Attempting to enhance its GPS products, Swiss chipmaker U-blox has acquired Cognovo for its LTE technology. In 2013, the company plans to introduce new semiconductor products that combine its positioning technology with the 4G technologies acquired from Cognovo. As LTE infrastructure deployments accelerate, U-blox needs new 4G products to stay competitive. The small (200-person) company focuses on automotive and industrial applications; by sticking to these niche markets, U-blox can increase its revenue without directly competing with huge connectivity leaders Broadcom and Qualcomm.

Cognovo, a U.K.-based intellectual-property (IP) company, spun off from ARM in 2009 to form a new company selling vector-DSP technology for LTE baseband processing. In the hypercompetitive CPU-IP market, new entrants face the expensive challenge of convincing potential licensees that a new design can deliver on its promises for semiconductor performance, power consumption, and die area. For an IP vendor with no other revenue source (such as chips, systems, or software), sustaining the high costs of a CPU design team requires royalty streams from multiple high-volume products. But such offerings can take more than a year to ramp into production. Like most CPU-IP startups, Cognovo chose not to follow this long path to profitability. Instead, the 30-person IP company was snapped up by U-blox.

U-blox was able to save a lot of internal development costs with its $16.5 million-dollar Cognovo acquisition. Cognovo’s CEO estimates that the company’s software defined modem technology required 300 man-years of engineering effort, which would equate to over $75 million in development costs alone – almost all of which was paid by ARM. This specialized DSP technology was never a synergistic fit with ARM’s general-purpose CPU business, which is why the company spun it out into a separate entity. ARM has been able to recoup some of its investment and avoided putting more cash into Cognovo. As part of a product company such as U-blox, the Cognovo team now has more financial stability and can finally see its software defined modem technology get into the market.