Arteris (AIP) Rosenblatt’s 5th Annual Technology Summit - The Age of AI 2025 summary

Industry trends and technology drivers

• Rising SoC design complexity and the shift to chiplets are increasing demand for outsourced network-on-chip (NoC) IP, with commercial solutions gaining market share over internal development.

• Chiplets address the challenge of large, complex chips by enabling multi-die solutions, allowing for mixing different process nodes and functions, and are gaining traction in data centers, automotive, and AI applications.

• AI adoption is accelerating across all verticals, with half of new customer design starts now related to AI and machine learning, reflecting industry-wide demand.

• The transition from internal to commercial NoC and EDA solutions is ongoing, with commercial adoption at about 25% and expected to rise significantly over the next decade.

• Key drivers for outsourcing include a shortage of specialized hardware engineers and significant cost savings compared to maintaining large internal teams.

Product innovation and business strategy

• FlexGen, a new product, enables less technically skilled customers to design complex NoCs, addressing industry talent shortages and cost pressures.

• Product pricing is increasing as designs become more complex, with average selling prices (ASPs) expected to reach $1 million by 2026, driven by adoption of newer product generations and greater system IP usage.

• The revenue model is based on ratable recognition, with deferred revenue (RPO) serving as a leading indicator of growth; profitability is projected around mid-2026 as deferred revenue catches up with OpEx.

• Diversification across geographies and end markets, especially automotive, mitigates regional headwinds and leverages global demand for SoCs.

Market dynamics and external factors

• Revenue from China has declined from 50% in 2019 to about 25% in early 2024, with further decreases expected as a result of regulatory changes and reduced VC funding, offset by growth in the US, Japan, and Korea.

• Trade restrictions have not directly impacted IP sales, but have created indirect challenges for Chinese customers due to EDA tool access; most products are of French origin, reducing direct US regulatory exposure.

• Cybersecurity is a major focus, with strict internal controls to prevent data leaks, especially as AI tools are increasingly used for operational efficiency.