S3 Group Ltd., of Dublin, Ireland, best known as a supplier of design services and intellectual property to the semiconductor, TV, and telehealth sectors, is preparing to sell complete ICs -- but not under its own name.
The development is what Darren Hobbs, director of product marketing for the silicon business unit at S3, calls private labeling. The first such product is likely to be a high-speed digital-to-analog converter (DAC) that S3 has offered as an IP core.
"We provide the design and our customer would brand and sell the IC," says Hobbs. "It's a high-speed DAC suitable for wireless infrastructure applications, satellite communications, and so on. It runs at 1 gigasample per second and about 14 bit resolution."
But if there is a market for such a discrete DAC why doesn't S3 move up from being an IP provider and keep all the sales revenue for itself? Hobbs explained:
In the discrete analog and mixed-signal market it is very much about branding. There are leaders such as Analog Devices, Texas Instruments, Maxim Integrated, and so on. They are making tremendous revenue on parts that sell at $20 and more but occupy little die area in mature processes. There are massive margins, so there is opportunity for competition, but it is hard for a startup to run against them. Look what happened to Touchstone. It wasn't the products that were the problem. It was the brand.
However, for somebody already in the analog and mixed-signal market that is already delivering to customers, we can provide the IC with a proven reference in silicon. When we hand over the design it would have been made in a foundry probably in 0.18 micron CMOS, but it could be 0.13 micron or 90 nm. All the vendor has to do is move it through the sales channel.
Hobbs also indicated that this extension of business is desirable in order to move S3 up to a product revenue model. While the IP core business is growing both for S3 and across the industry, it is competitive and it is hard to command a per-chip royalty.
"Unless you are an ARM or an Imagination it is hard to get a royalty," said Hobbs. Customers tend to insist on a one-off payment for a single-use license fee, he added. Without a product sale or per-chip royalty, a company's revenue tends to be closely linked to the number of engineering seats with little leverage.
"The DAC design is complete -- we are 'socializing' it with certain customers right now," said Hobbs. He added that it could take about three quarters to get a deal signed and for wafers to pass through a wafer fab and get chips into customers' hands. But, of course, it would be under a brand other than S3, and indeed the partner might not wish customers to know it is an S3 design.
Issues such as exclusivity and confidentiality would all be subject to negotiation, Hobbs told us. The basic DAC technology could be extended to produce a family of products with different application-specific circuitry and interfaces. "For example, the JESD204B interface is becoming more important."
S3 has about 60 engineers working on analog and mixed-signal circuit design with expertise in ADCs, DACs, phase-locked loops, and power management ICs, through to RF front-ends, and all sectors could be suitable cases for the private labeling approach, said Hobbs.
Deals for the outsourced design of complete ICs are not new, but the fact that IP core providers are often denied a per-chip royalty may be creating pressure for more to try and migrate to a fabless chip company model. It also means that in 2015 a high-performance DAC bought from company X, Y, or Z may have been designed by S3.
This article originally appeared on EE Times Europe.