Businessmodel of Tessera Technologies

Customer Segments

Tessera Technologies serves a range of corporate clients across the world, principally within the manufacturing and industrial sectors. Its client base largely comprises original equipment manufacturers, materials suppliers outsourced semiconductor assembly and test operators, and semiconductor manufacturers.

Around 98% of Tessera Technologies’s customers are headquartered in the US or Asia. The Company’s largest single market is its native US, accounting for 36% of total revenue, followed by Korea with 32% and Taiwan with 21%. Japan and the rest of Asia account for around 9% of total revenue.

A significant proportion of the Company’s revenues are dependent on a limited number of customers. According to Tessera Technologies’s 2015 annual report, Samsung Electronics, Micron Technology, Amkor Technology, SK Hynix, Powertech Technology and Sony Corporation have all accounted for more than 10% of Tessera Technologies’s total annual revenue in at least one of the last three fiscal years. Samsung Electronics is currently the Company’s largest single customer, accounting for 19% of royalty and licence revenue in

Value Propositions

Tessera Technologies is a well-respected and established name within the computing, communications and imaging technology space. In particular, it is regarded as a market leader in providing computational imaging solutions for mobile phones and digital still cameras.

The Company’s key value to customers is in the quality and reliability of its technologies. The quality of Tessera Technologies’s products and its standing within the industry is reflected in the amount of repeat business that high-profile manufacturers such as Samsung Electronics, Sony Corporation and Micron Technologies are prepared to do with the Company. Tessera Technologies devotes much of its operating funds to research and development activities, seeking to provide innovative and market-leading technologies to its customers.

Channels

Tessera Technologies operates a website at www.tessera.com which details the Company’s technologies and services. The Company’s technologies can be licensed through Tessera Technologies 40-man strong sales and licensing team, which oversees all sales and licensing activity. The Company does not appear to employ resellers or authorised distribution partners as part of its sales channels.

Customer Relationships

While it is possible for customers to browse Tessera Technologies’s products and services on its website, customers are not able to license the Company’s technologies on a self-service basis. According to its 2015 annual report, the Company’s sales activities focus principally on developing direct relationships with customers at the technical, marketing and executive management levels.

The Company provides a range of support services to its customers. It also interacts directly with its customers through its social media presence, notably its accounts with Twitter and LinkedIn.

Key Activities

Tessera Technologies develops and licenses its technologies and intellectual property to manufacturing and production companies, principally within the technology, communications and electronics space.

The Company operates through four subsidiary companies:

• Tessera Inc, which develops chip-scale packaging solutions;
• Invensas Corporation, which develops and acquires interconnect solutions and intellectual property in areas including mobile computing and communications, memory and data storage, and three dimensional integrated circuit technologies;
• Tessera Intellectual Property Corporation, which manages the group’s intellectual property licensing operations; and
• FotoNation, which develops embedded image processing solutions, including tools for red-eye removal, High Dynamic Range functionality, and image stabilisation. ### Key Partners

Tessera Technologies partners with a range of companies in order to develop, demonstrate, optimise, and commercialise its technologies. This largely comprises manufacturing companies, high-volume equipment and materials suppliers, and patent owners, that assist the Company in the development of its technologies.

Tessera Technologies subsidiary FotoNation has recently entered into several high-profile partnerships in its development of imaging technology. This includes a tie-up with Kyocera to develop intelligent camera technology for use in the development of smart cars, a collaboration with Socionext to deliver enhanced electronic image stabilisation technology for use in recording video on the move, and a partnership with Huawei to provide beautification tools in the company’s range of smart phones.

Key Resources

Tessera Technologies’s key resources are its technologies, its personnel – in particular the 180 employees working within the research and development team, and its network of manufacturing partners.

As of 31st December 2015, Tessera Technologies owned an estimated 4,036 patents and patent applications, comprising approximately 2,255 patents and patent applications held by the US Patent and Trademark Office and approximately 1,781 patents and patent applications held by foreign agencies. Tessera’s US patent applications include ‘Microelectronic packages with nanoparticle joining’, ‘System for managing data objects’ and ‘Method for manufacturing a fan-out WLP with package’.

Cost Structure

Tessera incurs costs in relation to the operation of its research and development facilities, the sale and marketing of its technologies, and the retention of its personnel. Research and development cost for 2015 amounted to $32.2 million, according to the Company’s 2015 annual report. The Company also accrues a range of administrative costs in relation to the payment of salaries and benefits for its 264 employees, rental and utility costs across its network of offices, public relations and production of promotional materials.

Revenue Streams

Tessera Technologies generates revenue through the collection of royalty and licence fees from customers. Royalty revenues are generated through a licensee’s production or shipment of licensed products incorporating the Company’s intellectual property, technologies or software, while licence revenues are generated through licence agreements for certain rights to intellectual property technologies owned by Tessera Technologies.

The Company also derives revenue from software licences for digital and video photography image enhancement technology. In some cases, Tessera Technologies enters into licence agreements that cover multiple arrangements spanning technology transfer, design, technical service and support.

In 2015 Tessera Technologies generated annual revenue of $273.3 million, down from the $278.8 million the Company generated in 2014 but up significantly on the $168.8 million recorded in 2013. The entirety of the Tessera Technologies’s annual revenue was attributed to royalty and licence fees.