Gartner: chip design houses will boom

While companies in the semiconductor IP space often fail to grab the public's attention, the chip designs developed by these companies help run a myriad of electronics products. While the vendors in this space rarely make anything tangible, they make money from licensing their chip designs and selling development tools and consulting services.

Many of the chip design companies design silicon for Net appliances, mobile phones and handhelds computers, so it should come as no surprise that Gartner expects these companies to enjoy robust growth. In many instances, these chipless design houses help manufacturers stay on top by providing them with designs that are in line with the most recent advances in chip technology.

"IP is a key enabler of design reuse and the only effective way of closing the 'design gap.'" Jim Tully, chief analyst for Gartner's worldwide semiconductor group, said in a statement. "Without this technology, semiconductor vendors and OEMs will not be able to take advantage of today's semiconductor manufacturing advances."

The semiconductor IP market generated $US442 million in revenue in 1999, according to Gartner's estimates. As opportunities for IP designs grow and players enhance their reputations, Gartner expects that figure to surge to $US620 million in 2000, and then catapult to a staggering $US2.94 billion by 2004.

"Today, most IP vendors are very small and are perceived by large potential customers as vulnerable," Tully said in the statement. "Customers are reluctant to purchase strategically important IP from these companies until they are a little bigger and more stable. We believe the industry will pass through this stage within two years to emerge ready for stronger growth beyond 2004."

UK-based ARM Holdings is among those profiting from the IP race, with its chip architectures proliferating in the wireless device market. ARM, which is little known outside circles of chip enthusiasts, sells IP designs to the world's major chip manufacturers and electronics companies. ARM technology is widely used in digital phones, handheld computers, entertainment devices and automotive systems on the market today.

Palm recently said it would adopt ARM's architecture as its hardware default -- a move which greatly strengthens ARM's position in the device market.

ARM, along with companies like Mips Technologies and Rambus, can help vendors make additions or extensions to chip designs that help companies adapt their hardware to industry and consumer demands.

ARM, for example, recently released a Java-based extension to its architecture in order to help phone makers and application developers take better advantage of that technology.

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Ashlee Vance

PC World
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