In 3 sentences: This document summarizes a case study comparing the commercialization strategies of Sun Microsystems and MIPS Computer Systems in the RISC microprocessor industry. Sun adopted a liberal licensing strategy to establish its SPARC architecture, while MIPS retained more control over its design through tighter licensing. Both approaches helped lower barriers to entry and establish their architectures, but may not be as effective in the growing embedded systems market dominated by Intel and Motorola.

1. Department of Business Administration
College of Management
授課老師：郭瑞祥教授
台灣大學商學研究所科技與作業策略課程報告
Jonathan Khazam and David Mowery
Unilversity of
California, Berkeley, CA
Y4720, USA 09 March 2012
商研博一 D00741002 林玠恆
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2. Department of Business Administration
College of Management
Abstract
Background
Reduced instruction set computers (RISC) recently have mounted a strong challenge to the
complex instruction set computers (CISC) that previously dominated the computer
workstation industry.
Purpose
This paper discusses the development and commercialization of RISC
architectures, focusing on the licensing strategies of Sun and MIPS Computer Systems, two
pioneers in RISC microprocessors.
Result
Licensing has assumed particular significance because of the important complementarities
between hardware and applications software, which results in network externalities. In such
technologies, the innovator may gain significant advantages from a relatively permissive
attitude toward “giving away” important intellectual property.
Method
Case study by Sun, MIPS, Motorola, IBM.
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3. Department of Business Administration
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Outline
Introduction
About RISC and CISC
Commercialization strategies in RISC
RISC, entry barriers, and user-supplier relation in the
microprocessor industry
Evaluating commercialization strategies
Embedded system
Conclusion
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4. Department of Business Administration
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Introduction
About Case
• IBM, which pioneered RISC architecture, failed to translate its early lead into
commercial dominance.
• Intel and Motorola ignored or failed to respond to early evidence of the advantages
of RISC architectures and lost the initiative in this fast-growing market to Sun
Microsystems and MIPS Computer Systems.
• Rather than an exogenous event, the emergence of a “dominant design” in this
technology was a conscious objective of the strategies of both Sun and MIPS.
This paper find
• This analysis suggests that there are important tradeoffs between the protection of
one’s intellectual property and commercial success in technologies characterized
by tight complementarities.
• But, The complementarity between software and hardware that underpins the Sun
and MIPS strategies may now be weakening, however, a development that could
threaten the long-run success of Sun’s commercialization strategy.
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5. Department of Business Administration
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About RISC and CISC
The creation of RISC
• Reduced instruction set computing was born in IBM’s Thomas J. Watson Research Center in
the mid-1970s.
• Although Their prototype RISC machines supported this theory, running some programs twice
as fast as comparable IBM machines already on the market.
• But IBM chose not to introduce RISC-based machines for almost 10 years after its pioneering
research, presumably to avoid cannibalizing its existing product lines.
RISC vs. CISC
• Simpler designs translate into shorter design and development cycles, an important
competitive factor in an industry characterized by shrinking product cycles.
• Future CISC components will incorporate features and design concepts presently associated
with RISC architectures, even as the firms that dominate CISC microprocessors exploit their
historic advantages in design and fabrication, pursuing higher levels of integration and
performance in both CISC and RISC designs.
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6. Commercialization Department of Business Administration
College of Management
Strategies in RISC (1/3)
Commercialization strategies in RISC
• This user-based innovation has been facilitated by the diffusion of the basic
principles of microprocessor design and fabrication associated with less
complex architectures like RISC, and means that the design and fabrication
capabilities of Intel and Motorola no longer provide an impregnable strategic
advantage.
• This source of advantage is likely to be much more compelling for
Intel, because of its strong position in PCs, than for Motorola, which faces
more rapid erosion of its CISC components’ share of the workstation market
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7. Commercialization Department of Business Administration
College of Management
Strategies in RISC (2/3)
Sun Microsystems MIPS Computer Systems Intel Corporation Motorola
• Exploiting the greater • Licensing strategy, allowed • Intel Corporation initially did • As was noted earlier, RISC-
simplicity of RISC the firm to focus on not respond to the new based workstations
designs, Sun developed microprocessor design and RISC designs entering the threatened Motorola even
SPARC, that was avoid the expense of market. more than Intel, because of
competitive with those of manufacturing its own chips. • However, RISC’s growing Motorola’s strong position in
Motorola and Intel. • Unlike Sun, however, MIPS acceptance in system this market.
• University research and retained control over the chip designs and the • The internal power struggle
researchers played an design, delivering only proliferation of RISC complicated the firm’s
important role in the masks to its semiconductor architectures could no marketing strategy (conflict
applied technology licensees. longer be ignored. Intel between executives).
development work. • Working with its abandoned its earlier • Customer confusion was
• Rather than integrating licensees, MIPS attempted position and introduced a heightened (License for
backward into the to use a “hybrid” alliance RISC microprocessor in SPARC or license for the
production (as opposed to strategy, in contrast to the early 1989. The i860, Intel’s MIPS architecture.)
the design and market-based approach of first RISC design.
development) of Sun, to establish its • Nonetheless, Intel
components, Sun licensed architecture as a dominant continues to focus its efforts
other firms to produce it. design. in microprocessors on
improving the performance
of its CISC-based 80 X 86
architecture.
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8. Commercialization Department of Business Administration
College of Management
Strategies in RISC (3/3)
Different approach to RISC
• Intel and Motorola, however, exhibited the classic reluctance of the incumbent, dominant
firm, moving slowly to avoid cannibalizing their established product lines.
• Sun adopted a liberal licensing policy, effectively conceding control over its intellectual
property in order to reap the returns to RISC through sales of its workstation.
• MIPS adopted a licensing strategy that followed the prescription of Teece, seeking to gain
access to “complementary” assets by licensing its technology under tighter controls to firms
manufacturing workstations.
IBM, Hewlett-Packard. and Digital Equipment Corporation
• IBM’s subsequent decision to license its RISC design to Motorola, broadening the market for
this architecture, was motivated in part by IBM’s desire to attract independent software
vendors to develop applications for this platform.
• HP is alone in providing a RISC product line specifically designed for business
applications, offering compiler and language support not provided by other vendors.
• DEC, like other entrants into the RISC competition, now is seeking licensees for the
production of its Alpha chip. 2012/3/13
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10. RISC, Entry Barriers, And
User-supplier Relations In The Department of Business Administration
College of Management
Microprocessor Industry
• The diffusion of RISC components has undercut the competitive advantages
associated with vertical integration between component and systems production.
• By lowering the barriers to entry in the microprocessor market, RISC has reduced the
power of the dominant microprocessor suppliers, and has threatened Motorola in
particular.
• User-supplier relations in another area, operating systems software, are also being
modified by forces unrelated to RISC.
About Unix
• Successful modification of Solaris might strengthen Sun’s UNIX-based operating
system as the “dominant design” in software, but this modification in the Solaris
operating system effectively pits Sun’s hardware division against its software
division, since customers no longer will require Sun hardware to run its operating
system.
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11. Evaluating Commercialization Department of Business Administration
College of Management
Strategies
The advantages of decisions by Sun and MIPS to license
• First, licensing enabled these firms to avoid the tremendous investment in complementary
assets required to manufacture and reap the returns to their innovations.
• Second, the relatively low technological barriers to entry into RISC design and fabrication
meant that a more restrictive approach to dissemination of their technologies might have
invited additional entry and competition.
• Finally, licensing SPARC and MIPS components established multiple production sources for
their microprocessors, reducing costs and risks, and attracting independent software
developers to create applications programs for them.
In contrast to Sun’s focus on establishing dominance in
workstations, MIPS sought to establish its RISC
architecture as a dominant component design, and
controlled its licensees more closely.
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12. Department of Business Administration
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Embedded Systems
Much larger market for microprocessors is in “embedded systems.” This market includes
microprocessor applications in automobiles, home appliances, telephone switching
systems, etc.
• Penetration of the embedded systems market by RISC therefore does not depend on the
availability of a large standardized applications software library. Network externalities and
“bandwagon effects” are far less important here.
• Since Sun does not reap large returns from its licensees and does not manufacture the
SPARC component
• The more restrictive licensing strategy of MIPS, on the other hand, made it very difficult for
its licensees to adapt MIPS’s RISC components to embedded systems applications for
which MIPS did not provide design solutions.
• Reflecting the fact that this market will reward more conventional commercialization
strategy that exploits control of “downstream” assets, Intel and Motorola have moved
aggressively to serve embedded systems designers, drawing on their many years of
experience and close ties with customers in this market.
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13. Department of Business Administration
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Conclusion
• The paper suggests that firms need not treat the emergence of a dominant
design as an exogenous event. Firm strategies can position a new design or
technology more favorably in the early-stage competition that produces a
dominant design.
• This paper has explored strategies for the creation of dominant designs in one
class of technologies, characterized by competition among architectures, high
levels of interdependence among technologies produced by independent
firms, and very rapid change.
• In this context, the tradeoff between stringent protection and more liberal
dissemination of intellectual property emerges as a central issue in technology
strategy.
• Beginning with a recognition of the ways in which management strategies can
affect the eventual dominance of one or another competing design, research on
these strategies in different classes of technologies should prove fruitful.
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14. Thanks For Your Listening
The End
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