First came the fabless model, in which chip-design firms switched from making their own integrated circuits in expensive fabrication facilities, or fabs, to contracting the design out to specialists called foundries. Now, according to speakers at a recent conference on microelectronics, division of labour in the chip business is moving to the next step. “Chipless” companies that design parts of chips and make their money selling those designs to others will play a growing role in the industry.With chips incorporating more and more transistors and companies building so-called “systems on a chip” that perform many functions, it is getting harder for one firm to do the whole job, and there is a need for specialists to create components or blocks for various functions.
“We’re at a phase where our industry is going to mature,” said Richard deBoer, chief executive of Galazar Networks Inc. DeBoer, whose company makes semiconductor components for networking, said slow growth means the industry must become more efficient. That means not duplicating research and development, and that means component manufacturers will have to use more third-party intellectual property, he said.
George Cwynar, president and CEO of Ottawa-based chip designer Mosaid Technologies Inc., said the chipless model has evolved because of increasingly complex chip designs and pressure to bring products to market faster.
Mosaid, a 30-year-old Ottawa firm that started out designing and manufacturing memory chips, is an example of the trend. Cwynar said it is now an intellectual property company, deriving most of its revenue from licensing its patents to others.
Another Canadian example is Kanata, Ont.-based Elliptic Semiconductor, which designs security and verification technology to be incorporated into systems on a chip.
Brian Piccioni, managing director of high-technology equity research at BMO Nesbitt Burns, said it is becoming too expensive for technology companies to reinvent what others have already done. He pointed to Gartner Group projections that the semiconductor IP business will show a 20 per cent compound annual growth rate through 2008.
Though he sees the chipless approach as the way of the future, DeBoer is not an enthusiastic advocate. He started his remarks in a panel discussion on third-party intellectual property by describing himself as “probably the most negative person about third-party IP out there.” Galazar avoids using third-party IP wherever possible, he said, because of problems the company has seen with adapting others’ designs to its needs. But it cannot entirely avoid doing so, and deBoer said he expects every chip company’s use of third-party IP to grow.
Co-panelist Patrick Boutard agreed. The director of mixed signal development at PMC-Sierra Inc. said his company is “paranoid” about using third-party IP in its chip designs, but is sometimes forced to do so.
What worries these companies is the fact that design components from other companies don’t always work as expected when incorporated into their designs. When that happens, they have to make changes to get the desired results. That takes time and money.
“We cannot run the risk of missing a market window,” Boutard said.
“If you sell me bad IP,” said deBoer, “it can cost me $10 to $20 million in damage.”
The Canadian Microelectronics Corp., a government-backed organization whose job is to facilitate Canadian microelectronics research, has noticed the increasing importance of the chipless model and is adjusting its strategy accordingly, said CMC’s president and CEO, Brian Barge.
Canadians now need to improve in integrating the elements of increasingly complex microsystems, Barge said.

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