Inside Secure pays $10m for 11-person SypherMedia

French security specialist Inside Secure has snapped up California-based secure semiconductor design company SypherMedia International, as it looks to build on momentum which saw its licensing segment soar 296% in the last quarter. It will inherit SypherMedia’s root of trust technologies to bolster its existing presence in TV and mobile, as well as help its expansion effort into emerging markets including IoT, automotive and anti-counterfeiting – saying the acquisition is focused on addressing a market opportunity of more than $400 million in 2020 as security shifts from dedicated chips into integrated solutions.

Interestingly, only last year Inside Secure sold off its semiconductor business to Swiss cybersecurity firm WISeKey for $13.2 million, as part of the company’s repositioning to focus on security software applications. This business was shipped off due to the shrinking size of devices associated with the IoT, which in turn has triggered the shrinkage of Inside Secure from a company bringing in revenue of $150 million+ a year, to less than a quarter of that figure today, in only a four-year time frame.

The 11-person SypherMedia team has won an impressive line-up of customers in its 14-year lifespan, including Broadcom, MStar, Motorola, Intel, STMicro, HiSilicon, Infineon, Mentor Graphics and Boeing. This has given it a decent position in the smart TV space, which is dominated by SoCs from Mediatek’s subsidiary MStar, and a solid standing in pay TV conditional access prior to that, the sector where SypherMedia earned its stripes.

The deal, worth up to $10 million after an initial $7 million upfront payment, talks up SypherMedia’s patented camouflage cells technology, which protect against tampering, IP theft, reverse engineering and cloning of application-specific integrated circuits. By using a collection of physical design and layout techniques, SypherMedia claims to increase the level of difficulty while decreasing reliability of reverse engineering. This is deployed in over 300 million licensed parts, with 45 US patents.

Inside Secure’s semiconductor sector brought in $12 million in revenue in Q2 2016 before it was sold off, which accounted for a massive 60% of its quarterly revenue at the time. Inside Secure posted Q3 2017 results showing a 5% year on year drop in total revenues to $11.4 million, of which its software and silicon IP business now accounts for 100%. Royalties remains Inside Secure’s biggest business, bringing in $7.1 million in the last quarter, but down 29%, while licensing revenue for Q3 reached $2.7 million in revenue for the last quarter after nearly tripling year on year.

The only time Faultline Online Reporter has covered SypherMedia prior to this week, was in September 2016 when we discovered that its Sypher Signature BlackBox Programming and Key Management System is in place at Dish India. In effect, this is the first set of credentials written onto the set top chips, and the SypherMedia system manages these and allocate keys to each of the DRMs. This works in a similar way to Irdeto’s “Keys and Credentials” service, which writes the root of the keyladder into the chips as they are made, on behalf of major US operators and then doles out controlled access to encrypted keys.

With 15.7 million pay TV subscribers, Dish India is a major account win for Inside Secure via its purchase SypherMedia, while Inside Secure’s global reputation, famed for its DRM Fusion Agent as well as being one of the first companies to be able to download a DRM instance onto ARM Trustzone hardware, will project the SypherMedia name and technologies into new markets.

Inside Secure President and CEO, Amedeo D’Angelo, said, “The acquisition of SypherMedia enables us to accelerate the execution of our strategy on Silicon IP business towards embedded security solutions that combine product and service offerings, aiming at generating recurring revenues. This is a great opportunity to complement our existing offering and accelerate our ability to provide our customers with complete solutions that bring security to the heart of their products from design to the entire chip lifecycle. As an example, combining our root-of-trust solution and SypherMedia’s provisioning is key to bring security to the growing IoT and automotive markets.”