In October, ARM Ltd. announced two unhappy firsts: its first-ever quarter-to-quarter sales decline, and its first layoffs. Prior to these developments, ARM seemed to have discovered a bulletproof business model that was easy to mimic: just whip up a core, license it, and let the royalty checks roll in. Indeed, ARM’s previously uninterrupted ascent, coupled with the ready availability of venture capital, gave rise to a flood of new processor core licensors in the late 90’s.
In truth, core licensing is anything but foolproof, and success requires far more than slapping together a core. Chip development is a difficult, expensive, and time-consuming process; forcing licensees to start with a poorly supported, bare-bones core just makes things worse. Stand-alone cores become even less attractive as increasing chip complexity and shrinking process geometries make chip development harder. Core vendors’ very survival—never mind success—hinges on the availability of complementary offerings such as world-class development tools, application software components, and supporting services.
Unfortunately, too many would-be ARMs vastly underestimated the importance of these complementary offerings. An all-too-common strategy among upstart core vendors was to offer a core and some rudimentary software development tools. In the past year, many of these companies have realized the error of their ways and have begun to develop comprehensive solutions for applications such as voice-over-IP and 802.11. But with so much ground to make up, these efforts may be too little, too late.
In contrast, leaders like ARM have made complementary offerings a cornerstone of their strategies. For example, ARM immediately followed the announcement of its ARM11 core with the announcement of an ARM11-based version of its wireless platform. And some newcomers have emphasized their complementary offerings: since its launch last year, Adelante Technologies has promoted its cores as part of a package that includes complementary IP and tools, for example.
Although the flood of new core licensors has slowed to a trickle, a few new core vendors continue to emerge. Can today’s market support these new entrants? Maybe—but only if they deliver compelling, comprehensive offerings—offerings that solve more problems than they create.
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