Outsourced chip design starts grew as percentage of total design starts in 2009

Chip design outsourcing suffered heavily due to the economic recession, but benefited relatively as chip vendors faced with staffing shortages continued to outsource chip designs from third-party chip design service providers, according to Gartner.

Suzanne Deffree, Managing Editor, news -- EDN, August 17, 2010

While the number of outsourced chip design starts declined across all regions in 2009, they grew as a percentage of total design starts and saw revenue increase, according to a recent Gartner survey of 35 IC design service vendors.

Gartner's fourth annual outsourcing survey showed that the total number of design starts captured by respondents declined about 9% in 2009 to 1100. However, as the overall number of design starts is estimated to have declined nearly 15% during 2009, the 9% decline in outsourced design starts indicates that the number grew as a percentage of total design starts in 2009, Gartner noted.

Gartner further reported that despite the 9% decline in chip design starts, revenue reported by survey respondents grew 18% in 2009 to about $450 million.

“The survey findings confirm Gartner's belief that chip design outsourcing suffered heavily due to the economic recession, but benefited relatively as chip vendors faced with staffing shortages continued to outsource chip designs from third-party chip design service providers,” Ganesh Ramamoorthy, an analyst with the market research company, wrote in a Gartner report this week.

The Gartner survey showed that outsourced chip design starts declined across all regions. However, the company noted that the number of chip design starts outsourced by customers based in the Americas declined less than the number outsourced by customers based in Asia/Pacific and Europe, the Middle East and Africa (EMEA). Revenue from Asia/Pacific-based customers grew more than 57%, Gartner reported. Also, Gartner noted that the number of designs outsourced by China-based chip vendors grew at about 49%. Their share of all outsourced designs grew from 6% in 2008 to 9% in 2009.

The survey further showed that the number of outsourced full-chip front-end design starts and back-end physical design starts declined more than 20% and 8%, respectively, in 2009. Gartner noted that the share of back-end design starts outsourced between 90 and 45 nm grew significantly, whereas design starts outsourced in lagging-edge process nodes between 350 and 90 nm declined drastically.

The Gartner data showed that the communications electronics segment continued to account for the bulk of outsourced design starts and revenue.