Defining Pricing Strategies for Silicon Intellectual Properties of Late Coming Providers by a Hybrid MCDM Framework

TLDR: In this article, a VIKOR based multiple criteria decision-making (MCDM) approach was proposed to price SIPs appropriately and achieve higher profitability in the IC/SOC domain.

Abstract: In the knowledge-based economy era, transactions of intellectual properties (IPs) in general and silicon intellectual properties (SIP) in special have played a daily important role in fostering innovation and achieving economic growth. The emergence of system-on-a-chips (SOCs) and increasing IC design complexity have further accelerating the popularity and transactions of IPs which can be used to assist IC/SOC designers crossing the gap between the growth of numbers of transistors on an IC and the growth of IC design engineering productivity. However, as transactions of SIPs have already become one of the most important business activities being related to IC/SOC designs in the semiconductor value chain, very few researches discussed the transaction related issues. Further, albeit an appropriate pricing strategy is one of the most important elements of a marketing-mix strategy, very limited researchers tried to uncover how SIP pricing strategies can be defined, not to mention the SIP strategy definition for late comers in the SIP industry, e.g. SIP providers in Japan, South Korea, Taiwan or other Asian countries. The late comers’ SIP prices usually follow those of western (e.g. U.S. and U.K.) industry leaders’ while these “me too” pricing strategies usually results in lower than expected revenues and profits. Apparently, how to price SIPs appropriately and achieve higher profitability have already become the most important marketing issues of the SIP providers. To price appropriately, this research aims to propose a VlseKriterijumska Optimizacija I Kompromisno Resenje (VIKOR) based multiple criteria decision making (MCDM) approach. The feasibility of this VIKOR based MCDM framework was verified by Taiwanese SIP experts for defining an SIP pricing strategy for late coming SIP providers in Taiwan which mainly sell low value added peripheral or memory SIPs or purchase high value added embedded processors (e.g. ARM cores) and then resell the cores with design services. Twelve criteria and nine strategies were summarized by literature and recognized by the experts at first. Then influence relationships between the twelve criteria were derived as the structure of the decision problem by using the Decision Making Trial and Evaluation Laboratory (DEMATEL) method for serving as the basis of the weight versus each criterion by using the Analytic Network Process (ANP). Finally, the nine strategies were graded and ranked based the VIKOR method. The optimal strategy, which the SIP providers sell optional extras along with the SIP to maximize its turnover, was recommended by the experts as the most suitable one. The proposed SIP pricing strategy is appropriate for the