Semiconductor IP News and Trends Blog

Consolidation Threatens Semiconductor Market

Challenges from a shrinking semiconductor market, the emergence of subsystems and increases in patent infringements will affect future IP creation.

A recent Technavio study of the global semiconductor Intellectual Property (IP) market focused on three major players: ARM, Synopsys and Imagination Technologies. Each company has major strengths but face major challenges in the years ahead. One of the biggest threads comes from industry consolidation, which translates to slower growth rates.

Merges have been the chief form of consolidation in the EDA market.

The semiconductor industry – especially but not limited to the EDA tools segment – has experienced increased consolidation in the last few years. Consolidation has typically occurred through the acquisition of other companies. Synopsys’s recent buying spree is but one example of the consolidation taking place across the industry. (see, “Was IP Key to Synopsys-Magma Deal?”)

Consolidation of chip design and even manufacturing firms means that EDA tools vendors will have fewer customers to sell to. This trend could lead to a loss of future sales and growth.

Semiconductor IP suppliers are not immune to the flattening of the EDA market. Chip designers and manufactures need EDA tools to create IP-rich System-on-Chip (SoC) products. Consolidation of the tools industry may affect the third-party IP supply market.

One solution to a shrinking market is to grow into adjacent markets. While lacking a strong internal IP offering – either by design or chance – Mentor and even Cadence have successfully grown into embedded and software markets, outside of the established EDA chip design space.

Additionally, consolidation of a different sort is occurring within the world of third-party IP. To handle increased complexity, component IP is being synthesized into subsystem blocks. The rise of IP subsystems means more IP functionality is being packaged into a single license. Incorporating signal component IP with subsystem blocks may shrink the number of IP companies that can compete in the future.

But increased system functionality requires a platform that can integrate all of the pieces and support a larger range of interfaces. ARM has embraced this strategy by developing interface standards to ensure the successful integration of most of the IP needed for today’s SoC designs.

The success of the company’s systems approach to designing SoCs has opened up an expanding range of new markets for ARM. Unfortunately, this success may present a new threat to the company. According to the Technavio study, ARM’s creation of more “functionally capable products” across a broader range of end markets increases the risk of patent infringement – the seeming blight of modern innovation.

Many believe that IP continues to be the best way to drive innovation and increase revenues. But challenges from a shrinking semiconductor market to increases in patent infringement cases will undoubtedly affect the way the IP is created and sold in the future.