Analyst Liu Jiongde of Huaguan Investment Co, Ltd said that according to the survey, the global silicon intellectual property industry is expected to grow at a CAGR of +5% between 2022 and 2028, but the research team believes that as the semiconductor process develops below 3nm, the functions carried on a single chip will increase The more complex the IC design becomes, the more difficult it will be to design ICs, and the Research expenses will inevitably and Development that IC design companies need to invest is increasing. With the development of technologies such as the Internet of Things, the number of terminal devices will continue to increase, which will drive the increase in the number of IP authorizations. In summary, IP licensing will continue to play a central role in the IC industry.
At the end of the article, we will use stocks as an example.
- Rapid interconnection of computer nodes in the 1970s
- The personal computer was invented in the 1980s
The personal personal computer is connected to a network to realize mutual communication and exchange, and the industry related to the PC and the Internet is called IT (Information Technology).
At that time, the semiconductor manufacturers with silicon developed a so-called IDM (Integrated Device Manufacturer) model by the material, that is, one company managed all the work from IC design to subsequent manufacturing and packaging and prove to sell. Although the one-stop operation model can understand the progress and cost of product development flexibly and efficiently, as the semiconductor process becomes more and more complex, the technical difficulty and capital expenditure in each step are also increases significantly, and the company must have quite a lot. strong capital capacity to cope with such huge expenditure.
- Since the 1990s, the emergence of professional foundries such as TSMC (2330) and UMC (2303) has driven the semiconductor industry to enter a professional division of the labor mode, while IC design companies (Design House) has gradually emerged during this period. the main business, and the subsequent work such as wafer manufacturing and packaging is transferred to other downstream companies. Although traditional IDM companies are gradually turning to Fab-Lite (fables fab) or even Fabless (fabless) development, only large-scale international giants such as Intel, Samsung, Texas Instruments, and Infineon are still use the IDM model to operate.
- In the 2010s, with the increase in the function and performance requirements of one IC, the IC design work became more and more complex, In order to enable IC designers to focus on the development of each core strength and accelerate the development of IC, Silicon Intellectual Property (IP or SIP, Silicon This led to an increase in licensing from Intellectual Property (Silicon Intellectual Property is a set of[blociau swyddogaethol]pre-designed, verified, and reusable), so that the chip is not required for end-to-end development, and some functions are purchased directly (It is usually achieved by authorizing standardized common functions), which enables IC design companies to further specialize in the division of labor, and causes many IC design service companies and IP companies to emerge and enter to the IP-Lite model.
- The biggest difference between an IC design service company and an IC design company is that the IC design service company itself has no products, but only assists customers in solving technical problems that may be encountered in the development and design of IC chips.
- The business of IP companies is mainly IP authorization after the completion of IP design and verification. Some companies also have technical maintenance and support services, and their business models are relatively simple.
- Different types of IP can be divided into processor IP, embedded memory IP, high-speed interface IP, etc.
At present, ARM, the world’s largest IP company (currently a subsidiary of Japan’s Softbank), is mainly based on licensed processor IP, and has a processor architecture (ARM architecture) that provides a market share of more than 90% in the smartphone market. Taiwan The factory’s M31 (6643) mainly authorizes high-speed interface IP (such as USB, PCIe, etc.) and analog IP; Liwang (3529) mainly authorizes embedded memory IP.
IP can be further divided into Hard IP Core and Soft IP Core The main difference is that the former authorizes a functional block directly and cannot be modified, while the latter is an architecture that can be used for subsequent development. For example, the embedded memory IP above is usually a hard core IP, which is directly used by IC design companies after obtaining authorization, and cannot be used for subsequent development; Processor IP (such as ARM architecture) is soft core IP, which is purchased from IC design companies. After authorization, subsequent circuits can be designed according to the processor architecture.
- IC design service companies are mainly in the business of designing ICs on behalf of customers, rather than producing ICs of their own brands. Such services are called NRE (Non-Recurring Engineering) and charge a one-time NRE fee. time, while outsourcing a well-designed Am and IC, if the customer is not good at dealing with wafer foundries and packaging and testing plants, but wants to strive for lower casting prices and good technical services, they will further uses IC design service companies that work closely with downstream companies. On the part of the film production, this part of the business is called Turn-Key.
- The rise of IC design services is because more and more brand factories have the demand for differentiated chips or self-developed chips (such as server ASICs for AI computing, etc.), or IC design companies want to develop areas that are not specialized in IC. but lacking relevant intellectual property, they need someone to assist them in drawing up product specifications, development, validation (in the NRE part) to subsequent manufacturing, production (in the Turn-Key part) and other steps.
- An IC design service company owns some intellectual property, and can also purchase the required IP license from other IP companies, which can be used for external design business or licensed to other IC design companies. Currently, the main providers of IC design services in Taiwan are TSMC (3443), in which TSMC invests, and Faraday (3035), in which UMC invests.
- The revenue source of IP companies is mainly from IP licensing fees (License Fee, the fee for the initial authorization of IP) and royalties (Royalty, the fee collected from each sale after IC products are officially mass produced).
- The revenue of IC design service companies mainly comes from NRE service revenue and Turn-Key sales revenue, as well as part of IP licensing revenue, of which NRE’s gross profit margin (about 30-50%) is higher than Turn-Key (generally ). around 15-25%, However, there are also products with a gross profit margin below 10%), but since the proportion of subsequent customer requests for film casting is usually high, the revenue is contributed mainly by Turn-Key.
Companies related to intellectual property licensing usually have a higher share of royalty revenue and a higher gross profit margin. For example, in 2021, pure IP companies such as M31 and Liwang will have a gross profit margin of 100%; Zhiyuan (3035) has about 9 % of its revenue from For intellectual property licensing, the gross profit margin was 49.7%.
Analyst Liu Jiongde Yi Shixin – KY (3661-TW) For example, the company is engaged in the design and manufacture of application-specific integrated circuits (ASIC) and system-on-chips (SoC), primarily in high-complexity, deep sub-micron high-end process chips. Products are mainly used in four major areas, namely high-definition television, communication network equipment, consumer electronics (digital cameras, entertainment systems, mobile broadband, etc.), and specialized products (medical equipment and surveillance systems, virtual currency, supercomputer, pachinko, etc.). The share of product revenue is design trust (NRE) and Turneky each account for 50%, and the share of product application in consumer electronics (digital cameras, image processing and tablet computers) accounts for 7%, high performance computing ( HPC) accounts for 81%, communication network 2%, niche markets (medical equipment and surveillance systems, virtual currency, supercomputers, Pachinko entertainment machines) 10%.
Currently, the global IP company market is mainly concentrated in the three major foreign giants (2327-TW), including ARM (40.9%), Synopsys (Synopsys, 18.2%) and Cadence (Yihua, 5.9%), with a total of 65%, Taiwan Factories including Liwang (3529-TW), M31 (6643-TW) and Faraday (3035-TW) have only about 1% of the market share.
In addition, MediaTek (2454-TW) reinvested in Andes Technology (6533-TW), a processor silicon intellectual property (IP) factory. In addition to the continued high performance in 2021, the Chairman and CEO said Lin Zhiming that RISC-V In several generations, it will develop into one of the three mainstream processor architectures on an equal footing with ARM and x86. Andes is expected to become the world’s leading CPU IP supplier in the field future RISC-V architecture.
Andes (6533-TW) will ship 3 billion system-on-chip (SoC) clients using its CPU architecture in 2021, an annual increase of 50%, and cumulative shipments over the years will exceed 10 billion. Last year’s revenue was 819 million yuan, an annual increase of more than 40%, and the net profit was 161 million yuan, an annual increase of 3.21 times, the same as a new high, and net profit per share was 3.59 yuan. In Andes Corporation’s revenue structure last year, more than 60% of its performance was contributed by contract licensing fees, and almost 30% was royalty income from mass production.
Recently, the American company SiFive announced that it will provide RISC-V core processors for NASA The amount of the case is as high as 50 million US dollars, which is equivalent to NT$1.543 billion. Cardiology (6533-TW), have the opportunity to extend their active tentacles into space.
Although the market share is low, Taiwanese factories and foundries cooperate closely, for example, Liwang (3529-TW) and M31 (6643-TW) are listed in the TSMC Open Innovation Platform Silicon Intellectual Property Alliance, representing TSMC (2330-TW) recommend these IP companies to the market. In addition to the significance of certification, the relevant advanced processes can also be quickly verified, which makes Taiwanese IP companies have great potential to’ w develop.
