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IP Trumps Moore’s Law in SoC Costs

Apple continues to reduce system costs through customized chip design via IP integration and software tailoring, not through traditional cost per gate.

No one doubts the intrinsic value of design reuse via third party semiconductor intellectual property (IP). Incorporating IP of known quality into a chip design allows companies to concentrate on their core design competencies while adding all the other functionality required for today’s complex System-on-Chip (SoC) integrated circuits. Large ecosystems of third party IP suppliers exist to fill this need within a royalty-based business model.

A large company can gain additional advantages over the royalty-based model through outright ownership of critical IP. Acquisition of IP allows a company to customized the IP to meet specific design needs or processes, e.g., such as low-power. Further, acquisitions give a company access to valuable technical IP in the form of engineers and process professionals. Finally, acquisitions may afford a strategic advantage to a company, allowing them to limit competition to key IP technology.

In practice, large companies follow both approaches to varying degrees. For example, ARM acquires IP companies as necessary but focuses much of its energy on building and supporting the third-party ecosystem.

Intel has recently begun in earnest to emphasize the development of its IP ecosystem – mainly consisting of companies it had acquired. (see, “Intel Challenges ARM with IP and Interconnect Strategy”)

Recent news shows that Apple follows the same approach of customizing its design chain through the IP acquisition.  Apple’s recent purchase of Anobit adds memory controller expertise to the company’s existing low-power microcontroller (PA Semi) and DSP (Integrity) portfolios.

However IP is obtained – through royalties or acquisitions – it is the game changer. “In the SoC era, system performance and development costs are not dominated by cost per gate (Moore’s Law) but rather chip design and software,” said Gus Richard, an analyst with Piper Jaffray & Co., in a report, which was obtained by SemiMD. (see, “Apple Buying Anobit as it Builds IP Portfolio,” by Mark LaPedus)

“The (Apple) A5 processor is not faster than an Intel processor, but instead it has a large number of IP blocks that execute functions with lower power and typically more quickly than a general purpose CPU. We believe that the CPU is only a portion of the SoC and has become less relevant,” he said. “This coupled with the fact that Apple’s software is written to work with one set of hardware resources significantly reduces software development cost as compared to Windows that needs to run on an infinite combination of hardware resources.”

This tight coupling between chip customization and software is replacing processor performance as the critical design driver. While this realization is nothing new, the technical reality continues to play out in a shift to subsystem rather than component IP development. Augmenting this shift to subsystem IP are the business realities of a slow global economic recovery and the very large cash reserves of many tech companies. All of which suggests that IP-based acquisitions will increase in the near future.

(First appeared in Chipestimate.com – IPInsider)

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