The worldwide semiconductor IP revenue was $933.8 million in 2002, up 5 percent over 2001, Gartner said. By comparison, various estimates put the worldwide semiconductor chip industry's growth at an anemic 0.5 percent to 2 percent in 2002.

However, the semiconductor IP market has been checked by the prolonged downturn in the worldwide chip market. The semiconductor IP market grew 25 percent from $713.5 million in 2000, despite the weak global economy and declining sales in the rest of the electronics industry that year (see April 30, 2002, story). As royalty and licensing revenues were squeezed in 2002 the market overall was not able to repeat the trick.

Gartner defines a semiconductor IP block as a pre-designed function to be implemented in one or more semiconductor devices, such as application-specific integrated circuits (ASICs), application-specific standard products (ASSPs) or programmable logic devices (PLDs).

The top two vendors of hardware intellectual property, ARM Holdings plc, a licensor of processor cores, and Rambus Inc., a licensor of memory interface technology, both managed to retain their positions from the year before. However, ARM's revenues moved ahead by 10.1 percent while Rambus was affected by the stagnant chip market and suffered a decline. As a result ARM scored nearly twice as much revenue as Rambus and represented 19.8 percent of the total IP market in 2002.

But MIPS, a rival licensor of processor cores and architectures that had sat next to ARM and Rambus in the rankings, saw its IP revenue tumble from $70.2 million in 2001 to $43.1 million in 2002, according to Gartner. MIPS was overtaken by five companies enjoying strong growth rates: Synopsys, based on acquisitions and block libraries; TTPCom, based on mobile communications platforms; ParthusCeva, Virage Logic and Artisan Components.

Monolithic System Technology Inc. (Mosys), which is busily licensing out its embedded memory technology, scored the highest growth in the Gartner rankings (see table below).

"Business models for IP vendors are a topic of much discussion, with a large amount of experimentation taking place," said Jim Tully, vice president and research director for Gartner's emerging technologies and semiconductor group. "Even among the top ten vendors, there are narrow-focused vendors, broadline players, vendors of commodity products, differentiated product vendors, library suppliers, block vendors and platform/solution providers. Some companies focus only on IP, while others are primarily in a different business."

Royalty revenue was hit harder than license revenue because of poor semiconductor conditions. However, royalties remain the main way forward for the industry, Tully said.

"Vendors must develop business models that will build royalty revenue for the benefit of vendors and users," Tully said. "But, the royalty percentage should not be allowed to grow over 50 percent as this would expose vendors to the relative volatility of the semiconductor market."

"Value can lie in unique technology, applications expertise, support services or simply making it easy for customers to evaluate, buy and integrate the product. Wherever it lies, value must be at the core of a successful business model," Tully said.

Top 10 Semiconductor IP vendors by total IP revenue in 2002

2001 rank	2002 rank	Company	2001 sales	2002 sales	% change	% of market
1	1	ARM	$168.0 million	$184.9 million	10.1%	19.8%
2	2	Rambus	$107.3 million	$97.4 million	-9.2%	10.4%
4	3	Synopsys(1)	$45.0 million	$73.2 million	62.7%	7.8%
6	4	TTPCom	$39.5 million	$58.0 million	46.8%	6.2%
5	5	ParthusCeva(1)	$40.9 million	$51.2 million	25.2%	5.5%
7	6	Virage Logic	$34.8 million	$47.5 million	36.5%	5.1%
9	7	Artisan	$27.8 million	$43.7 million	57.2%	4.7%
3	8	MIPS	$70.2 million	$43.1 million	-38.6%	4.6%
8	9	Mentor	$30.4 million	$25.7 million	-15.5%	2.8%
-	10	Mosys	$9.5 million	$24.9 million	162.1%	2.7%
-	-	Others	$318.1 million	$284.1 million	-10.7%	30.4%
-	-	Total	$891.5 million	$933.8 million	4.7%	100.0%
Source: Gartner Inc. (June 2003)

(1) Note: 2001 revenue for ParthusCeva and Synopsys represents those of Parthus Technologies and Synopsys, respectively. Parthus Technologies changed name in 2002 to ParthusCeva after acquiring the Ceva IP business from DSP Group. In 2002, Synopsys acquired InSilicon, RIIC and Lateral Sands, IP companies previously covered in this study. 2001 revenue for DSP Group, InSilicon, RIIC and Lateral Sands are included in "Others," while revenue for 2002 have been consolidated in the acquiring company