Where The Wild Things Are…

By Kurt Shuler
After spending the past month on the road meeting customers in China, Korea and Europe, I finally had the opportunity to read Maurice Sendak’s excellent children’s book, “Where the Wild Things Are,” to my two year-old son this weekend. I see some parallels between the world experienced by the book’s young protagonist, Max, and what I learned from Gartner analyst Ganesh Ramamoorthy’s excellent presentation last week at the IP-SOC conference in Grenoble.

In the book, Max has to confront a menagerie of scary imaginary monsters by staring them down one by one, and subsequently becomes their master. In the semiconductor IP market, we are also staring down our own monsters. But if we target the right markets, we can be their master.

At least that’s my slightly convoluted explanation of the takeaway from Ganesh’s presentation. After showing data on rising semiconductor inventories and falling margins in almost every market segments except smart phones, Ganesh stated, “If you are selling IP, you need to target the smart phone market.”

The reason why is shown in the graph I created above. The growth in the cumulative number of Apple iPhones sold to date, and most likely still being used, is exponential and dwarfs the stagnant growth of the general worldwide economy. (The cumulative number of iPhones sold, and most likely still in use, is increasing 10x every three years if we use the almost straight line after Q3 2009.)

Think of cumulative iPhone sales as a proxy for a new computing use model we’ll call “ambient computing,” where the dream of always-on connectedness and computing capability is finally becoming reality. The first market where these new models are establishing themselves is the smart phone market, and therefore this market is growing immensely, perhaps at the expense of other markets as consumers choose to spend their precious money on smart phones versus other products.

For IP vendors that have targeted this market, the rewards have been enormous. But this market also requires the best technology, the quickest adaptation to changing customer needs, and the fastest rate of technology and product innovation. Many IP vendors have chosen to avoid this market and to focus on less risky and more predictable markets. This made sense when the general semiconductor market was growing but may seem like a mistake in retrospect.

All is not lost, however: The same requirements that are driving smart phones are also starting to propel digital TVs, automobiles, and even kitchen appliances into the age of ambient computing. In fact, if you look at the current SoC architecture of a digital TV or audio infotainment processor, what you are looking at is last year’s smartphone application processor SoC architecture. This means that IP companies that missed the first wave of ambient computing technology can still pursue the second wave.

So let’s not get depressed when we read stories about declining semiconductor sales or rising inventories. This is an opportunity for us to accept the challenge to innovate for the fastest changing markets our world has ever seen, and to be a part of the ambient computing revolution.

–Kurt Shuler is director of marketing at Arteris.