A View from the Top: A Virtual Prototyping Blog

 

Wrestling for Dollars in a World of Open Source Androids

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.

imageFirst, 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:

  • A comparison of Android devices yields 106 smart phones and 42 tablets
  • The Apple App Store really maps to four devices, iPad, iPhone, iTouch and iPod
  • The HP/Palm App Catalog currently maps just to the Palm Pre
  • The RIM App World maps to 7 phones and 1 tablet
  • OVI by Nokia maps to 26 rows of 5 phones, that’s 105 devices
  • Windows Market Place maps to 11 phones for version 6.5 and 6 phones for version 7

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:

  • Qualcomm has embraced Android quite some time ago and has been referred to together with it as the new “Wintel”. One specific step to deal with Open Source was taken by Qualcomm in 2009, when the spun out the Qualcomm Innovation Center, specifically with the “goal of investing greater resources into enabling and optimizing open source software with Qualcomm technology [….] to enable the faster advancement of the wireless industry as a whole”. The mission is simple: Make sure Qualcomm silicon works with open source software as well as possible. Driving ports and releases of Android and other open source projects makes sure that they run well with Qualcomm Silicon.
  • Broadcom now has fully embraced Android in product and at the executive level after they had been initially cautious.
  • AMD is investigating Android for tablets
  • Mediatek is driving Android into lower cost areas
  • Marvell has enabled Android for a while already for tablets and mobile devices. It recently has made probably one of the bolder moves of the top 5 fabless players. With Kinoma they acquired a maker of software which augments Android, As quoted by the Wall Street Journal on Kinoma’s page, it allows to “better navigate media-related Web services — without having to buy a new mobile device”. From a fabless semi perspective, augmentation of Android gives Marvell an edge in the pack of chips supporting open source. Not only can they make sure Android runs effectively on their silicon (like Qualcomm as described above), they now can also drive how their chips best support Kinoma on top of Android, essentially wrestling themselves back into monetization via the software their devices enable.

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 …

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