The network as we’ve known it for a couple of generations is changing before our eyes. The IoT is only the latest addition, although a very large one.
The electronics industry finds itself today at a tipping point (well, okay, another tipping point).
Consider: The network as we’ve known it for a couple of generations is changing before our eyes, not the least of which to accommodate the expected explosion of Internet of Things in the coming years.
ARM CEO Simon Segars put it this way at the recent ARM TechCon event in Santa Clara:
“The network we have today just can’t absorb orders and orders of magnitude more data. We’re going to have to change the network. The network itself is going to have to evolve. Silicon content is going to have to grow.”
(Editor-in-Chief Ed Sperling expands on Segars’ presentation here).
A day later, HP Labs CTO Martin Fink said this at the same event:
“Increasingly, we will start to see the data we want to process and the processors specialized to what we want to do. Do I want to deploy a general-purpose processor … to do video processing and video analytics? Maybe I want to create a specialized SoC that only does that.“
Now, consider Google, Amazon, eBay, Facebook, and Apple. Each market leaders in their respective areas. Companies like these are starting to call the tune in electronics design because they have very specific design needs, big markets and big money.
We’re just beginning to get a sense of the implications. It could be a golden age of silicon or it could be one huge squeeze play on semiconductor vendors.
Already relationships between IP providers, semiconductor vendors and system OEMs are evolving in astonishing ways.
Cadence Fellow Chris Rowen and I have talked about this a few times this year. Last week, Kurt Shuler, VP of marketing at Arteris, articulated his version of the story during a presentation at the Semico Research IP Impact event here.
Gorillas in the midst
The simple version of Shuler’s argument is this: Companies including Google, Facebook, Apple, eBay, Amazon and Microsoft are wielding enormous silicon-design influence today because they have to–and because they can. Their system needs are so tightly defined or requirements for optimization are so unique that they’ve had to assemble huge engineering teams to create customized designs.
They’re either doing it themselves all the way to the foundry door, or their engineering teams are attached to the hips of their silicon partners.
“The algorithms you need to do web search are different than what you need to do ecommerce are different than what you need to do social networking side.“
So, the traditional silicon vendors are challenged to meet these custom or semi-custom design requests within the confines of their traditional (non-custom) manufacturing models.
In some cases, these system houses have bypassed silicon vendors and designed their own chips, leveraging commercial IP such as ARM cores.
This raises the level of fear, uncertainty and doubt among silicon vendors.
So, in Shuler’s slide nearby you can see how silicon vendors might be squeezed from customers above and by vendors below (vendors who could bypass them altogether).
Shuler said, “The semiconductor vendors are sandwiched between these guys who have tons of money to … design their own chips and these guys (IP vendors) down there who are enabling anybody to build chips.”
But it’s not yet time to hit the panic button. That’s because some of these OEM/systems houses won’t take on the cost risk of designing their own chips.
In addition, the Googles, Facebooks and Apples of the world represent a fraction of the world’s system OEMs—albeit they’re very large and influential ones.
Shuler argues that silicon vendors need to:
The future of IP
What does this mean for IP vendors? Huge opportunity (earlier this year on Cascade Effects we asked Can the EDA Software Industry Evolve Successfully?). Today, IP vendors sit at one end of the innovation food chain. While their value proposition includes design flexibility, IP vendors can struggle with pricing because their semiconductor customers can always threaten to design that particular block themselves.
Implications in this brave new world for IP vendors include:
Another tipping point indeed.