In the month you were appointed, MIPS generated headlines from CES in Las Vegas with design wins in Samsung's HDTV and Broadcom's set top box chip amongst others. How will MIPS processor cores shape home entertainment?
The MIPS processor architecture has already been shaping home entertainment for more than a decade. For example, it was used to render the dinosaurs in the original Jurassic Park movie! Today, MIPS Technologies holds the number one market position in digital home and networking products such as DTVs, set-top boxes, Blu-ray players, DVRs, Wifi, and broadband consumer premises equipment. MIPS licensees today offer some of the industry's most cutting edge products for the connected entertainment experience.
Regardless of the device-be it a DTV, mobile handset, netbook-consumers want access to high-quality, high-definition content any time, anywhere, on any screen. With increasingly prolific internet connectivity, data is speeding across pipelines at faster and faster rates. As an embedded processor vendor with leadership in multimedia processing and networking, MIPS processors enable a rich user experience by quickly processing high-quality audio and video content and moving it efficiently across networks.
MIPS Technologies works with our broad ecosystem of third party IP, software and tool providers to create fully integrated hardware/software solutions. One of our recently announced strategic relationships is with Imagination Technologies to provide integrated CPU and graphics solutions. By working with our ecosystem directly on integration and optimization, we are helping our customers get to market quickly.
Next on the exhibition calendar was Mobile World Congress in February. What does MIPS offer the 3.5 and 4G mobile infrastructures?
This year MIPS exhibited at Mobile World Congress for the first time, and we were very pleased to see a great amount of traction in mobile applications. There were ports to MIPS from four separate LTE software vendors, and two distinct end-to-end LTE solutions, including one from MIPS licensee Cavium Networks. MIPS-Based LTE solutions from Altair Semiconductor were demo-ed by ZTE, Huawei, Anritsu, Aeroflex and Litepoint. Wintegra also featured numerous demos around LTE on MIPS, and NetLogic announced that its MIPS-Based processors are powering ZTE's next-generation mobile infrastructure network products and other LTE trials worldwide.
We recently announced our entry into the mobile handset space and signed our largest customer developing MIPS-based applications processors for mobile handsets. We're able to enter this market now because of two main inflection points: Android and 4G.
Looking ahead, high-bandwidth 4G data networks are needed to move HD multimedia rapidly between devices. This is where the MIPS architecture excels. Because MIPS cores are small, more of them can fit on a die-we can fit three MIPS cores into an area smaller than that taken up by two of our competitor's cores. This translates to higher performance with lower power consumption. And because we offer multi-threading, our customers can achieve further improvements in power and area efficiency.
To enable our customers to quickly create MIPS-based mobile devices, we are engaging with software and middleware providers, and forging partnerships with providers of complementary IP to provide a range of choices and differentiation for their mobile designs.
MIPS is taking on ARM as the choice for processor cores in mobile handsets. Can you update us on progress with this campaign?
MIPS recently secured a large and fast growing fabless semiconductor company in Asia Pacific as our flagship mobile handset customer. Through extensive evaluation, this supplier selected the MIPS solution over its incumbent ARM-based solution for its next generation mobile handset chips. This customer is targeting a range of 3G mobile phones including Android smartphones.
This is now our third licensee targeting mobile handsets with MIPS. In Q3 we announced that a China-based company called Mavrix will develop a mobile applications processor based on MIPS, and Altair Semiconductor is creating mobile WiMAX baseband chips based on MIPS. We believe that based on these wins, our licensees are on track to introduce the first MIPS-Based handset chips in the first half of 2011.
How significant is the introduction of platforms like Android in your strategy for mobile communications?
With Android, we can bring all of MIPS' architectural advantages to handsets. There was previously a barrier to entry for MIPS in mobile handsets because the operating system was tied to the processor. With Android, that barrier has been removed because applications can run on an Android system regardless of the processor architecture. Thanks to our Android on MIPS initiative and performance/power consumption advantages, a range of companies will now be able to quickly and cost-effectively build enhanced 3G and 4G mobile functionality into their devices.
Another part of the business is networking. What are the differentiating factors that are closing the gap between MIPS and Freescale's PowerPC processors in this market?
Networking is a key area of growth for MIPS. Our architectural licensees Cavium Networks and NetLogic are displacing competitive solutions across leading networking vendors. These companies have MIPS-based multi-core implementations that are the most innovative in the industry. In Q3 we also had a significant design win with a major networking OEM that chose MIPS for its next generation multiprocessor design. So now it's not just networking chipset vendors choosing MIPS, but system OEMs too.
The company reported revenue growth of 15% this quarter, over Q2. What factors account for this continued growth?
Key growth drivers for MIPS include our royalty revenues, which are very strong. Our unit shipments have reached record levels. All indications are that consumer electronics shipments are climbing back to pre-recession levels. Asia Pacific continues to be a growth driver for MIPS. It is our fastest growing licensing region, and we recently added two Asia Pacific customers into our top 10 royalty providers. Android is also key. We have already seen significant licensing activity from our activities with Android.
During the economic crash last year, operating expenditures were reduced across our customer base. Customers focused on finishing designs they already had in the pipeline, not on starting anything new. IP companies that were doing well in this environment were providers of physical IP and other IP that was needed to finish - not start - a chip. Now customers are doing better and this year they will start increasing their investment in new projects. Signs are positive moving ahead.
License revenue also increased this quarter to reach $5.4million. Can you describe the spread of license growth across the business interests (i.e networking, home entertainment and mobile communications)?
This past quarter our new licenses were for a range of target applications including mobile internet devices, e-books, DTVs, set-top boxes, home networking, automotive, and digital still cameras, as well as the mobile handset license. We saw fairly even activity across all of our key markets. On the royalty side, this past quarter was our highest quarterly unit volume ever. MIPS licensees are projected to be collectively shipping approximately 0.5billion units per year.
