Absolutely fab-less

22 Feb 2007

Peter Smith, founder of Drogheda-based Redmere Technologies, readily agrees that the chips have been down for Ireland’s electronics sector since the glory days of the Nineties when every month saw a new overseas company invest in Ireland. But this, he says, is about to change.

A new generation of home-grown electronics companies is winning global renown in the consumer electronics, telecoms and automotives field.

Not only are they showing that the electronics industry in Ireland is a far from spent force but that it’s a field that represents Ireland’s aspirations of building its own industries of scale and not being over-reliant on inward investment.

Many of the current crop of electronics players develop their own intellectual property (IP) and design cutting-edge microchips here in Ireland but have their chips fabricated elsewhere in the world, in locations such as Taiwan. For this reason they are known as ‘fab-less’ chip makers.

The fab-less model being explored by Irish companies like Redmere, Firecomms, Duolog and Lightstorm is inspired by Silicon Valley firms like Xilinx, which employs 400 people in west Dublin. The fab-less model is the polar opposite to that employed by Intel, which insists on building its own wafer fabrication facilities.

At the recent Consumer Electronics Show in Las Vegas, Redmere Technologies met with 30 of the world’s top consumer electronics manufacturers about getting its chips included in future generations of TVs, DVD players, satellite consoles and video cameras.

“The indigenous electronics industry now is very different to that of 10 years ago,” explained Kevin Sherry, head of Enterprise Ireland’s high-potential start-up division. “Companies like Redmere, S3, Duolog, Lightstorm and GloNav are all spawned out of original players like Parthus and Massana and are today targeting specific niches and competing internationally.”

The idea of fab-less Irish chip companies is not new. In the late Nineties and early years of this decade, companies like Parthus and Massana posed the potential of Irish companies one day creating their own-brand microchips. Instead, both companies became hot acquisition targets of much bigger fish.

In 2002 Parthus Technologies was merged with Israeli firm Ceva in a deal that valued the company at around €153m and in 2004 Massana was acquired by Agere Systems for US$26m.

Companies like Redmere are largely staffed by former employees of Parthus-Ceva and Agere. Last year Redmere raised US$8.5m in funding to develop a chip technology for high-definition (HD) TV products that effectively replaces the old scart cable on existing TVs.

“Our intent was to build our own chips rather than just design the IP,” explains Smith. “In the electronics industry the real value is driven when you own the customer. When you own the customer you own the margin and the company has the greater potential in the long term.”

Explaining how the fab-less model works, Smith says: “We are based in Ireland and it is almost irrelevant internationally except for engineering talent. As far as we’re concerned this is a world market.”

Showing how the model works, Smith says the chips are designed and created in Ireland but manufactured in Taiwan. All sales and marketing activity would take place in the US, France and Taiwan.

Smith says Ireland is awash with chip-engineering talent. “Because of the companies we’ve had here, whether through inward investment or start-ups, Ireland punches above its weight for engineering talent. At its peak Ceva in Ireland had 350 people.
“Where did those people go? They didn’t leave the country. The next generation of electronics companies in Ireland are staffed by people who’ve been around before. In many ways the current generation of companies are spin-offs of other firms.

“And more spin-offs will come,” Smith says, referring to one company called Silansys that was a spin-off from Parthus and was bought two years ago by UK company Frontier Technologies for €6m.

“If you think about it, very little manufacturing is done in Silicon Valley. Ireland has the potential to create a Silicon Valley model of owning the technology but making it elsewhere.”

But there are obstacles ahead, he says. “I have a general concern about the ongoing availability of engineering talent that companies like Redmere needs. The development of technology education in Ireland has been allowed to slip. We will need a flow of design staff in the future otherwise we will have to look elsewhere.”
Aside from the development of Irish-branded microchips that will feature in future HD television and video recorders, there is also a fast-growing electronics equipment manufacturing community developing locally.

Dublin-based Xsil Systems builds micro-machining technology for semiconductor manufacturers that sell for anything between €10m and €20m per machine.
Another player in this space is a Dun Laoghaire-based

company called Shenick, established by a group of ex-Euristix employees.
Shenick has more than 75 customers in over 20 countries for its broadband testing equipment, including Deutsche Telekom subsidiary T-com. The company has raised up to €8m in funding from investors that include Trinity Venture Capital and Novocom.

Shenick co-founder Robert Winters explained that the company’s technology allows firms offering triple-play (telephony, TV and broadband) services to test their lines for security. “Even when we move into the realm of TV over the internet we will still have hackers in the background trying to destroy everything.

“TV and telecom companies are putting massive capacity into these services and are investing heavily in intrusion detection and firewalls. Our technology launches massive attack traffic against their networks to test how strong they are. The latest system is capable of testing 10GB networks.”

Case study: Blazing a trail

Cork-based Firecomms is an example of an Irish electronics company that is quite at home on the world stage. It targets the consumer electronics, automotive and home networking markets with its fibre optic semiconductors.

CEO Declan O’Mahoney says the company’s semiconductor light source technology is being used in next-generation cars from BMW and Daimler-Chrysler.

Last year Firecomms raised €9.6m in venture capital from investors that included ACT Venture Capital, Alps Electric North America and anchor investor Atlantic Bridge Ventures.

A fab-less semiconductor company, Firecomms develops its own IP and has the chips manufactured elsewhere. “You don’t need to connect Kinsale’s gas rig to your cooker to use gas, so nor should you need to make a huge capital investment in a factory to make your own microchips,” says O’Mahoney.

The company is a spin-out from the Tyndall Institute in Cork. “We saw a fantastic opportunity and licensed the technology from the Tyndall Institute and now have customers in the US, Japan, Korea and Germany.

“Glass fibre is an amazingbut complicated technology. We can deliver 50,000 phone conversations on one tiny fibre.

“Our technology ships directly into the automotive sector. Every BMW in the world has a flashing red light that carries communications on everything from the stereo to your iPod or mobile phone.”

He believes that Ireland can mirror the success of Silicon Valley: “Irish companies in electronics understand how the industry works and Ireland is a good environment for running an electronics company.”

High-growth Irish electronics companies

Company – Activity
Connaught Electronics – In-car electronics
Duolog Technologies – Comms chip design
Eblana – Photonics for telecoms
Firecomms – Photonics for home, car and telcoms
Lightstorm – Networking semiconductors
Redmere – Chips for home entertainment
S3 – Chip design for comms and healthcare
Shenick – Test systems for IPTV
Xsil – Semiconductor manufacturing

By John Kennedy