Rambus patent claims burrow to heart of semiconductor industry By Mark
Hachman Electronic Buyers' News (06/17/00, 10:01:56 AM EST)
SANTA CLARA, Calif. - Once a curiosity, then an upstart, and more recently a
controversial player, Rambus Inc. emerged Friday as a company that could
prove to be the tollbooth of the semiconductor industry.
Analysts expressed utter shock at Toshiba Corp.'s concession to Rambus'
claim that it essentially owns the fundamental rights to the synchronous
DRAM memory interface used by the majority of the semiconductor industry.
Indeed, Toshiba's decision could have a profound impact on a wide range of
companies, according to observers, as Rambus prepares to conduct similar
licensing deals with memory and logic firms alike.
Essentially, Rambus, Mountain View, Calif., has successfully laid claim to a
fundamental tenet of computing. All logic devices manipulate data in memory,
the majority of which are not embedded but consist of discrete chips using a
synchronous memory interface.
The list of companies that may have to line up at Rambus door could include
the entire DRAM industry -- which research firm Dataquest Inc., San Jose, is
projecting will record revenues of $36 billion this year -- as well as any
company that designs products that directly interface to synchronous memory.
That includes makers of PC chipsets, graphics chips, embedded controllers,
I/O hubs, and networking components, among others.
"Our patents are pretty fundamental," said Rambus chief executive, Geoff
Tate, during a press conference Friday to announce Rambus' next-generation
memory interface technology for the consumer market. "I think it's likely to
say that most companies will violate these patents."
Rambus will initially seek out royalties from DRAM vendors, Tate explained,
because a large number of DRAM chips will typically connect to a single
chipset, providing a lucrative target. "But the non-main memory TAM [total
available market] is about the same as the main memory space in TAM," Tate
said.
Tate said between five and 10 companies are "in active discussions" with
Rambus, either evaluating the patents in question or negotiating similar
licenses of their own. Representatives for Toshiba were unavailable for
comment.
"We're reviewing with individual manufacturers what patents we have, what
patents they have, and why they require a license," Tate said. "It may take
a couple of months."
The license is restricted to a synchronous memory interface and its many
offshoots which dominate the DRAM industry today. The patents that Rambus is
asserting, and the license Toshiba signed, do not apply to older
fast-page-mode or EDO memory.
Tate conservatively estimated the Toshiba royalties would generate $10
million per year in royalties for Rambus. According to Dataquest analyst Jim
Handy, the royalty revenue from Toshiba alone could be substantially higher,
upwards of $15 million. The royalties Rambus will charge Toshiba are
retroactive to April of this year. In 1999, according to Dataquest, Toshiba
recorded $1.5 billion in revenues from DRAM alone, a 6.5% market share that
placed it sixth in the market.
Under the licensing agreement Rambus strikes with all of its partners, the
licensee is responsible for tallying and then reporting the amount of Rambus
chips sold during the quarter. Under what are typically five-year
agreements, Rambus then records the revenue during the following quarter.
Under Rambus' default contract, Direct Rambus royalties are between 1% and
2% per chip. Under its new agreement, Toshiba will pay an even higher,
undisclosed royalty for sales of DDR memory. Tate also said that Toshiba
could be asked to pay royalties of 3% to 5% for memory controllers or for
products that include a controller interface.
Toshiba's concession comes at a time when Rambus is engaging in a broader
effort to try to enforce its patents against Hitachi Ltd. in court, both in
front of the International Trade Commission through a petition with the
Department of Commerce, and in a civil court in Germany. Tate said he
expects a response by either the ITC or the German court before the end of
the year.
According to Tate, Hitachi asked other DRAM manufacturers to stand with it
in a show of solidarity, but all refused. Several came to "kick the tires"
of Rambus' patents instead. "If they were going to be innocent bystanders,
they figured they were going to need to be proactive," Tate said.
A spokeswoman for Hitachi's DRAM business, part of Hitachi Semiconductor
(America) Inc., San Jose, said Hitachi executives were unavailable for
comment, and would not comment in any event, given the pending litigation.
Analyst Sherry Garber of Semico Research Corp., Phoenix, said that she could
not really grasp the ramifications of the deal until the industry had a
chance to react. "I was stunned," she said. "I mean, it's like Rambus and
Toshiba said the [ITC] suit didn't mean anything."
Whatever the outcome, Rambus has refused to engage in the cross-licensing
deals prevalent in the industry today. Such deals dilute the value of the 85
patents issued to Rambus in the U.S., executives said, including additional
claims that have yet to be verified.
"We have no interest in cross-licensing, because we have no interest in the
patents of others," said Avo Kanadjian, vice president of marketing for
Rambus.
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