Corrent Hits the Boards

Security chip vendor Corrent Corp. has conceded that chip margins aren't enough to survive on as it shifts its business to boards and subsystems.

Corrent will continue selling chips; it has three Japanese design wins that are going to production soon, according to CEO Richard Takahashi. The company even showed off its latest chip design at last week's Network Processors Conference.

But chips alone won't sustain Corrent. Chips sell for between $100 and $300. By contrast, Takahashi claims, a fully loaded card sells in the $1,000 or even $10,000 range and delivers better margins.

"The ROI [return on investment] is not there for a small company," Takahashi says. "The market could be as small as $30 million going out in 2004, so it's a pretty thin market for just chips."

By itself, the encryption function no longer takes up a substantial amount of chip space, says Sanjay Iyer, analyst with The Linley Group. That's made it less valuable to produce a chip that speeds up the encryption process. In fact, encryption is compact enough to be melded into the microprocessor for some applications (see Chipmakers Flock to Security and Motorola Locks Down Chips).

To compensate, every security-chip vendor will have to start working on higher-layer functions. "They're all scrambling. People are taking different approaches," Iyer says.

Hifn Inc. (Nasdaq: HIFN), for example, has aimed itself at the storage market through the acquisition of NetOctave's assets. Another option would be to integrate more functions into the security chip, something that's possible for more general-purpose architectures such as Cavium Networks Inc.'s, Iyer says. Layer N Networks Inc. has taken this approach, adding TCP/IP offload to its chip (see Hifn Targets iSCSI Security and Layer N Lives!).

So far, Corrent's hopes are pinned on a partnership with Check Point Software Technologies Ltd. (Nasdaq: CHKP). The goal is to provide cheap all-in-one security cards, allowing OEMs to compete with the security appliances produced by Cisco Systems Inc. (Nasdaq: CSCO) and NetScreen Technologies Inc. (Nasdaq: NSCN), Takahashi says. Corrent could strike up similar partnerships with other firms but hasn't yet.

The Corrent/Check Point SecureXL Turbocard was announced in March and began shipping in August (see Check Point, Corrent Team on Security).

— Craig Matsumoto, Senior Editor, Light Reading
chipsischips 12/4/2012 | 11:18:17 PM
re: Corrent Hits the Boards From boards to chips requires a huge software effort if the margins (and pricing) are to command a big premium over the chips. It is doubtful that Corrent can make this transition with bumping up their burn rate big time.

Corrent correctly states that the business model for stand alone security chips has yet to be proved as shown by Hifn (owning most of that $30M market and currently losing lots of money). In contrast, Intel, Broadcom & Motorola have gone down the path of integrating the security function, adding further evidence that this function does not add enough value on its own.

In any event, there is certainly no room in the market for another stand-alone chip maker, i.e. Corrent, Cavium, Layer N, etc.
chip.sales 12/4/2012 | 11:18:08 PM
re: Corrent Hits the Boards Hifn has also answered the challenge for board-level solutions. Check with Interphase for a PCI and cPCI offering.

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