October 12, 2009 – After three years (2005-2007) of solid double-digit growth, third-party chip design service firms saw growth stumble in 2008, fall hard in 2009, and how they address three key challenges will decide the landscape of the sector over the next five years, according to a new report from Gartner.

The economic & industry slumps not only dented the sector’s growth, but also have caused "drastic change" in the landscape for chip design services. In addition to responding to customers’ pressure to add value, such firms must also deal with three key factors, writes Gartner analyst Ganesh Ramamoorthy: shrinking available market for outsourcing, lagging design productivity growth, and fewer/more costly skilled workers.

How they do this will likely revolve around four strategies (either standalone or in some combination), depending on their size and market position and who their customers are:

— Align sales and marketing strategy with prevailing design start trends;

— Broaden the service portfolio to include product engineering services and other design support services;

— Explore mergers and acquisitions to widen service offerings, skill-set capabilities, and geographical reach; and

— Understand and analyze regional design start trends, while examining prospects and opportunities.