Introduction to Semiconductor IP Reuse

Semiconductor Intellectual Property (IP) reuse refers to the practice of utilizing pre-designed, pre-verified, and reusable design components—known as IP cores or IP blocks—in the development of integrated circuits (ICs) and System-on-Chip (SoC) designs. These IP cores, which can be digital, analog, or mixed-signal, serve as foundational building blocks that enable semiconductor companies to streamline the design process, reduce development costs, and accelerate time-to-market. IP cores include components like microprocessors, memory modules, interface protocols, and specialized functions such as AI accelerators or encryption units.

The concept of IP reuse emerged prominently in the 1990s as the complexity of chip designs grew, driven by the demand for advanced electronics in sectors like telecommunications, consumer electronics, and computing. By leveraging third-party IP, semiconductor companies can focus on differentiating their products while outsourcing the development of standardized or complex components to specialized IP vendors. This blog explores the mechanics of semiconductor IP reuse, the business models of third-party IP companies, the motivations behind big semiconductor companies purchasing IP, key players in the IP market, and the overall market landscape.

The Mechanics of Semiconductor IP Reuse

Semiconductor IP reuse involves licensing pre-designed IP cores that can be integrated into a larger chip design. These cores are typically offered in two forms:

1. Soft IP: Delivered as synthesizable Register Transfer Level (RTL) code in hardware description languages like Verilog or VHDL. Soft IP is flexible, allowing designers to modify and optimize it for specific applications, but it requires additional synthesis and verification steps. It is ideal for applications requiring customization, such as IoT devices or AI systems.
2. Hard IP: Provided as a fixed, pre-verified physical layout (e.g., in GDSII format) optimized for a specific manufacturing process. Hard IP offers better predictability in terms of performance, power, and area but is less flexible and often tied to a specific foundry’s process technology. Analog and mixed-signal IPs, such as SerDes, PLLs, or ADCs, are commonly delivered as hard IP.

IP reuse allows semiconductor companies to avoid reinventing standardized components, such as USB controllers, DDR memory interfaces, or processor cores, which can be time-consuming and costly to develop in-house. By integrating proven IP cores, companies reduce design risks, shorten development cycles, and leverage the expertise of specialized IP vendors. For example, a company designing a 5G modem might license a pre-verified RF IP core instead of developing one from scratch, saving years of development time and millions in costs.

Business Models of Third-Party IP Companies

Third-party IP companies specialize in designing, verifying, and licensing IP cores to semiconductor manufacturers and system designers. Their business models typically revolve around the following revenue streams:

1. Licensing Fees: IP vendors charge an upfront fee for licensing their IP cores. This fee varies based on the complexity, functionality, and market demand for the IP. For instance, a high-performance processor IP like an Arm Cortex core may command a significant licensing fee, while simpler peripheral IPs may be less expensive. Some vendors, like Imagination Technologies, have explored no-fee licensing models with revenue tied to technical support and maintenance services.
2. Royalty Payments: Many IP vendors operate on a royalty-based model, where they receive ongoing payments based on the number of chips produced using their IP. This model aligns the vendor’s revenue with the success of the customer’s product, making it attractive for high-volume applications like smartphones or IoT devices. In 2024, the royalty segment accounted for approximately 59% of the semiconductor IP market, driven by its risk-sharing nature.
3. Support and Maintenance Services: IP vendors often provide technical support, integration assistance, and updates to ensure their IP cores perform optimally in customer designs. These services generate additional revenue and foster long-term relationships with clients.
4. Custom IP Development: Some IP vendors offer bespoke IP solutions tailored to a customer’s specific needs, particularly for niche applications like AI accelerators or automotive-grade IPs. This involves close collaboration with the client and can command premium pricing.
5. Subscription-Based Models: Emerging models include subscription-based access to IP portfolios, allowing customers to use multiple IPs for a fixed period. This is particularly useful for companies working on multiple projects or requiring frequent design iterations.

Key third-party IP vendors include Arm Holdings, Synopsys, Cadence Design Systems, Imagination Technologies, and CEVA. These companies invest heavily in R&D to develop high-quality, reliable IP cores that meet the stringent requirements of modern chip designs. For example, Arm Holdings, which held a 43.2% market share in 2013, licenses processor cores widely used in smartphones, IoT devices, and automotive systems.

Why Big Semiconductor Companies Buy IP

Large semiconductor companies, despite having significant in-house design capabilities, often opt to purchase third-party IP for several strategic reasons:

1. Time-to-Market Acceleration: Developing complex IP cores in-house can take years, especially for advanced components like high-bandwidth memory (HBM) controllers or AI accelerators. Licensing pre-verified IP cores allows companies to meet tight market windows, particularly in fast-moving sectors like consumer electronics and 5G.
2. Cost Efficiency: Developing IP from scratch requires substantial investment in engineering talent, tools, and verification processes. Licensing IP reduces these costs, as the vendor absorbs the initial development burden. For instance, Imagination Technologies highlights that third-party IP reduces total cost of ownership and eliminates the risks of in-house development surprises.
3. Risk Mitigation: Third-party IP cores are pre-verified and tested, reducing the risk of design flaws that could lead to costly respins or product failures. This is critical in industries like automotive, where reliability is paramount.
4. Focus on Differentiation: By outsourcing standard or foundational components, semiconductor companies can allocate resources to developing proprietary technologies that differentiate their products. For example, a company designing an AI chip might license a standard processor core and focus its efforts on custom neural network accelerators.
5. Access to Specialized Expertise: IP vendors often specialize in niche areas, such as high-speed SerDes, encryption cores, or RF IPs, offering expertise that may not exist in-house. This is particularly relevant for emerging technologies like AI, IoT, and 5G, where specialized IPs are in high demand.
6. Scalability and Reuse: Licensed IP cores can be reused across multiple designs and product lines, maximizing return on investment. This is especially valuable for companies producing diverse product portfolios, such as Qualcomm or NVIDIA.
7. Mitigating IP Theft Risks: Licensing from reputable vendors ensures compliance with intellectual property rights, reducing the risk of legal disputes or patent infringement. This is a significant concern in regions like Asia-Pacific, where IP theft and counterfeiting are prevalent.

Major semiconductor companies like Intel, Qualcomm, NVIDIA, and Samsung frequently license IP to complement their in-house designs. For example, NVIDIA uses Arm processor cores in its GPUs, while Qualcomm licenses RF and modem IPs to enhance its Snapdragon processors.

Key IP Buyers and Sellers

Major IP Sellers

1. Arm Holdings: A dominant player, Arm licenses processor cores (e.g., Cortex-A, Cortex-M) and GPU IPs widely used in smartphones, IoT, and automotive applications. Arm’s IP is integral to over 200 billion chips shipped globally.
2. Synopsys: Offers a broad portfolio of digital and analog IPs, including HBM3 controllers and verification IPs, catering to AI, data centers, and automotive markets.
3. Cadence Design Systems: Known for interface IPs like PCIe and DDR, Cadence also acquired Rambus’ SerDes and memory interface IP business in 2023 to expand its portfolio.
4. Imagination Technologies: Specializes in GPU and AI accelerator IPs, with innovative licensing models like no-fee services.
5. CEVA: Focuses on DSP and connectivity IPs for IoT, 5G, and AI applications.
6. Rambus: Provides memory interface and security IPs, including Hardware Root of Trust (HRoT) solutions for secure SoC designs.
7. Lattice Semiconductor, Achronix, Marvell, Menta, Movellus, Allegro DVT: These companies offer specialized IPs for FPGA, AI, and mixed-signal applications.

Major IP Buyers

1. Intel: Licenses Arm and other IPs for its data center and edge computing chips.
2. Qualcomm: Uses third-party IPs for RF, modem, and connectivity components in its Snapdragon processors.
3. NVIDIA: Relies on Arm processor cores and other IPs for its GPU and AI platforms.
4. Samsung: Licenses IPs for its Exynos processors and invests heavily in semiconductor R&D, including a $489 billion plan for semiconductor development in Asia-Pacific.
5. Apple: Integrates third-party IPs into its custom silicon, such as the A-series and M-series chips.
6. NXP Semiconductors: Licenses IPs for automotive and IoT applications, including a 2024 partnership with NVIDIA for AI integration.
7. MediaTek, Broadcom, Texas Instruments: These companies license IPs to support their diverse product lines in consumer electronics, networking, and industrial applications.

The Semiconductor IP Market Landscape

The global semiconductor IP market has experienced robust growth, driven by the increasing complexity of chip designs and demand for advanced technologies like AI, IoT, 5G, and automotive electronics. Below is an overview of the market size, growth trends, and regional dynamics based on recent data:

1. Market Size and Growth:
2. In 2022, the semiconductor IP market was valued at approximately $6.6 billion, with projections to reach $14.6 billion by 2032, growing at a CAGR of 8.3%.
3. Alternative estimates suggest the market was worth $8.8 billion in 2024, with a projected CAGR of 15.1% through 2034, reaching $22.8 billion.
4. The royalty segment dominates, accounting for 59% of the market in 2024, driven by its risk-sharing model and applicability to high-volume products.
5. Processor IP holds the largest share (50% in 2024), fueled by demand for specialized processors in AI, data centers, and IoT.
6. Key Drivers:
7. Rising Complexity of Chip Designs: SoC designs require integrating multiple functions (e.g., CPU, GPU, memory, connectivity), making IP reuse critical.
8. Demand for AI and IoT: Specialized IPs for machine learning and low-power connectivity are in high demand.
9. Automotive and 5G Growth: The automotive sector’s shift to autonomous driving and 5G infrastructure drives demand for reliable, high-performance IPs.
10. Geopolitical and Supply Chain Resilience: Governments and companies are investing in local semiconductor ecosystems, boosting IP development.
11. Challenges:
12. IP Theft and Counterfeiting: Particularly in Asia-Pacific, IP theft in ASIC and FPGA cores is a major concern, prompting initiatives like the World Semiconductor Council’s task force.
13. Long Development Cycles: Developing new IP cores can take years, challenging vendors to keep pace with rapid innovation.
14. Complex Licensing Agreements: Managing royalties and usage rights is a significant hurdle, especially for global operations.
15. Regional Dynamics:
16. Asia-Pacific: Dominates with over 38% market share in 2023, driven by electronics manufacturing in China, Japan, and South Korea. China’s role as a major semiconductor consumer and producer fuels growth.
17. North America: Holds a 50% share of the global IP market in 2024, led by the U.S. with hubs like Silicon Valley and companies like Intel and NVIDIA.
18. Europe: Growing moderately due to demand for connected devices and automotive IPs, with a focus on chemical supply chains.
19. India: Emerging as a fast-growing market due to its expanding electronics and automotive sectors.

Future Trends in Semiconductor IP Reuse

1. Chiplet-Based Designs: The rise of chiplet architectures, where modular IPs are combined to create customized chips, is increasing IP reuse. This trend requires robust IP management solutions to handle integration and verification.
2. Open-Source IP: Royalty-free open-source IPs, such as RISC-V, are gaining traction for their cost-effectiveness and customizability, particularly in AI and IoT applications.
3. AI and Machine Learning IPs: The demand for specialized IPs optimized for deep learning and neural network processing is surging, driven by AI applications in data centers, edge devices, and automotive systems.
4. Security-Focused IPs: With growing concerns about data security, IPs like Hardware Root of Trust (HRoT) and encryption cores are becoming critical for IoT, automotive, and defense applications.
5. Sustainability and Energy Efficiency: IP vendors are developing low-power IPs to meet sustainability goals, particularly for IoT and mobile devices.

Conclusion

Semiconductor IP reuse is a cornerstone of modern chip design, enabling companies to innovate efficiently while managing costs and risks. Third-party IP vendors play a vital role by providing specialized, pre-verified cores that cater to diverse applications, from AI to automotive. Big semiconductor companies license these IPs to accelerate development, focus on differentiation, and leverage external expertise. The market, valued at $6.6–$8.8 billion in recent years, is poised for significant growth, with projections reaching $14.6–$22.8 billion by 2032–2034, driven by technological advancements and global demand. As the industry evolves with trends like chiplets, open-source IPs, and AI-driven designs, IP reuse will remain a critical strategy for staying competitive in the fast-paced semiconductor landscape.

For more information on specific IP solutions or market opportunities, companies can explore resources from leading vendors like Arm, Synopsys, or Cadence, or consult industry reports from organizations like the Semiconductor Industry Association (SIA) or MarketsandMarkets.