Unfamiliar names in developing economies

Two axioms we’ve heard pretty consistently since the start of the 2008-9 recession are the observation that even if decoupling is impossible in today’s global economy, the nations of the Southern hemisphere will get by with less of a beating in the current downturn than the older Western economies. The corollary to this assumption is that most emerging trade is South-South, so citizens of the US and European Union only have a vague idea of new boom markets being served.

Until I saw Martin Walker’s essay, ‘The Southern Supermen,’ in the Winter 2009 World Policy Journal, however,  I did not realize the scope of the contracts being signed between OPEC powerhouses, China, and India on the supplying side, and emerging economies in Asia, Africa, and South America on the receiving side. We often hear about individual efforts in the emirate states to score joint semiconductor manufacturing deals with IC designers, of the type long prevalent in China, Taiwan, and South Korea. But do we realize how much the emirates are paying for scores of telecom service providers, wireline and wireless alike, in the Southern Hemisphere?

This got me thinking about the future of intellectual property ownership in the post-recession environment, as OEM leadership turns to the likes of Huawei and Lenovo. IT manufacturers in the US and Japan have learned that the dominance of China in peripheral components in recent years has not been a problem-free trend. The rise of counterfeit power-control discretes and MSI peripherals, for example, has led to a problem in laptop reliability.

As large integrated semiconductor fabs dominate all global production in the future, the problem will be less one of possible malfunctioning processor architectures, and more a problem of determining ownership of IP cores. In order to survive the lean years, fabless designers of processors, DSPs, LAN co-processors, and the like will be tempted to reach broader terms for licensing architectures for both production semiconductor companies, and the internal use of OEMs based in Asia. As the South-South trade patterns become more difficult for US and EU companies to follow, it’s uncertain whether every instantiation of an ARM or PowerPC core will be properly compensated.

Ultimately, FPGA vendors should care about monitoring this traffic, because the real challenge to the likes of Xilinx and Altera will not necessarily come from a new FPGA startup based in Bangalore or Shenzhen. Instead, the sockets that represent next-generation opportunities for FPGAs may go to VLSI devices of unknown origin. And if current trends continue of Northern industrialized states becoming economic backwaters in coming decades, the issue of which processor gets designed in to the next generation of iPhone or Android may become largely irrelevant, as OEM systems emerge that are designed in the South, manufactured in the South, and sold in the South, with very little awareness on the part of designers and marketers in the traditional Western industrialized nations.