The recent announcement by MicroSemi on MI-V Embedded Ecosystem that aims to accelerate the adoption of RISC-V ISA has encouraged me to write this blog. Gradually, RISC-V is building an ecosystem around the open-source ISA, and many companies, which are using Arm architecture, are including RISC-V in their portfolio. In this blog, I will try to analyse this competitive dynamics from a market structure perspective, and attempt to propose some actions for both Arm and RISC-V. Hope you can take a look at the post and share improvement areas and flaws.

Platforms

Let us take a look at market structure of the automobile industry. An automobile OEM procures raw materials such as tyres, steel, ECU, battery, etc. from various suppliers, and then assembles these parts to build the complete vehicle and sell it to end-users. This is a conventional business model or a product-based model, in which the money flows from right to left side, and the value flows in the opposite direction. The model is simple, as the transactions happen in a sequential manner.

Now, let us take cab service provider Uber. Can we have a sequential flow of transactions for Uber? No. Uber is just an aggregator that establishes connection between the driver and end-user. The value does not follow a set direction, and same is the case with money. Uber creates value for both drivers and end-users. We can say that Uber is a platform as it enables connection among different type of users, who use the service/product. There are many examples of platforms including Facebook, Twitter, LinkedIn, Google search, dating sites and more. Each of these platforms operates in a multi-sided market, mostly one side is the money-side and other side is the subsidy-side.

Adobe Acrobat can also be a platform, with readers of the pdf documents constituting the subsidy-side, as Adobe Reader is free; while content creation using Adobe Writer is charged. The idea is to get on-board plenty of users in the subsidy-side, so that the money-side is encouraged to pay for using the platform. This is an example of cross-side network effects, in which the increase of number of users on one side of the platform encourages more users to join on the other side.

The other case can be of same-side network effects. You are using Facebook because all your friends and connections are using Facebook. What is the utility to be the lone user of Facebook? If you are the only one having a phone, then whom you will call? As the number of users grows, the utility of a product/service increases, thus encouraging more users to use the product/service.

Platforms have the characteristics to develop strong network effects, and this shields competitors from entering their market. However, multiple factors have to be fulfilled to maintain strong network effects for sustainable competitive advantage.

Platforms in embedded processor market

Now that we have some basic understanding of the platforms, let us apply the concepts to embedded processor market. The various players or users in this market include vendors of ISA, CPU IPs, SoC, peripheral IPs, debug tools, operating system, EDA, boards, software applications & libraries, fabs, etc.

Among all these players, the ISA provider interfaces with multiple players in the market. On one side, it deals with the SoC manufacturers, who buy licenses for ISA, and then partner with various other players such as fabs, vendors of EDA, CPU IPs, peripheral IPs, debug tool, operating system, libraries, etc. to develop the SoC. So, the ISA is a platform, as it enables a connection among various users in the market. There is no fixed direction for flow of value and money, as many transactions happens bypassing the ISA vendor. The SoC vendors constitute the money-side that pay licensing and royalty charges for using the architecture; all other vendors, which supports the architecture and offer compatible products/services, constitutes the subsidy side. I have generalized the model for ease, as there can be exceptions wherein the ISA provider can charge few users on the subsidy-side as well.

As the number of users on the subsidy-side increases, the ecosystem around the ISA expands, thus more users on the money-side are willing to pay for using the architecture. The reverse also holds good. Thus, strong cross-side network effects kick in.

Currently, Arm architecture is a dominant platform in the embedded processor market, with an extensive ecosystem that enables strong network effects. So, Arm is de-facto architecture for many designs in the embedded market. It licenses the architecture by offering CPU IPs to SoC vendors, who partner with vendors of debug tools, EDA, operating system, etc. and fabs, to design and develop the SoC.

RISC-V, with its open-source ISA, can enable development of CPU IP that is void of licensing and royalty charges. History is replete with cases wherein open source systems have shaded the hegemony of closed and proprietary systems. Linux limited the presence of Windows to PC, while the former captured embedded, mobile and many other markets. A decade back, Nokia was at peak of smartphone market, with its Symbian operating system. However, open-source Android enabled 3rd party developers to build apps that gave a massive boost to Android adoption. Now, Symbian is nowhere to be seen.

Should Arm be worried?

Although strong network effects shields new entrants from capturing market, some factors influence network effects.

Switching cost

A low switching cost weakens network effects. If few users move to the new platform, then more users will follow, and it will have a viral effect, leading to downfall of the existing platform. The social networking website Orkut was quite popular in India; however, as some users moved to Facebook, other users followed, and Facebook got viral adoption due to network effects. Now, Orkut is obsolete. There was no switching cost of moving from Orkut to Facebook.

Users are discouraged to move to a new platform if the switching cost associated with movement is high. Currently, many SoC vendors use Arm architecture, and their team has good learning curve on its architecture and tools. It will take time and money to switch over to RISC-V, even though the upfront cost associated with RISC-V will be less, the NRE cost and project duration may increase, as the team has to pick up knowledge of the new ISA and associated tools, which are yet to be as extensive and matured as those for Arm.

What should Arm do?

Obviously increase switching cost. Arm should explore to establish deeper relationships with SoC vendors. Instead of going for a transactional sales model, the focus should be on building long term relations. With my limited understanding, one way of doing so is to focus more on architectural licenses, as the SoC vendors will have to commit more resources and time, thus moving over to RISC-V will be difficult and expensive. Arm can explore reducing the charges or offer some favourable terms for architectural licenses.

What should RISC-V do?

RISC-V should explore how existing licensees of Arm can seamlessly switch over. One way is to offer RISC-V support for various tools, applications, operating systems, etc. that are popular among Arm’s customers.

Entry cost

High cost associated with entering a market discourages new firm to enter the market. A firm will find it difficult to enter a market due to the following reasons:

Government regulations

Incumbents have exclusive partnership with other firms in the value chain

High product development cost

Strong network effects favouring incumbents

The cost and time associated with developing a new ISA and creating an extensive ecosystem around it, is high. RISC-V started some time back as an academic project, and later ventured into professional area by steadily creating an ecosystem. RISC-V has already shown serious intentions to become a prominent player in the embedded processor market. So, we can ignore the entry cost factor, as RISC-V is way past this stage.

Multi-homing cost

Cost borne by users for associating with more than one platform constitutes the multi-homing cost. The cost can be associated with any user on the chain. Smartphone app developers, who are supporting iOS, Android and Windows, incur cost associated with building the app for each operating system. High multi-homing cost discourages users to support multiple platforms, and focus on one or few platforms that offer highest returns or maximum users. So, we see many apps on only android, as android-based smartphones are widely adopted.

Many users, who are currently using Arm architecture, are adding RISC-V in their portfolio. MicroSemi recently announced MI-V ecosystem to promote RISC-V adoption. Now, it will be offering soft-core processors for both Arm and RISC-V. Many SoC vendors are also planning to offer RISC-V based SoCs.

What should Arm do?

The money side, which includes the SoC vendors, will certainly support RISC-V, as it avoids architecture locking and may enable concession terms for licensing charges. Further, the operating cost reduces, as they don’t have to pay licensing and royalty charges for RISC-V. So, Arm should focus on the subsidy-side that includes fabs and vendors of IPs, operating system, apps, debug tools, etc. In my view, Arm can incentivize this side for promoting and supporting the architecture. Further, to increase multi-homing costs for these vendors, maybe Arm can set revenue or project target, so as to minimize the resource and time allocation for supporting RISC-V. I am not sure whether such micro-management is possible; however, a similar strategy is already validated on taxi aggregator platforms.

Some time back, Uber and Ola (Indian competitor of Uber) faced a unique challenge in India. Many drivers registered on both Uber and Ola. Drivers receive trip bookings from both the platforms, and they cherry-pick which trip they would like to take, and then decline the other one. This leads to customer frustration, as drivers refuse some trips. The solution was that both service providers started associating the drivers’ incentive to a minimum number of completed trips over a limited period of time mostly few days. With this scheme, drivers are less likely to default and refuse trips, as they will forego incentives, if the target is not met. Further, it is highly unlikely for a driver to achieve the targets on each platform within his working hours. So, this scheme indirectly increased the multi-homing cost for drivers.

Appying this strategy to the embedded market will be challenging, as the users are diverse, not uniform as in case of taxi aggregator market, wherein the strategy impacts only drivers.

What should RISC-V do?

RISC-V with its open-source ISA will definitely gather support from SoC vendors, as it offers a good-enough alternative to Arm. The existing members of RISC-V include many prominent SoC vendors including NXP, NVIDIA, MediaTek, Qualcomm, and Samsung. These members will encourage more vendors of IPs, operating system debug tools, EDA, etc. to start supporting RISC-V. So, I believe RISC-V should focus on gathering support from more SoC vendors. A week back, Andes announced the availability of 32 bit CPU IP cores based on RISC-V.

Disruptive business model

New disruptive business models have an adverse impact on network effects that are based on conventional models. Entrants can challenge the incumbents with new business models that enable more efficiency and cost optimization in the market.

With open-source ISA, RISC-V disrupted the existing market structure. The model is democratic, as SoC vendors do not have to pay licensing charges to RISC-V, so the money-side has disappeared. Value and money flow among the various users in the market, with RISC-V acting as a common base. With custom SoCs gaining prominence due to latest industry dynamics, SoC vendors can offer RISC-V-based custom SoC with less investment. Cross-side network effects will encourage more companies to support the ecosystem with supplementary product/services for enabling RISC-V-based development at low cost and fast-time to market. Read more about custom SoCs in my blog Why, How and What of Custom SoCs.

What should Arm do?

With DesignStart program and its subsequent amendments, Arm is enabling custom SoC design at lower cost and risk. The Cortex M0 and M3 CPU IPs are offered along with zero upfront license fees and a success-based royalty fee to minimize risk for commercial custom SoC development. I believe Arm should explore how to add more utility to the DesignStart program, and thus reduce the cost barriers for Arm-based custom designs.

Conclusion

In the war of platforms, both Arm and RISC-V have unique competitive advantages. RISC-V will enable collective innovation that benefits the entire community; Arm already has an extensive ecosystem with more than a decade of influence and growth. Interesting times are coming ahead; I look forward to see what strategies Arm adopts to retain its market share and how RISC-V intends to pulls the pie from Arm.

I believe there are flaws in the post, as it is based on my limited understanding of the current licensing terms of Arm. The views are completely personal; I do not have professional association with any company mentioned in the post. I believe both Arm and RISC-V have competent people, who have already thought about the likely strategies mentioned in the post. If you believe the suggestions mentioned here are useless, then I eagerly look forward to your feedback and view.

ARM vs RISC-V: Beginning of a new era

ARM vs RISC-V: A Game Theory perspective