The recession had an adverse impact on the third-party chip design service market in 2008, slowing outsourcing growth for the year, Gartner has reported. According to a Gartner survey of 40 vendors offering IC design services, the number of outsourced projects grew more slowly in 2008 compared with the previous year, with survey respondents reporting rapid growth in designs at lagging-edge process nodes.
Indeed, the total number of design starts captured by survey respondents grew at about 6.5 percent in 2008, compared with 34 percent in 2007, according to a report made in the research house's Semiconductor DQ Monday Report issued this morning.
The survey found that during 2008, growth in full-chip and partial design and back-end physical design outsourcing slowed to about 20 percent, 24 percent, and 3 percent, down from 27 percent, 38 percent, and 52 percent, respectively, in 2007.
The survey also found that outsourcing of back-end physical design starts at lagging-edge nodes (130-nm and above) grew significantly in 2008.
Growth in chip design outsourcing by Asia-Pacific-based chip design service customers grew the fastest, Gartner said, noting that Asia-Pacific-based survey respondents reported the fastest growth in the number of outsourced design starts captured by them.
"The survey findings confirm Gartner's belief that the recessionary market conditions that prevailed during the third and fourth quarters of 2008 had an adverse impact on the third-party chip design service market," Gartner Analysts Ganesh Ramamoorthy wrote in the Semiconductor DQ report.
"A deteriorating business climate following the financial crisis, and the onset of a recession and uncertain market conditions, started taking its toll on chip vendors' plans for new chip designs in the third and fourth quarters of 2008," he continued. "Consequently, chip design service providers and semiconductor intellectual property (IP) vendors had to face delays, cancellations or push-outs of design projects into 2009. This, in turn, had a clear impact on the number of chip design projects outsourced by chip vendors to third-party chip design service providers during 2008."
According to Gartner, 2009 will be a "make or break" year for chip design service providers as they try to "wriggle out" of the economic recession. "With ASIC design starts expected to be down almost 22 percent in 2009, it is imperative that chip design service providers align their cost structure and sales and marketing strategies to the prevailing ASIC design start trends," Ramamoorthy wrote. "This will enable them to maximize their revenue-earning potential in these uncertain times and weak market conditions."
Gartner further advised that with a recovery in chip design activity expected starting in the Q4, design service providers should prepare now to invest, especially in engineering resources, to meet a likely surge in demand for design services and support activity.
Gartner
