rankings by IP block type, revenue type and region reveal the growth areas. This report can be purchased on Gartner's Web site.

The latest research by Gartner's semiconductor group can be found in the Gartner Semiconductor Focus Area. Reports can be purchased on the Internet at www.gartner.com.


About Gartner:
Gartner, Inc. is a research and advisory firm that helps more than 10,500 clients leverage technology to achieve business success. Gartner's businesses consist of Research, Consulting, Measurement, Events and Executive Programs. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and has 4,000 associates, including more than 1,000 research analysts and consultants, in more than 75 locations worldwide. Fiscal 2002 revenue totaled $907 million. For more information, visit www.gartner.com.