The Coming NPU Population Collapse

At some point in everyone’s teenage years of schooling we were all taught in a nature or biology class about cycles of population surges and then inevitable population collapses. Whether the example was an animal, plant, insect or even bacteria, some external event triggers a rapid surge in the population of a species which leads to overpopulation and competition for resources (food, space, shelter) at which point either the surge in population exhausts the food supply, or the species itself becomes food for some other predator that decimates the local population. The cycle is consistent: external trigger, population surge, resource exhaustion, and finally a collapse back to a population level that can be sustained long term in the native habitat’s normal state of affairs.

The same cycle of Boom and Bust applies to the business enterprises that we humans create in response to economic opportunities. Cycles of production in new house construction, oil production or even trendy boba tea merchants see waves of new ventures followed by inevitable market shakeouts that thin the herd, where weaker players disappear, and strong competitors survive and thrive. The semiconductor and semiconductor IP businesses are no different, as observers with long memories can no doubt recall.

IP industry shakeouts of the past

For the past 25 years, every time a new interface standard emerges or a new design trend becomes mainstream, we’ve witnessed a surge of both IP suppliers and chip startups that attempt to race to market and grab a piece of the emerging pie. In the world of processor IP, we’ve seen this happen with CPUs, DSPs, GPUs and even esoteric categories such as packet processors.

Consider, for instance, the huge population of CPU and DSP architectures that existed in the year 2000. The image below shows the three public processor IP companies from late 2000, as well as some of the more than 40 other companies either licensing cores or building silicon and systems with competing CPUs or DSPs.

The semiconductor world did not need – and could not support – all 40 architectures. That surge of market participants occurred because it was the beginning of the age of System on Chip design. SoCs need processors, and thus many processors were either born or spun out of existing tech companies. Within a few years of that Y2K peak population, the number of CPU and DSP licensing companies collapsed to less than 10. Most the names and logos in that image above ceased to exist by 2005 while several of the survivors (such as Tensilica and Arc) were gobbled up by bigger companies.

Following the analogy of the natural world, it’s fair to ask what “resource scarcity” did those CPU/DSP companies run out of? Two primary ingredients ran short: investment capital and compiler talent. Investors do not have infinite patience and thus many enterprises begun during the population explosion years of 1998-2000 (which coincides with one of the biggest stock valuation bubbles of all time!) could not sustain themselves beyond 2005. And less competitive architectures that were difficult to program suffered as they struggled to hire enough compiler talent to build advanced tools to compensate for inferior architectures. The clock ran out for most of those names.

NPUs today – We’ve seen this movie before!

Twenty-five years removed from Peak CPU/DSP, we are seeing the same movie being replayed with different actors in the world of NPU architectures. The external trigger: the meteoric rise of AI and the rush to embed AI horsepower in every device, from your smartwatch to the giant data center. A tidal wave of opportunity drew a flood of investment dollars from 2018 through 2024.

This second image captures a snapshot of just some of the competing NPU accelerator offerings – as IP and embedded in silicon – from just two years ago, when the wave of NPUs was at its peak.

Already we’ve seen several of these names disappear as each successive rapid change in AI – such as the emergence of transformers, then LLMs – rendered wave after wave of fixed-function accelerators obsolete. Today, the same scarcities that doomed the herd of CPU startups a generation ago is now rapidly thinning the herd of AI acceleration startups in today’s market. Silicon startups are failing or being acqui-hired for their engineers (the latest: Untether). NPU licensing companies struggle to build sophisticated compilers that map ever more complex AI algorithms to unnecessarily complex architectures that bolt together legacy processors with matrix accelerators. And most ominously, venture investors are no longer willing to endlessly write big checks for round after round of frenzied investment. Instead, they demand to see market traction – either silicon volume ramps or increasing licensing success.

How many will survive?

The world doesn’t need, and cannot support, 50+ NPUs. Nor does the world want to see only one survivor – no one likes having an 800lb gorilla dominate a market. 50+ will dwindle down to 5 to 10 winners. 2025 will be an inflection point in the NPU world as the population of contenders collapses. The winners will be marked by: (1) superior software toolchains (compilers) that can handle thousands or tens of thousands of AI models; (2) tooling that empowers end users to easily program new AI models onto silicon as data scientists continue to innovate as a rapid pace; and (3) business traction that attracts the fresh capital needed to continue to invest and grow. If you want to see what an emerging NPU winner looks like, head over to ww.quadric.io to see for yourself.