China's smartphone market is huge, but it can't sustain so many China fabless offering similar multicore apps processors.
A third emerging trend, said Synopsys’ Pan, will be more M&A among China fablesses.
noted that IPOs in both Shanghai and Shenzhen markets have been
suspended over the last year or so. VCs who seeded those startups,
sooner or later, “need to find an exit,” Pan explained. This gives extra
impetus for mergers or acquisitions. Consolidations among Chinese
fablesses will pick up.
Meanwhile, Western companies are more
likely to snatch up “a team” [of engineers] in China, instead of going
through M&A, Pan added. Such smaller deals often remain invisible,
because the companies find no reason to disclose them.
contrast, will any China fabless be interested in buying baseband
technologies from Ericsson (i.e. after ST-Ericsson dissolved) or Renesas
Mobile? Pan thinks that’s unlikely. Those multinationals were initially
interested in getting bought in their entirety. In order to attract
China fabless, they need a good technology licensing program, Pan added.
Pan summed up the state of the Chinese electronics industry today as follows.
China’s electronics industry--including everyone from fabless to foundries--finds itself trapped in a perpetual quandary.
one hand many Chinese fabless companies are so close to the market
[design houses, system OEMs/ODMs] that they’re under constant pressure
to respond to their customers immediately. “The push from the market
keeps them very aggressive,” and makes them yearn for advanced process
nodes all the more, he explained.
On the other hand, many
Chinese electronics firms lack experience. They lack IPs. Asked what
roles companies like Synopsys play here, Pan said, “We try to fill in
the gap.” Cadence’s recent announcement on Tensilica acquisition aside,
getting ready for “complete solutions” is one of the key trends Synopsys
pioneered. “Last year alone, we pulled off nine acquisitions including
Magma Design Automation, SpringSoft and Eve.”
Chinese fabless in
designing next chips, for example, would want all the connectivity IPs
around ARM. “When you look at Synopsys resources vs. revenue ratio,
you’ll find that ratio is higher” in China, he added. It’s because EDA
companies need to provide more help.