Semiconductor IP, what is the strength of domestic production?

In the entire semiconductor IP (Intellectual Property) field in 2023 , the most eye-catching one is the listing of Arm. With the successful listing of Arm in the United States, the semiconductor IP market has once again become the focus of the industry. Semiconductor IP are pre-engineered modules or components that play an integral role in modern integrated circuit design. With the continuous growth of cutting-edge industry applications such as 5G, artificial intelligence, automotive electronics, Internet of Things, and high-performance computing (HPC), new opportunities in the IP market are being driven. Building a chip from scratch requires a lot of resources and can be expensive. As a result, semiconductor companies are increasingly relying on pre-designed, licensable IP blocks for functions such as memory, connectivity and processors to increase product innovation and shorten time to market.

However, in the global IP market, IP giants such as ARM, Synopsys and Cadence dominate. For domestic chip design companies, long-term reliance on imported IP not only intensifies the cost burden, but also creates supply chain uncertainty and security risks.

Because of this, the rise of domestic IP suppliers is imperative. Semiconductor IP can be divided into processor IP, interface IP, memory IP and other categories according to functions. In recent years, many IP manufacturers have emerged in China. They chose specific segments as their entry point and gradually gained a certain market share. So, how is the development of domestic semiconductor IP currently?

In the field , there are not many local processor IP manufacturers. The one that is more representative and has a certain scale is VeriSilicon . VeriSilicon's current annual revenue is more than 2 billion yuan, 2.679 billion yuan in 2022, 2.139 billion yuan in 2021, and 1.765 billion yuan in the first three quarters of 2023. It is worth mentioning that in recent years, as more and more system manufacturers, large Internet companies, cloud service providers and other groups have begun to make cores, it has brought growth opportunities to domestic IP manufacturers. Nearly half of VeriSilicon's current revenue comes from these customer groups, accounting for 48.76% of its operating revenue in the first three quarters of 2023.

The global processor IP market is relatively competitive. Processor IP design requires deep technology accumulation and R&D capabilities. International companies such as ARM have many years of technology accumulation and market dominance, while domestic companies started late in this regard. In addition, there are a large number of patent barriers in the field of processor design, and new entrants need to develop technologies that can circumvent these patent barriers, which increases the difficulty of research and development.

However, the rise of the RISC-V open source instruction set architecture provides domestic companies with an opportunity to avoid patent restrictions and develop independent IP. Therefore, there are many domestic manufacturers working in the field of RISC-V processor IP , such as Pingtouge , Xinlai Technology , Saifang Technology , etc. Among them, Pingtou Ge’s Xuantie processor IP has been authorized for 3 billion units; Xinlai Technology’s RISC-V processor IP products can cover various application scenarios from low power consumption to high performance. Currently, more than 150 companies have officially Authorized customer; Sai Fang Technology is promoting RISC-V to the high-end and high-performance field, and has released Fang·Tianshu-90 (Dubhe-90) and Fang·Tianshu-80 (Dubhe-80) high-performance core products.

In general, there has been some improvement in domestic production in the field of processor IP, especially in the field of RISC-V. Domestic processor IP manufacturers have shown strong adaptability in the local market, and their products can promptly meet the needs of domestic enterprises in cloud computing, Internet of Things, smart terminals and other fields. Despite significant progress, there is still a certain gap between China and international leading companies such as Arm in the field of high-end processor IP, especially in terms of complex processor design, high-performance computing and advanced process compatibility.

For the rapidly developing interface IP market, China still relies heavily on overseas. According to IPNEST's "2022 Design IP Report", the market share of interface IP has increased from 18% in 2017 to 25% in 2022. However, in recent years, domestic manufacturers have already sensed the potential and business opportunities of interface IP. In terms of interface IP , domestic manufacturers such as Innosilicon , Xin Yaohui , Niu Xin , Canxin , Ruicheng Xinwei , Jingxin Micro , and Naneng Micro , Kuixin Technology , Xinsiyuan and many other companies.

Among these companies represented by interface IP, Innosilicon Technology has a full set of high-speed interface IP, including DDR series, UCIe-compatible Innolink Chiplet series, and Serdes; A strategic partnership has been reached and there is good development; Ruicheng Xinwei has the most complete range of IP, in addition to interface IP, there are also memory IP, analog IP and radio frequency IP; in addition, companies such as Jing Xinwei have begun to The development of high-speed interface IP fields such as RapidIO and Fiber Channel shows that domestic manufacturers are actively deploying high-end markets. In general, China's development in the field of interface IP has shown a positive trend, and it has focused on specific technological breakthrough points and gradually integrated it with international standards.

In addition to processor IP and interface IP, there are also some domestic IP manufacturers that are secretly working in the fields of storage, analog/digital-analog hybrid, etc., such as Hexin Micro, which focuses on digital-analog hybrid IP, semiconductor basic IP and storage IP suppliers Business with Suzhou Tengxin Micro and other manufacturers.

Looking at companies such as Synopsys and Cadence, they not only provide IP core technology, but also provide a complete set of design tools and ecosystem support to help customers speed up the product launch process. Therefore, the linkage of EDA and IP to form a solution rather than a single product is a key factor to success. In this regard, domestic EDA companies such as Huada Jiutian , Guanlun Electronics , Hejian Industrial Software and other EDA companies also have IP business. This shows the determination of Chinese companies to improve their product and service ecology. By integrating EDA tools and IP resources, domestic companies can improve their competitiveness and better serve domestic and foreign markets. Especially in the context of supporting localization and independent control, this strategy is very important for improving the domestic semiconductor industry chain. Overall strength is particularly important.

However, among the many local IP manufacturers, not many have successfully gone public. Except for VeriSilicon, Canxin Technology had previously planned to go public with an IPO, but has now put it on hold. Compared with other tracks, some entrepreneurial chip companies may be able to go public in 3 to 5 years. Why is it difficult for IP manufacturers that have been in the IP field for 7 to 8 years or even more than ten years to go public?

In this regard, Yunxiu Capital Zhao Zhanxiang told the author: " It takes a long time for IP manufacturers to reach the revenue scale of listing. Moreover, IP with high technical threshold and large market space often requires many years of early technology accumulation and customer verification ."

Zhu Jing, deputy secretary-general of the Beijing Semiconductor Industry Association, once expressed emotion in a circle of friends: "It is not easy for a chip IP company. Even if the IP subdivision becomes the first in the country, it may not meet the listing requirements. All the current capital markets only have VeriSilicon. Look. Looking at the overseas situation, it is far from enough. At least 1 to 2 platform-based IP listed companies (including EDA and IP jointly owned), and 3 to 5 IP companies that are the world's number one in subdivisions are a more reasonable structure. Only then can we represent the success of our domestic IP .”

Another phenomenon is that EDA and IP are often closely related. However, compared with the EDA track, which is a hot investment market, the IP industry is slightly inferior in terms of the frequency of financing activities and the amount of capital. In addition to several large-scale financings by Xin Yaohui and Can Xin, IP manufacturers’ enthusiasm for financing seems to have cooled down a bit in recent years: In August 2022, storage IP manufacturer Teng Xin Microelectronics completed tens of millions of A+ rounds of financing, and Xin Lai Technology announced Completed a new round of financing of hundreds of millions of yuan; in January 2023, interface IP manufacturer Jingxin Micro completed a series A financing of over 100 million yuan, and Kuixin Technology received a series A financing of over 100 million yuan; in April 2023, Zhongyin Microelectronics Received over 100 million yuan in Series A financing, focusing on enterprise-level high-speed interface IP and chiplet product development; in August 2023, Angmax Micro completed tens of millions of yuan in angel round financing.

However, capital participation is crucial to the growth of any high-tech industry, especially in the field of semiconductor IP, which is capital-intensive and has a long R&D cycle. The following are some factors that may affect capital interest in the semiconductor IP industry:

1. High threshold and long return cycle: The semiconductor IP industry requires profound technology accumulation and long-term R&D investment. From R&D to market recognition and then to commercialization benefits, it often takes a long time, which is not consistent with the investment strategy of quick return.

2. Huge R&D costs: Developing a reliable semiconductor IP core can cost a lot of money. These costs include high talent costs, patent fees and continuous investment in technology updates.

3. Fierce competition and high concentration: As shown above, the semiconductor IP business in the market is often dominated by a few large companies such as ARM, Synopsys, Cadence, etc. These companies have established strong technical barriers and customer bases. New entrants need to break through these barriers, which is a huge challenge for capital.

4. Technology risks and intellectual property issues: Technology updates rapidly, and the technology invested may soon be replaced by new technologies. At the same time, intellectual property disputes may result in additional legal risks and costs.

5. Demand for professional knowledge: The semiconductor IP industry is a highly specialized field that requires investors to have or be able to acquire relevant in-depth knowledge and understanding. This may be a higher threshold for some capital that is more inclined to invest in general industries.

Regarding the low financing amount and reduced popularity of semiconductor IP manufacturers, Zhao Zhanxiang said in an interview with the author: "Most semiconductor IP companies do not have much demand for Full Mask tape-out. At the same time, after the IP is sold, there are not that many personnel. , the demand for funds is not that big.” He went on to point out that “start-up IP companies have relatively few product lines and low ceilings, so they are not very attractive to investors.”

In the global market competition, China's semiconductor companies are rapidly advancing in all directions and from multiple angles. As the foundation of the industry, the development of semiconductor IP (intellectual property) manufacturers is particularly critical. In the global semiconductor industry chain, the development and application of intellectual property (IP) core technologies is one of the key factors to enhance competitiveness. Therefore, the following suggestions for the development of domestic semiconductor IP manufacturers are as follows:

Focus and specialization have always been the keys to early success. For example, Synopsys and Cadence have established their market technology leadership positions through in-depth research in their areas of expertise, such as EDA tools and specific IP core technologies. Domestic companies should also focus on their areas of expertise and commit to deepening professional skills and knowledge.

Clearly position the market, deeply understand customer needs, and form long-term partnerships with them. Part of Synopsys' and Cadence's success is their ability to work closely with customers to provide customized solutions that meet their specific needs. Local IP manufacturers should work closely with EDA tool suppliers, chip manufacturers and end-user companies to jointly build a solid supply chain system.

"The lack of IP capabilities has affected the improvement of China's mature process production capacity and wider acceptance by domestic and foreign customers. Many process platforms are not doing well because the IP is not well done. Domestic IP must be fully developed from design to foundry. The coordination and support of the chain should also include the support of the capital market. It should not only support leading EDA and IP companies to continue to grow bigger and stronger, but also support a certain degree of letting a hundred flowers bloom to promote the growth of individual champions ." Zhu Jing pointed out in the circle of friends. .

At the same time, continuous optimization of product lines is the key to maintaining competitiveness. While maintaining competitiveness in major fields, we should continue to explore and enrich our product portfolio to meet the diversified needs of the market, especially in rapidly growing market segments such as the Internet of Things and artificial intelligence.

For those startups that are new to the IP track and want to gain the favor of capital, Zhao Zhanxiang suggested: “They need to make some products with high technical thresholds and large market space, and capital will prefer them.”

Taken together, although the domestic semiconductor IP field started relatively late, it has shown strong development momentum. In terms of technical depth, market insight and innovation capabilities, domestic IP is rapidly narrowing the gap with international giants. Although there is still a need to catch up in some high-end areas, international competitiveness is already achieved in specific vertical areas and processor design for specific applications. I believe that with the efforts of many IP manufacturers, domestic semiconductor IP will hopefully gradually get rid of dependence on foreign countries and achieve a certain degree of independence and controllability.

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