SiFive Inc., a chip designer competing with Arm Holdings Plc, forecasts a significant increase in its licensing revenue and lifetime royalty deals for the year. The company aims to boost its licensing revenue to $60 million while striking at least $180 million worth of lifetime royalty deals in 2024.
In 2023, SiFive generated $38.2 million in revenue and signed $186 million worth of lifetime deals, according to documents reviewed by Bloomberg News. However, the company experienced a net operating loss of $113.1 million during the same period, primarily due to operating expenses totaling $148.9 million.
Similar to Arm, SiFive derives the majority of its revenue from licensing and royalty agreements. Under licensing agreements, customers pay for access to chip blueprints and technology. Royalties are then paid when these designs are utilized to create products.
Despite facing challenges in expanding its market share within the tech industry, SiFive’s figures indicate a promising growth trajectory. The company anticipates that its second-generation chip for artificial intelligence servers will further drive revenue, suggesting that its projections may be conservative.
While SiFive declined to comment on these projections, the data highlights the company’s efforts to establish itself as a formidable player in the chip design sector.
SiFive, led by former Qualcomm executive Patrick Little, offers chip designs for AI, automotive, and computing customers, positioning itself as an alternative to Arm. The startup utilizes RISC-V, an open-source chip design standard aimed at enhancing affordability and accessibility in technology.
In the face of competition from Arm and Intel, SiFive has garnered support from both companies, with Intel also investing in SiFive as a strategic move. SiFive expects robust performance in 2024, projecting $16 million in the first quarter, followed by $43 million, $103 million, and $79 million in the subsequent quarters. The company secured $233 million in future revenue from royalty contracts by the end of 2023.
Having raised $175 million in 2022, SiFive was valued at $2.5 billion. Despite its lucrative licensing approach, the company faced challenges due to substantial operating costs, resulting in a 20% reduction in its workforce in 2023. Nevertheless, SiFive remains optimistic about its growth prospects and financial stability, with plans to continue collaborating with industry leaders.
The critical question for SiFive revolves around the potential of the RISC-V standard to rival existing technologies. Although some major companies, like Apple and Intel, have yet to fully embrace it, SiFive remains confident in its long-term viability. Discussions about potential acquisitions and future plans for going public have been considered, but no concrete decisions have been made.
While SiFive is significantly smaller than Arm, which had a successful IPO in 2023, it continues to strive for growth and innovation. Arm is expected to report a substantial increase in revenue for fiscal 2024, underscoring the competitive landscape in the semiconductor industry.