Tessera aims to wrap up IPO
Published: 30 Oct 2003 15:45 GMT
The company began filing its patents in 1990 and first started licensing its intellectual property in the mid-'90s. Although Intel and TI, among others, licensed the technology, it didn't spread rapidly. The tape packages were expensive, said Brookwood.
Instead, the industry gravitated toward FPGA (Flat Pack Grid Array) packaging, a then-emerging standard. FPGA shares similar flexible characteristics but allowed the chip to float face up. Although the face up position creates longer electrical leads, it was a lot cheaper and could be made on existing equipment, noted Brookwood. It got adopted by manufacturers, such as Toshiba, that do their own packages as well as contract testing and packaging companies such as Amkor Technologies.
FPGA "was a big deal because the leads didn't bend. It was robust," said G. Dan Hutcheson, CEO of VLSI Research, who added that in general, "the industry has never been wild about paying licences to individual intellectual-property providers."
Letter of the law
FPGA, though, proved to be Tessera's best friend. TI filed suit in federal court in California in 2000 seeking relief from royalties. A few months later, Tessera filed an action in district court and with the International Trade Commission against Sharp for copyright infringement.
In November 2001, an administrative judge with the ITC ruled in favor of Tessera.
On 31 December, 2001, TI paid the company $13.3m in a settlement, according to Tessera's IPO filing, while Sharp followed shortly after with a $4m settlement. Settlement fees from Seiko Epson, Shinko, Mitsubishi and Intel came to $2.1m in 2003.
"The Tessera technology includes a patent on a flexible interface between the chip and the package that is very broad," said Brookwood.
The settlements had a huge impact on the company's bottom line. In 2000, Tessera reported revenue of $11.5m and a net loss of $34m. In 2002, revenue came to $28.3m, and the company had a net income of $6.5m. In the first nine months of 2003, revenue hit $26.6m, and net income came to $6.3m. (Still, because of the amount of stock issued to employees and backers over the past 13 years, the company has been typically reporting net losses on a per share basis.)
The lawsuit with Samsung revolves around similar issues. Samsung asserts that it isn't required to pay royalties on its independent packages. The Korean giant has also alleged fraud, a contention Tessera denies.
While the outcome or ultimate effect of the Samsung suit is uncertain, it seems fairly clear that Tessera will file more legal actions. The company currently has 44 licensees. In its IPO filing it states: "We believe that more than 100 companies across the semiconductor supply chain have invested in the materials, equipment and assembly infrastructure…that incorporate our technology."
Revenue growth outside of lawsuits is likely to occur as well. DDR 2, a faster version of DDR DRAM, the most common form of memory in PCs today, will start to hit the market next year, and both Marshall and Brookwood said chip scale packaging of some sort will be needed to facilitate high-speed signalling. To help its popularity, Tessera also long ago defused the face up-face down distinction by making a version of the chip scale package that can use wire bonding.
Despite the potential, success could still prove difficult. Other competing technologies exist on the market, said Hutcheson. Tessera also doesn't charge huge royalties -- the cost is a fraction of a cent per pin on a package, said Brookwood.
Demand for multi-chip packages will also increase. Intel has come out with multi-chip packages for housing memory chips in phones. In the future, these packages will be used to bind communications chips closer together, or to put extra buffer memory close to the graphics processor, said Marshall. While popular in consumer electronics, network equipment makers are also looking at new packaging.
"If you have a dollar part that doesn't work, and you have to throw out a $300 part because of it, that's not a good situation," said Marshall.
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