Mirics: a fabless start-up with a clear vision
Having had a taste of starting out on their own once before and building a company which was subsequently sold to a large semiconductor company, the founders of Mirics laid low until there was another big problem to be solved. Before setting out on their second venture, they revalidated their ideas with some market research and discovered a big opportunity which could make use of their expertise and knowledge.
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Just like camera phones, it is expected that the majority of cell phones will incorporate mobile TV by the year 2010, but market growth is inhibited due to the plethora of different mobile TV standards and the ensuing costs. Mirics, a UK based fabless semiconductor start-up company, is addressing the mobile TV video issues head-on with a clearly defined strategy. The Chilli examines the company and its strategy under our Due Diligence series.
Vital statistics
Mirics Semiconductor Inc. is headquartered in Delaware, USA, with R&D facility located in Fleet, UK, just outside the M25 around London. The company was founded in April 2004, and was self-funded while it carried out its market research, feasibility and validation of its strategy. It received its first major capital investment a year later with a seed round from Pond Venture Partners in April 2005.
It received its second tranche in April, 2006, also from Pond Venture Partners, whose team has given Mirics substantial foundation and strategy support. Mirics will be looking to close a further round of funding around the early part of 2007. It currently employs 11 people and is growing fast – with several job offers out and key hires identified or being interviewed.
Co-founders and management team
Simon Atkinson (CEO of Mirics), Andy Carpenter and Paul Williams are co-founders of Mirics. All previously worked together at LSI Logic’s Sidcup, UK facility on mixed signal designs.
After leaving LSI logic, Simon Atkinson co-founded a mixed signal-RF design company, Mosaic Microsystems, with colleague Jonathan Strange in 1991. Mosaic Microsystems was successfully acquired by Analog Devices (ADI) in 1996. At ADI, Atkinson was director of strategic RF products, whose engineering team worked on 2G/3G cell phone radios.
With over 22 years domain expertise in RFIC (radio frequency integrated circuits) semiconductor design, Atkinson cut his teeth at Plessey Semiconductor (now Zarlink), a leading supplier of broadcast RFICs and tuner ICs. He could see great potential in reconfigurable RF, and felt that the large-company dynamics and centralised decision-making did not best suit the rapid exploitation of such cutting edge technology.
Simon Atkinson’s initial plan after leaving ADI at the end of 2003 was to take a sabbatical and do some consulting work while he formalised the market planning and technology assessment for Mirics. He was later joined by his colleague Andy Carpenter, who previously worked with Atkinson at Mosaic and LSI Logic.
Andy Carpenter’s expertise is in layout of RF and mixed signal designs, as well as software development and they jointly did some design consulting projects to help fund the early development of Mirics’ own core technology base. In their first year, they became profitable; however, based on their previous experience with Mosaic, they knew that the design services business model was not scalable in the long-term. As a result, Mirics grew as a fabless chip company, with another colleague Paul Williams, who had previously worked with the team at LSI Logic and also ran Nokia Networks’ R&D team in the UK.
Mirics current management team includes Peter Heller (part time CFO) who has 22 years valuable financial experience in technology start-ups, with successful exits including Gateway Design, Chronologic and Ambit. Dan Budin is VP systems, with 25 years experience in wireless communication technology. Budin was chief scientist at WinData – an early Wi-Fi company. He was founder and CTO of WaveAccess, where Budin and his team were acquired by Lucent in 1999. Anthony Eaton is director of engineering. He was previously design manager with Sony Semiconductors (cell phones) and PA Consulting.
Ralph Weir is VP marketing, whose extensive experience in product marketing is coupled with DSP and wireless experience at Motorola and TI. He also served as director of marketing with DSP equipment suppliers Blue Wave (acquired by Motorola), Hunt Engineering and Elixent. Weir is also currently acting as VP of business development, while Simon Atkinson is acting as VP of sales.
The current board members are Simon Atkinson and Dr. Mike Gera of Pond Ventures. Gera also serves on the board of Air Semiconductor Inc.
Commenting on the team, Mike Gera said, “Since we met the Mirics team in 2004, we recognized in Mirics’ founder & CEO Simon Atkinson a highly backable repeat entrepreneur as well as a leading RF guru. Simon and his team have been way, way ahead of competitors in their thinking. First, they recognized the need for poly-band (multi-standard, multi frequency) tuners long before anyone else and designed accordingly from day one. They also captured and realized the tremendous opportunity presented by the existing market of radio on cell phones.”
Value proposition
Mirics believes that the conventional single-chip integration model for mobile broadcast devices is a fad that will prove a dead-end. Today the multiple radios required for the disparate broadcast standards are treated as independent blocks. Such an approach results in a clumsy, power-hungry architecture which is optimized for neither cost nor size, and further developments along this path are futile.
Instead Mirics believes that this plethora of radios can be replaced with a single broadcast device, improving all key value metrics for the mobile industry. The company’s roadmap indicates this can be performed at less than half the price of competing single-standard TV-only solutions.
Cutting through a plethora of standards
In the mobile TV market, there are currently five distinctive mobile TV standards.
*DVB-H, adopted by Nokia and some European mobile operators.
*T-DMB, adopted by Samsung and Korean operators, plus some European operators.
* DAB-IP, adopted by other European operators, such as BT’s Movio service.
*ISDB-T, adopted and extensively used in Japan and Brazil.
*MediaFLO is a standard promoted by Qualcomm, expected to be used in some US markets.
On top of this, there are several digital radio standards currently being deployed in the world – DRM (Digital Radio Mobile), DAB (Digital Audio Broadcast), HD radio and the ever popular FM radio. Each of the standards have different nuances, such as a number of TV channels, compatibility with existing infrastructure, allocation of radio spectrum, costs and different interest affiliation groups.
Mirics believes the market is held back by the fragmentation of ‘standards’, which result in a multitude of different mobile TV designs and architecture for each standard, resulting in higher overall costs. This fragmentation has been identified as the principal bottleneck to the wider adoption of mobile broadcast technologies.
It has been observed that FM in the mobile phone is becoming near-ubiquitous outside the US. A major factor which is often quoted is that ‘FM is the only global broadcast standard’. To achieve the uptake FM has enjoyed, other broadcast solutions must offer this level of global compatibility, overcoming the fragmentation they currently suffer.
Mirics has developed a highly innovative tuner silicon design, which converges TV and radio while eliminating all the fragmentation – both standards and spectrum-related. This, it claims enables lower cost system solutions for mobile, multi-standard TV & radio broadcast.
Mirics has also stated that its long-term roadmap is as a low-cost RF/mixed-signal vendor enabling this multi-standard vision. This is in marked contrast to the deep sub-micron roadmaps portrayed elsewhere in the industry, which actively mitigate against multi-standard systems and the integration of FM radio on the same chip.
Current dilemma in the mobile broadcast market
As can be expected, such a larger potential market for FM radio, digital radio and mobile TV, estimated to exceed to more than 350million units by 2010, is going to attract a lot of players, each with different solutions, partitioning and price points.
Mirics sets out to address three main issues – single chip, low cost and low power – simultaneously with a single RF tuner that supports all the different markets and standards, thus enabling the creation of a global platform.
It has developed a single chip ‘poly-band’ tuner supporting all the different standards at the same price, as opposed to those that only support one or two standards. Besides offering one of the lowest power devices on the market it also throws in support for digital audio and FM radio. This will enable the development of a single platform that can support the converging FM and TV into a single solution.
Mirics’ first chip provides coverage for all major broadcast bands ranging from 100KHz-1.9GHz (covering LW/MW/SW, L-Band and VHF Bands II, III, and UHF Bands IV and V). The MSI001 tuner IC chip, which Atkinson said costs $3.50 in low production volumes, will receive all broadcast standards announced to date, including DVB-H, T-DMB, ISDB-T, DAB-IP, MediaFlo, DAB, DRM, HD Radio and AM/FM. Major mobile phone firms and consumer digital radio companies are already evaluating the chip.
Locking in value, while growing future business
While most first-time entrepreneurs would raise substantial amounts of VC money only to spend it on expensive tools, office space and recruitment costs, Mirics’ second time entrepreneurs had a goal to build up the company's assets and lock in some value prior to a VC round.
According to Simon Atkinson, “We were profitable in the first year and actually had to pay tax in our first year.” The company partnered with Cre8ventures*, which provided them with a lot of assistance, with access to EDA tools, office space and an introduction to strategic partners including potential investors from its extensive network.
As a result, Mirics’ first product was developed within nine months within a very tight budget. It has implemented three separate receiver architectures on a single RF platform that can be dynamically reconfigured and optimized for each mode.
Initial revenue for the current single chip tuner, is likely to come from existing digital radio applications, at an affordable market price and with good gross margins, thus giving Mirics, increased cash flow in the very near future. This is absolutely key as time-to-volume on mobile TV is still unknown. Locking in early business in a proven market provides an invaluable revenue stream early.
The strategy also gives Mirics the backup plan, which allows the company to continue locking in additional value while it develops its next set of products on its roadmap.
According to Mike Gera, “It is very hard for competitors to now go back and build in what Mirics has, without compromising on power, size and cost. Finally and most excitingly, Mirics has recognized that the ‘conventional’ view of how mobile audio and video reception is carried out in the phone can, in the long-term, be drastically improved. Mirics’ technology will help drive this quantum step forward.”
Gera concluded, “Bottom line from the VC perspective, Mirics has hit or exceeded every target and now has the best product in its class ready to ramp with a pipeline of high-impact future products.”
Mirics has used its exceptionally strong analogue design talent. As a result, its first product, currently-sampling MSI001, offers multi-standard functions at lower cost and power than contemporary single-function solutions.
Divide and remix
Traditional mobile TV thinking suggests that the lowest cost route is via an integrated RF + demodulator approach. This brings established partnerships under stress, as former partners try to gobble up and integrate each other’s technology and functions. So far this has not yielded a competitive price/performance product.
This disruption to the ecosystem offers Mirics a great opportunity. As a pure-play RF tuner company, it has the opportunity to become the ‘white knight’ for demodulator vendors who recognize in it a partner which has no plans to perform this competitive integration.
The company’s confidential roadmap (of which The Chilli has had some visibility) includes a startling breakthrough that will bring benefits to all demodulator solutions. We will provide you with an updated report on this in the future in thechilliRED.
The Chilli perspective
Although the full radio spectrum for DVB-H will not be available until analogue is switched off, there will be a transition, country by country, thus creating opportunities, for multimode multi-standard devices.
There is no doubt, that the mobile TV function will be a tick list item on future cell phone design, when all the inhibiting issues such as spectrum allocation, business logic and cost justification for mobile operators are ironed out. The biggest market potential will be Asia, more specifically China, where the standard for mobile TV has yet to be settled.
But while all these issues are being addressed, it creates an opportunity to address possible eventual outcomes, without having to redefine the architecture. The market is at a stage where no single architecture or partitioning has been settled yet. This provides Mirics with ample opportunities to seek out further tractions with potential customers, channel partners and supply chain.
Competition
Mirics faces two distinct set of competitors. One set comprises stand-alone tuner chip vendors, both single mode and dual mode; the other set consists of the proponents that plan to combine the analogue tuner plus the digital demodulator on a single chip.
Plethora of tuner vendors
Amongst the list of companies that offer stand-alone tuners are Maxim, which sells single channel tuners for DVB-H and DAB; and Freescale (ex Motorola Semi), which has been producing tuners for a while and works with DiBcom’s demodulator chip.
Microtune is a leading vendor in the tuner space, and is likely to follow Mirics with a poly-band multi standard tuner. It currently sells a single mode tuner at $4 and dual mode tuner $5.
Atmel currently supplies a DAB demodulator chip plus a separate tuner, so likely to move in this area, although current management issues mean that it is focused on the bottom line, rather than new market growth.
Chipidea offers a DVB-H only tuner IP in 0.18µ process, but is believed to be bigger than Mirics’ solutions.
Mirics’ major differentiator is that it offers one of the lowest power tuners, an important feature for handheld devices running on limited battery power. It is also able to match not just prices, but the entire feature set.
Single chip tuner demodulator
Mirics also faces competition from single-chip solutions. The market is currently totally open as to whether it adopts a fully integrated (single chip) tuner plus demodulator solution from companies like DibCom, Siano, Frontier Silicon, Newport Media and Abilis as a co-processor solution for the main application processor or conversely, a solution based on a demodulator with a separate multi-standard RF device.
Mirics belief is that the integration of the RF with the demodulator is not cost effective, pointing to the increasing cost of wafers at the lower geometries. As RF does not benefit from linear scaling, each process shrink represents an increase in cost of the RF portion by almost 20 percent. Although digital portions enjoy around 40 percent cost reduction with each process shrink, mapping digital into an RF CMOS process increases wafer cost by 25 percent or more.
Assuming that digital and RF/mixed signal components are the same size, integration will increase the overall die cost by approximately 25 percent through the use of the RF process.
Handset vendors looking to differentiate
Nokia currently ships more than one million cell phones per day, thus creating a huge market for product differentiation. The cell phone market is now reaching a point where it is ripe for a more open-standard based architecture, which defines the different components suited to different technologies, price points and supply chain.
In a similar fashion to what happened in the PC industry, where standardized motherboards created (pioneered by companies like Chips and Technologies, indirectly aided by Intel) a whole new industry for the chipset, memory banks, user interface, and PC displays, the cell phone handset is on the cusp of a similar industry trend.
Unlike the PC industry, where Intel drove the architecture, the challenge for cell phones is that there is no single vendor who can drive and influence such an architecture.
This creates opportunities for different sectors of the supply chain to take the lead. It could be the central processor, or the application processor, or the display and user interface vendors. Cell phone vendors need this, so that they can commoditize the silicon and display components, and rely on differentiating themselves by use of software and ergonomics (look and feel) design.
There is no doubt that the market will take in additional features like Wi-Fi, mobile TV, games and video. Leading cell phone vendors are looking for partnerships with chipset suppliers, so they can execute on this common architecture plan, even if that means throwing in the old legacy architecture and creating a new supply chain.
Anything that delivers low-power, longer battery life, will get a strong look in. Currently the vast majority of the power budget is used up in the front end RF stage. Mobile TV will create more challenges with regards to power consumption of the colour displays, so battery life will become even more critical. Any start-up that tackles the power budget on a system level and produces substantial power saving has a great chance of being designed into the next the new generation of cell phones utilizing mobile TV.
The supply chain is also evolving, whereas some components will be procured in the form of modules which have taken the pain of integrating several different technologies and vendors. Mirics has a great opportunity not only in the form of cost-effective supply chain, but also making good use of the module vendor's channels, to the OEM and ODMs, specifically in Taiwan and China.
Develop rapid partnership and channels
The challenge for Mirics after it raises its next VC round would be to set up the appropriate logistics, market channels and partnership programs that are appropriate for each specific region. We would expect Mirics to be generating respectable pilot revenues by 2007 from its first generation platform products.
This would command better gross margins than a commodity digital only product. The key for Mirics is to take advantage of this position and rapidly develop and deploy its channel and partnership strategy, in order to cut through the uncertainties created by the different standards and sets of competitors. In order to do so, it will need to raise the appropriate VC round so that it can add substantial resources and expand its offerings support around the globe.
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