Posted by frank schirrmeister on March 30, 2011
This is really a companion Blog to an article I recently wrote, called “Which Design Comes First: Hardware Or Software?”. In this article I argued that the landscape of software responsibilities is rapidly changing, and with it the way the different players can actually make money. I ended the article with the words “Chip vendors are trying to battle their way back into monetizing on software after Android essentially neutralized them. The hardware-software world remains very interesting!”, Well, this deserves some examples.
First, the neutralization piece. Neutralization may not be the best term. Equalization might be better. Bear with me for a second here. As of today, March 30th, the graph on the left is the best I could come up with to outline the dependency of silicon on end user applications. 728,084 applications is the sum of all available apps of the main application stores from the list of digital distribution platforms for mobile devices. The top six application stores are the Google Android Market, Apple App Store, Palm/HP App Catalog, RIM App World, Nokia OVI Store and the Windows Phone Market Place and they map the applications into an installed base of roughly 964.5 million users. When checking the application stores and counting which mobile devices they map to, one arrives at a total of 230 mobile devices on sale:
What does that mean for a semiconductor company? Well, in the Apple universe 48% of all applications map to 17% of the overall installed base but to only to four actively sold devices. It’s an “all-or-nothing” game. In the Android universe 41% of all application map to 8% of the installed base but 52% of the overall available devices. Much more room for silicon here, but a crowded space. Hence Android effectively neutralizes hardware dependency. Everybody can play!
So how does one make money here? There is selling the silicon, selling the device, selling the two year contract with it. And then there are applications. According to Techcrunch and IHS Screen Digest, “Despite 861.5 Percent Growth, Android Market Revenues Remain Puny”. Well, in 2010, Apple App Store made 82.7%, Blackberry App World 7.7%, Nokia OVI Store 4.9% and the Google Android Market made 4.7% of the $2.155 Billion made with applications. The key is the separation of software and hardware revenue. Apple, RIM and Nokia all make money with the hardware and the software as they take a cut of the application revenue. For all Android devices, the hardware is one piece, and the cut of the software revenue is separate, it goes to Google and other Android app stores out there.
So how does a semiconductor company play in this landscape? With great difficulty? Perhaps. Let’s see what the 2010 top 5 fabless semiconductor companies are doing:
It turns out that for semiconductor providers the life outside of Apple is quite interesting. Embedded software is the key enabler and as shown above the top five fabless companies have realized this and are running with it. Oh, why do I care? The system-level tools I am involved in are the bridge between hardware and embedded software. Chip developers desperately need system-level design methodologies to optimally utilize and monetize the trends above.
There is a reason why we are showing Android running on virtual platforms in our cloud demos …
As always – I am looking forward to your comments …
Patrick Sheridan is responsible for Synopsys' system-level solution for virtual prototyping. In addition to his responsibilities at Synopsys, from 2005 through 2011 he served as the Executive Director of the Open SystemC Initiative (now part of the Accellera Systems Initiative). Mr. Sheridan has 30 years of experience in the marketing and business development of high technology hardware and software products for Silicon Valley companies.
Malte Doerper is responsible for driving the software oriented virtual prototyping business at Synopsys. Today he is based in Mountain View, California. Malte also spent over 7 years in Tokyo, Japan, where he led the customer facing program management practice for the Synopsys system-level products. Malte has over 12 years’ experiences in all aspects of system-level design ranging from research, engineering, product management and business development. Malte joined Synopsys through the CoWare acquisition, before CoWare he worked as researcher at the Institute for Integrated Signal Processing Systems at the Aachen University of Technology, Germany.
Tom De Schutter
Tom De Schutter is responsible for driving the physical prototyping business at Synopsys. He joined Synopsys through the acquisition of CoWare where he was the product marketing manager for transaction-level models. Tom has over 10 years of experience in system-level design through different marketing and engineering roles. Before joining the marketing team he led the transaction-level modeling team at CoWare.