Gartner Says Worldwide Semiconductor IP Industry Grows 21 Percent in 2004 as Industry Experiences Significant Consolidation

EGHAM, UNITED KINGDOM, June 9, 2005 — Worldwide semiconductor intellectual property (IP) revenue totaled $1.27 billion in 2004, a 20.7 percent increase from 2003, according to Gartner, Inc. While the industry experienced strong growth, it saw significant consolidation.

"There are signs that the market is maturing," said Christian Heidarson, analyst for Gartner's semiconductor research group. "Unsuccessful players have withdrawn, there have been increasing number of mergers and acquisitions and there is greater competition among the top vendors."

Advanced RISC Machines (ARM) extended its lead in the market with its acquisition of Artisan Components (see Table 1). In 2004, its revenue was more than twice the size of its nearest competitor Rambus and three times that of TTPCom, the two closest competitors.

Table 1
Worldwide Semiconductor IP Vendors by Total IP Revenue
Estimates (Millions of U.S. Dollars)

Company	2004 Revenue	2004 Market Share (%)	2003 Revenue	2003 Market Share (%)	Growth(%)
ARM *	312.2	24.5	175.2	16.6	78.2
Rambus	144.9	11.4	118.2	11.2	22.6
TTP Com	104.1	8.2	76.4	7.2	36.3
Synopsys *	76.2	6.0	78.9	7.5	-3.4
MIPS Technologies	56.7	4.5	40.4	3.8	40.5
Virage Logic	53.0	4.2	40.6	3.8	30.5
Ceva	38.5	3.0	36.8	3.5	4.6
Imagination Technologies	28.6	2.3	23.6	2.2	21.3
Mentor Graphics *	27.3	2.2	22.2	2.1	22.8
Silicon Image	20.8	1.6	14.2	1.3	46.7
Others	411.5	32.3	429.3	40.7	-4.1
Total Market	1,273.8	100.0	1,055.7	100.0	20.7

Note: Revenue figures for ARM, Synopsys and Mentor Graphics in 2003 represent those of the core companies before acquisitions. In 2004, ARM acquired Artisan, an IP company previously covered in this study. Revenue for Artisan in 2003 is included in "Others", while calendar-year revenue for 2004 has been consolidated under ARM. Synopsys acquired Cascade Semiconductors, another IP company previously covered in this study, in 2004. Cascade's 2003 revenue is also included in "Others" while calendar-year revenue for 2004 has been consolidated under Synopsys.
Source: Gartner Dataquest (June 2005)

"Microprocessors made up the largest part of the IP market, with ARM holding the largest share of the market," Mr. Heidarson said. "Part of this segment's growth is attributed to the move from 2.5G to third-generation (3G) baseband designs, which will require higher-performance cores from ARM. The growth of digital video, portable consumer electronics and voice over wireless local area network (WLAN) also helped drive new licenses for MIPS Technologies, the second-largest microprocessor core vendor."

Royalty revenue grew 39 percent in 2004, while license returns grew 17 percent. Gartner believes the trend is for royalties to continue to outperform income from licensing. Proceeds from licensing are limited by a downward trend in the number of new designs.

"The IP industry has always been very dynamic and despite signs of maturing, this has not changed, " Mr. Heidarson said. "This is shown by the number of emerging markets. The market for non-volatile memories has seen several new entrants, and they have already achieved good progress. The market for encryption cores emerged in 2003 and has grown fast. After years of little or flat growth, analog and mixed signal IP began to grow again in 2004, and we expect to see much more from this part of the market."

Semiconductor IP is defined in this report as a predesigned block of circuits used in semiconductor devices. These typically include application-specific integrated circuits (ASICs), application-specific standard products (ASSPs) and programmable logic devices (PLDs). Recently, the list has included microcontrollers and embedded microprocessors, which increasingly make use of third-party IP.

Additional information is available in the Gartner report Market Share: Semiconductor Intellectual Property, Worldwide, 2004. The report is available on Gartner's Web site.

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