The future market performance for an IP vendor licensing an IP based on a model with upfront fee plus royalties can be easily and safely evaluated if you look at the first part of revenue: upfront fee. Even if the royalty part is declining, exhibiting a 52% increase (Q4 2013 to Q4 2012) in upfront licensing fee is a promise that the future revenues will also climb. It may takes 12 to 24 months before the IC including the DSP IP core go into full production, then you may have to add at least a quarter for the production figures to be consolidated and the royalties to be paid, but, if the production volumes are high, the royalties will be high too. You may wonder that some IC project may not be successful, and this is a matter of fact, but when an IP vendor reaches licensing revenue in the $7.3 range, you may rely on a statistical effect. We can extrapolate this high licensing range to be linked with 15 (+/- 5 !) licenses. Even if a couple of design starts fail to reach high volume production, most of it will generate royalties. On the other side of the Gaussian curve, the IP vendor may be surprised by higher than expected production volumes. That is, such a high level of licensing revenues generated by design-in in Q4 2013 will certainly generate a strong royalty flow in 2015, 2016 and even further…
If we take a look at CEVA’s licensee list (above picture) we can see that most of them are large Semiconductor company, the type of customer staying loyal as far as the product is competitive, and also because of the software installed base, reusable project after project. These are also the type of customers able to invest into SoC development, the most flexible and efficient approach to implement Digital Signal Processing algorithm, as we have shown in this previous article. If DSP as an ASSP product is in bad shape, DSP as an IP core is booming!
To be more specific, there are precise reasons why the future is bright for CEVA:
- LTE: CEVA is now benefiting from increased momentum behind Long Term Evolution (LTE). You may want to read CEVA white paper, created jointly with ARM, on their LTE solution which involves an ARM Cortex-R7 to handle the higher levels of the stack (2 and 3) with Ceva DSPs to handle level 1 where all the heavy lifting is done
- We have seen that the wireless phone market growth is now coming from the developing world, asking for low end smartphones and low cost basic phones. Thanks to DSP IP core flexibility, CEVA is also entrenched in this very promising market. Just think at the volume production level, and at CEVA business model, based on upfront fee and royalties.
CEVA is also expanding beyond wireless phone market and baseband:
- CEVA-XC product line has been tailored for the wireless infrastructure market
- We have posted numerous blogs about video/imaging solutions from CEVA, with MM3100 product line. This blog explains how using CEVA solution for super resolution, this one about Computer Vision and Imaging.
- CEVA is also diversifying into the very promising voice-audio markets for Internet of Thing and wearable systems. Will these markets develop as expected and reach smartphone like production level? I guess that nobody knows it for sure today, but it is certainly better to propose a specifically tailored (low gate count and low power), highly customable solution: CEVA TeakLite4.
A company like CEVA, enjoying more than 200 licensees and 300 licensing agreements signed to date, and a comprehensive customer base including most of the world’s leading semiconductor and consumer electronics companies, has certainly a brilliant future. Moreover, the systems developed today tend to integrate large SoC including DSP IP core, rather than DSP ASSP, and this trend is reaching all market segments, after being mostly used in wireless phones. CEVA was present at the early days of the wireless segment, no doubt that the company will continue to expand!
If you want to get the full picture of CEVA’s portfolio, just take a look at CEVA powered product