Interesting news today : Lattice Semiconductor, FPGA vendor is buying Silicon Image. In fact, Silicon Image is a chip vendor, but also an innovator, licensing well known IP like HDMI, MHL and more. If we consider the amount paid for Silicon Image ($600 million), compared with the last full year revenue, $276M in 2014, that’s a 2.2X multiplicator… not really a success story for Silicon Image !
I am following the company since 2007, as I wanted to understand the SATA IP market and Silicon Image was the #1 with 80% market share or $16M on a $20M market. Thus I have continued to look at the company, as HDMI technology was starting a penetration which is today at 100% in many segments like PC or TV, and very strong in adjacent segments like Mobile. At that time Silicon Image was credited to (almost) 100% on the HDMI IP segment, no surprise.
You can take a look at the above results, you will see that the company was healthy, and growing fast between 2005 and 2007, passing from $212M to $320M in two year, which is more than 50% growth ! But if you look at the results for the last three years (below) you will see that none of the annual revenue is surpassing this made in 2007 :
So what’s has happened to Silicon Image ?
Looking at the company behavior through the prism of IP, we can say that Silicon Image has been a real innovator, inventing HDMI (after DVI). HDMI was a true revolution in the consumer market, as you can transfer Image through a serial high speed link, and that’s make a real difference ! Just try to use that we call a « Peritel » in France, a parallel link and you will jump to buy an HDMI cable.
Along with the patent, silicon Image has created the « HDMI Licensing LLC » to collect the royalties, 4 cent per HDMI port.
On top of HDMI Licensing LLC, Silicon Image has created the Authorized Test Center (ATC) policy : « The HDMI Founders have established Authorized Testing Centers (ATC) where licensed manufacturers can submit their products for compliance testing. Upon successful compliance testing, take advantage of the HDMI Product Finder to promote your Fully-Compliant products.” Good idea? Certainly for Silicon Image, as their direct competitors had to pass by these ATC to have the right to put the “HDMI” Logo! Such a policy can be a good way to accelerate Silicon Image time-to-market… or slow down competitor release.
From informal discussion that I had with application processor chip makers integrating HDMI –and paying the royalties to HDMI Licensing, it seems that these chip makers were upset by Silicon Image. Arrogance is not a guarantee of success…
To come back to the IP business, Silicon Image was making $50M with licensing in 2007 (SATA + HDMI + DVI) but around $44M in 2013 (replace DVI by MHL). On a product family (Interface IP) exhibiting 10% CAGR between 2007 and 2013, this is clearly a counter performance. To make a comparison, on the same products (SATA and HDMI) an IP vendor like Synopsys has made $5M in 2007, but $25M in 2013!
We can’t explain everything by only looking at the IP revenue evolution, but it’s clear that Silicon Image had some nuggets like HDMI in their port-folio, a good strategy back in 2007, and has failed to continue on the long term and develop new technologies, or new market. That’s why Silicon Image revenue has been 20% less in 2013 than in 2007, that’s the reason why Lattice has acquired the company for 2.2X the yearly revenues…Share this post via: