NEW YORK--Correct us if we’re wrong, but many readers may be writing off MIPS Technologies way too soon.
The fate of MIPS is shaping up as one of the industry’s biggest stories in 2012. The company’s potential sale would have a significant impact on its storied processor IP line, MIPS customers, potential suitors who would either gain access to the processor IP or lose access and, of course, the current MIPS work force.
MIPS has not commented on speculation about a possible sale, and we’ve been unable to confirm that it has retained an investment banker to represent it (the rumor mill says it’s Goldman Sachs). Nevertheless, the question of who might buy MIPS is unavoidable and should be debated considering the broader implications of such a deal.
For one thing, there are enough chip companies -- including Broadcom, Sigma Design, Cavium Networks and others -- whose SoC roadmaps are dependent on MIPS cores. The outlook for MIPS licensees is as muddled as the future of MIPS. Switching to new cores is tricky since it requires an extensive rework of the internal software infrastructure. As one EE Times reader noted: “Current-day SoCs need a fast turnaround time, and the time needed to rework the software / debug with a new processor IP is just not there.”
But some argue that the transition might not be all that traumatic. Gary Mobley, senior research analyst at The Benchmark Co., wrote in his recent research note that “there is evidence that many of MIPS’ long-time licensees such as Sigma Designs and MStar have started to migrate toward ARM cores.”
To close a deal, seller and buyer must first agree on the sale price. MIPS, which has reportedly been shopped around for the last decade, the question of price is a moving target. In assessing the value of MIPS, Mobley wrote that “the wild card is MIPS patents.” He believes MIPS’ patents, “at a minimum,” could be “worth $100 million.” Mobley estimates the liquidation value for MIPS at about $5 per share “based on our best estimate for the present value of the company’s royalty stream, plus cash and certain assets, minus balance sheet and off-balance sheet liabilities.
MIPS understands how to play this game.
J. Scott Gardner, a senior analyst at The Linley Group, said MIPS has had its patent portfolio evaluated and is now included in the Ocean Tomo 300 Patent Index for 2011-2012. Ocean Tomo, an IP merchant bank, developed an “IPQ score” to rate patent assets based on a proprietary statistical methodology. The IPQ score has a median of 100. Patent assets with higher IPQ scores are statistically more likely to generate economic returns, according to the firm. The IPQ score for MIPS is 135 – one of the highest among semiconductor companies listed in the Ocean Tomo 300 list of member companies
The list “includes a lot of very large companies, and the median market cap is over $9 billion,” said Gardner. “MIPS could raise cash without selling the entire company.”
Gardner added that there are “a few scenarios that would really shake up the industry,” including Apple and Google. “Apple has proven the value of complete vertical integration and ecosystem control,” he said.
Others find promise in the emergence of a tighter Google-MIPS relationship. Google has recently decided to include the MIPS architecture as part of its SDK for the next generation of Android, noted Mobley. "This means eventually all future Android applications will run native on MIPS.
In the following pages, EE Times editors weigh in on the debate, sharing their thoughts in the categories of: a few unlikely candidates, best bets and a potential wild card.
I still don't see the issue. Ingenic is a Chinese SoC manufacturer making products based on the MIPS architecture. Intel might like to sell them Atom based SoCs, but that might require changes to Ingenic's strategic plan and business model. One question is whether Ingenic has its own fab and makes its own chips. What would they buy from Intel if they do? Do they close their own foundry and buy parts from Intel, do they license Intel IP to make in their own foundry, or do they keep their own foundry making MIPS chips and buy Atom chips from Intel?
And part of the confusion may lie in what constitutes the product. ARM and MIPS are fabless semi-conductor firms. They license designs that other vendors will actually make chips using. For ARM and MIPS, a design win is a license by a manufacturer to use their IP, with a royalty stream based on production.
Intel is a fabbed semi-conductor manufacturer. They both make designs and manufacture chips using those designs. So for Intel, a design win might be either a license of IP with royalties based on production, or an order for X thousands of physical chips to build into someone else's device. Which Intel might prefer to get will probably depend upon estimated volume.
But if Intel buys MIPS, I *don't* see them canceling existing licensing agreements. Not only would it be difficult to do: they'd be buying MIPS in part to *get* those customers. Canceling existing agreements would require OEMs to renegotiate to continue production, and they might just switch to ARM. It would probably also make OEMs who *hadn't* previously licensed MIPS IP reluctant to do so, as the question would be "Can we trust Intel not to screw us?", and the answer might be "On evidence, no."
If I'm Intel and I buy MIPS to get a piece of the mobile market, I keep existing licenses in place, and what I sell depends on the market. I'm not going to convert one of my fabs to MIPS production unless I have a really big design win to pay for it.
Perhaps a new Chinese company is created to buy MIPS. It converts the architecture into open source and becomes a design services company. China rallies behind MIPS and the ecosystem is strengthened because like Linux its free. Big picture, China wins since it spends less on foreign ARM/Intel IP.
I'm curious as to why you wouldn't discount the patent portfolio. It does seem very reasonable to ask ... if MIPS is not successfully asserting patents rights against ARM/Intel/AMD now, why would someone be able to in the future or how would the patents otherwise be useful?
Perhaps explain myself well. My meaning was that Intel licensing a MIPS core for use in an SoC by Ingenic would then be competing with Ingenic when it tries to sell an Atom-based SoC.
Of course, if Intel buys MIPS and stops all licensing operations and offers Atom- or MIPS-based SoCs there is no competition. But terminating those licensing agreements is not necessarily easily done.
'BUT I still feel they would fall foul of the "don't compete with your customers" rule.'
I don't see how Intel buying MIPS and offering MIPS cores falls under this rule. Intel's customers are OEMs using chips. Was Intel competing with their customers when they licensed ARM IP and sold ARM CPUs through their former StrongARM division? Why should acquiring MIPS and offering their cores instead be any different?
"How could Intel license high-end and mobile MIPS cores when it is trying to sell Atom and Ivy Bridge into the same sectors?"
That would be a matter of competing with themselves. For the customer, it's an advantage: is what they are trying to do better served by Atom and Ivy Bridge, or by MIPS designs? And it's an advantage for Intel, too, as it broadens their product offerings and gives them more options in competing.
You might get the sort of fun I observed decades back, when IBM salesmen for the AS400 and RS6000 lines danced around each other, as there was overlap in what those products could be used for, and two IBM divisions might be competing head to head for the same customer.
My bet in this speculative discussion is on Intel too. They desperately need an out into the mobile market; and with ARM infringing on the server market it makes sednse for Intel to use its cash to do with MIPS as they see fit. The question is, is there a tight fit between MIPS and Intel strategies? For a company that capitalized on a radically different RISC architecture developed by current Stanford U. president J. Hennessy MIPS might be just what Intel needs to counter the ARM-based mobile juggernaut.
With China's recent commitment to a national silicon standard (ISA), a Chinese firm (newly created, established, or government) makes perfect sense as a purchaser. I suspect that any regulatory and security concerns can be negotiated.