Global revenue associated with semiconductor IP is projected to reach $1.8 billion in 2006, a 24.9 percent increase from 2005 revenue of $1.4 billion. By 2010, Gartner (Stamford, Connecticut) thinks the worldwide semiconductor IP market will be more than $2.7 billion.
Gartner's predictions are roughly in line with those of iSuppli Corp. (El Segundo, Calif.) given a year before, when iSuppli said the semiconductor IP market would grow to more than $2.04 billion in 2009 from $1.2 billion in 2004.
Gartner defines semiconductor IP as predesigned circuits for use in making complete semiconductor devices. Its definition of the semiconductor IP market only includes revenue from IP sold on the open market. Captive IP, which is IP designed and used by one organization alone, is excluded.
"The semiconductor IP industry has matured considerably during the past five years," said Christian Heidarson, senior research analyst for Gartner's semiconductor group, in a statement. "However, the next five years will bring major challenges to business models as demand for IP shifts from standard functions to more complex specifications."
Heidarson said complex IP blocks are needed, such as ones to support network-on-chip designs however the complexity often leads to a need for customization, which in turn can lead to the sorts of business problems faced by design services, such as being hard to scale.
"Vendors of highly differentiated IP will need to adapt their business model to pursue large deals with fewer customers. However, this will be a risky strategy for small vendors who may not survive if there are delays in market developments or a key customer fails outright," said Heidarson.
Gartner analysts expect a significant number of complex IP solutions to be supplied by fabless semiconductor companies to complement their chip revenue.
"The implication for the semiconductor IP industry is that it will become more segmented," Heidarson said. "We expect vendors of highly differentiated IP to themselves become significant customers of smaller IP blocks, and that many of these firms will be semiconductor vendors. We advise players in the IP industry to prepare for a market landscape where, by 2010, at least two semiconductor vendors are found among the top 10 IP vendors," he concluded.