What real innovations should Fabless companies focus on

What are the real innovations
at which Fabless companies James O’Riordan
CTO
should be looking?
IEEE SOCC 2009, Belfast, 9th Sept
Copyright © 2007-2009 Silicon & Software Systems Limited

Who are S3?

The Connected Consumer Technology™ Company

Brief Statistics
Founded in 1986

260+ Employees

6 Design Centres Globally

IC Design, IP Licensing,
Embedded Software Development

Consumer Electronics Focus

Agenda

• Industry Background

• Purpose of a Fabless company

• The Standing Army problem

• Outsourcing

• Licensing in

• Licensing out

• Software

• Suggestions for Innovation

Industry Background

• 1947: 1st transistor

• 1958: 1st IC

• Industry is in a maturing stage
• No longer 17% average growth
• Consolidation / re-structuring

Source: stochastix.wordpress.com

Fabless is a ‘long-term’ play

• To play requires ‘long-term’ ability
• It can take 8 years to get to profits
• It can be an expensive journey

Source: flickr

The Goal: Build a Valuable Company

• The goal of a Fabless company is to build a
valuable business

• This applies whether it is a start-up or
publicly quoted company

• In everything you do, you must think

“does this make us a more valuable business”

Source: priceyincanada

Copyright © 2007-2009 Silicon & Software Systems Limited Slide 6

Don’t Get Distracted From The Goal

• Shareholders and VCs are not giving
you money:
- to hire loads of people
- to invent new things …
- these are just means to the end!

• Innovation must be focused on the goal

• Always ask:
“Does this innovation make the business
more valuable?”

Source: irishheritagecarnival.blogspot.com


An Over-done Strength Can Be a Weakness

• Fabless companies tend to be
dominated by techies

• A problem with being a techie…
… You think you can design everything!

• But does this mean you should design
everything?


What makes up a “Business”
• The ‘IC design’ is only
the tip of the iceberg

Product Development *

Market Opportunity

The Business Structure

Channel & support *

Quality & Manufacturing *

Source: Sean Millar * Outsource

Don’t Build a Standing Army
• ‘Provisioning an organisation for the peak load it must sustain,
at the peak of a SoC development (perhaps a few months),
leads to under-utilisation at other times.’

• The Standing Army
- Worryingly common!

• This is a high fixed cost
• It potentially remains indefinitely Source: Flickr -Roseinbal

• It is more than just salaries, it is EDA tools, computers …
• When you don’t need it, it is a waste of money
• Money that would be better spent on something else
• But it is worse than that …


Parkinson’s Law
Cyril Northcote Parkinson (1909 – 1993), a Naval Historian presented a
Scientific Law in 1955;

“work expands so as to fill the time available for its completion”

Engineers will find work to do!

“work expands to fill the resources available”

Which can contribute to:

Feature Creep – $$$

Source: George Burnett
Source: George Burnett


Parkinson’s Law

But worse…

It can lead to skewing towards ‘Technology Push
- your product may start heading in a direction not required
by the market!

Source: Drurydrama

Source: Drurydrama


You need different skills at different stages

• When you start you need to get a good product
definition
• You then need to design and implement this product
that the market wants
• You then need to sell the product

Product Marketing Development Sales


Sub-contract Development
• Most Fabless start-ups are
dominated in numbers by
engineers, which makes them
susceptible to the above
problems

• Sub-contract development
– What counts is:
not what you are paying when you are using it,
but what you are not paying when you are not using it

– So you have an encouragement to not only save money, but
ensure your get a better product


Sub-contract Development – other benefits
• If you are not one of the big players, with a large
number of product developments running at any time,
then you run the risk of not being able to be ‘sharp’

• If you are not playing regularly
you will not be competitive

• “If you don’t have the critical
mass of designs, get in someone
who has”

Source: USA Today


Master the Art of Sub-contracting & Outsourcing
Apart from sub-contracting Development are there other things you can sub-
contract / outsource?
Why not
– Sales - Outsource?
– Finance function - Outsource?
– IT support – Outsource?
– Cost-downs of existing ICs - Sub-contract
– IC packaging, assembly and test – Sub-contract?
– Order fulfilment, shipping and logistics - Outsource?

What you need to know is:
– what is important when doing these,
– what it is important to look for when you are getting their deliverables,
– what the main issue you have to manage are,
– how to best manage multiple suppliers (with complex interactions)
– And knowing how to do the above quickly and efficiently

But you don’t need to do them yourself


Master Sourcing

Source: Automotive News Europe


Semiconductor Industry Trends
• Emergence of the Fabs

• Equal access to the
same manufacturing
capability!

• Multi-project wafers
•share the cost
of prototypes

• Advancing geometries
- 90, 65, 40, 28nm …

Source: IEEE Spectrum


License in IP

• Avoid the “not invented here” syndrome

“Not Invented Here (NIH) is a term used
to describe persistent social, corporate
or institutional culture that avoids using
or buying already existing products,
research or knowledge because of its
different origins.” - Wikipedia

• License in the Intellectual Property you need
– Less risky
• Experts who focus sole on it designed it
• It is used in many different ICs
– Lower cost
• The supplier can recover his development costs over more than just one customer /
product


License in ‘Off-the-shelf’ IP

• When designing at the board level, the
initial design tends ‘off-the-shelf’ ICs

• When designing silicon chips, the initial
design often asks for ‘bespoke’ IP?


License in ‘Off-the-shelf’ IP
• ‘Bespoke’ IP is costly for
a supplier to supply

• Supplier has more business
model flexibility when
supplying ‘off-the-shelf’

- has to recover some of
their R&D cost over each
license sale

-more open to royalty rather than up-front cost
- For a VC funded fabless company up-front IP cost may
not be an efficient use of capital
- IP costs funded from the success of the product is less
costly


Summary so far …
• Keep focused on market

• Know your differentiators – and concentrate your
innovation here

• Do not try to do everything yourself

• Build the skills to:
– Manage outsourced design
– License in IP
• Take ‘Off-the-shelf’


When should you start to think about the after life?

• Consider your customer’s product development cycle
– What happens when they
‘cost-down’ their product?

• Will your IC be designed out?

… but has its function been
integrated into an SoC?
… is there still business for you?

• Consider planning the lifecycle of your IC, supply it as IP to SoCs

• Will this distract you from your immediate goal?
… remember “outsource”


License out IP

• To lengthen product life
• To dominate a market


Software
Software can account for 80% of the development cost

Software is an integral part of the system
• Good HW alone is not good enough
• Total system design must be considered

Without good software your ICs won’t be designed in
• Must ensure that this software is built and supported correctly

Multi-core
• Diminishing returns from increasing
clock speed
• Enables multiple wireless stacks,
richer applications etc.
• Homogeneous and Heterogeneous
processors
• How to program these???

Suggestion: Innovate around funding

• Why would VCs invest in Fabless?
– Exits proving hard – no IPOs, no M&A!
– Returns not there – valuations > $0.25b!
– Cycle is long – 8 years!

• Customer NRE funding

• Corporate Seed Capital

Source: bushywood.com


Suggestions: Know the market

• Spend your time and money on Product
Marketing
– Really analyse the market opportunity
– Talk to real customers
– Don’t confuse this with
• General industry knowledge
• Technical knowledge
• Unproven hypothesis

tgmag.ca


Suggestions: Stay close to customer

• Spend your time close to your customer
– Much talk about doing engineering in low cost country
etc.

– The #1 country you need to
concentrate on is the one
where you customer is!


Suggestions: Innovate around standards

• How to take advantage of a Standards body
– Standards bodies get dominate by major players

– You may get squashed!

– Play to your strengths,
• E.g. Do what they don’t


Suggestions: Innovate around technology

• Don’t get pulled on to the latest geometries,
– Older geometries have a lot going for them
• They cost less
• They are mature and stable
– 0.18um for lower cost
– 65nm for large volumes


Suggestions: Innovate around services

• Do the chips that relate to a service*, and try to
get hooked into that service
• There is generally more money there, and you
need to find out how to be part of that money
stream

* e.g. Mobile phone services, Digital TV services, iTunes


Suggestions: Multi-skilled people

• Employ people with more than one skill
– You need them to have a ‘bigger picture view’
– You need them to be able to help in many areas

Source: insidehousing.co.uk


Suggestions: Innovate to solve real problems

• In terms of market needs, solving problems that
exist today, rather than one that may exist
tomorrow, bring more certainty to the value

• Innovation should be focused on:
– understanding the market,
– identifying a real problem
– applying the right technical
solution

Source: mostlymath.com


Suggestions: Innovate where there is risk

• Find solutions where you reduce others risk

• When there is a real risk,
people don’t look for the
cheapest doctor or
cheapest lawyer


Suggestions: Innovate to be more than gap filler

• Big companies are more comfortable buying from
big companies

• Watch that you are not used to fill the gap that
exists until the big supplier steps in


Wrap-up

• The goal is to build a valuable company

• To do this - Focus on what the market wants

• Target your innovation where your differentiation
creates real value


Acknowledgements

Bernardo Henriques, Bob Tait,
Sean Millar, Brendan Farley,
Donnacha O’Riordan,
Conor O’Donoghue,
John O’Sullivan,
Noel O’Riordan,
Fiona D’Arcy,
Mark Barry,
and many
others
in S3

What real innovations should Fabless companies focus on

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