Future of EDA
There is an interesting recent article in EE Times called “Are ESL and DFM false hopes?” Richard Goering poses the question whether Electronic System Level Design (ESL) and Design for Manufacturability (DFM) software can save the EDA industry, seemingly caught in a spin cycle of same ol’ same ol’, fierce price competition, high cost of sales, and an overall unattractive future.
Here are four things that I think ought to happen:
First, Mentor needs to cease to exist (chopped up and sold off by an LBO firm), thereby releasing some of the unnecessary price-competition in EDA software. Magma needs to be acquired by one of the other two EDA giants, Cadence or Synopsys, achieving more of the same effect. Likely, this will adjust some of the structural disfunctions of the industry, and render better P&Ls.
Second, EDA ought to merge with the IP Industry, and consolidate the sales channel. The players of significance are ARM, Virage, and a host of smaller ones like DSP IP vendor CEVA and Microprocessor core vendor MIPS.
Third, this combined industry should then merge with the Semiconductor Equipment industry, providing a seamless “Chip Infrastructure Portfolio”. Who ought to merge with whom will depend on how the First and Second steps pan out. Key questions like who gets Calibre, Mentor’s DFM franchise, will determine a few of the follow-on steps.
Finally, the Packaging Foundries need to be worked into this consolidation process, as a highly strategic piece of the Chip Infrastructure Portfolio. With chip packaging becoming more complex, the Amkors and Chip Pacs of the world have become eminently critical pieces of the equation.
Bottomline: Incremental steps have got us this far. They won’t suffice in the longer term. Bigger, bolder moves are necessary.
Here is an interesting article on why TSMC should buy Cadence. EDA exiting into the Foundry world is a perfectly legitimate option, and may end a lot of woes by verticalizing the design-manufacturing infrastructure.
Is EDA at its nadir?
Sramana Mitra attempts to make a case for consolidation in the EDA industry.
Very interesting actually, especially the part about
… Likely, this will adjust some of the structural disfunctions of the industry..
and from another post
…
Actually, my analysis has little to do with the combined revenue of the top three players. It has everything to do with lack of growth, a flat stock price over many years (Mike Fister commented jokingly: “If I had seen this 10-year stock performance chart, I would not have taken the job!”), and a very unattractive P&L structure.
SG&A costs are WAY too high.
Actually, Synopsys *is* the second largest IP provider behind ARM so your second contention is moot. And CDN & SNPS are both moving aggressively into DFM (mask manufacturing) so contention three is a given. Not sure about MENT’s fate, but an LBO has never happened in EDA, why would this happen now?
What about suggestions on how EDA can grow ‘organically?’ I mean, any ideas about new technology and therefore new services/tools which can sell for higher margins and therefore obviate the need for financial growth like the contentions you have listed?
Think bigger… please!
But Synopsys is only a very distant second, behind ARM. I don’t see how one disregards this fact. If Cadence and ARM were to merge, Synopsys would be an even further distant second in the combined EDA+IP space.
Tech LBOs are happening now, in droves, for obvious reasons (industry maturity) so your point that something hasn’t happened before, why would it happen now, rather, is moot, isn’t it?
After all, Oracle had never acquired Peoplesoft, Siebel, … before, either!
Why does EDA need to survive as a separate industry, and avoid the inevitable consolidation that happens in all mature industries? … To protect the interests of the “smaller” thinkers and special interest groups, I suppose??
I can understand that it is vastly threatening, mais, c’est la vie!
[…] My piece on the Future of EDA is here. […]
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[…] I have often said in the past that Cadence should buy ARM. At this point, given how solid the mobile and consumer electronics businesses look for the foreseeable future, an extremely compelling way to modify the business model of the EDA business, and for Cadence to get itself leverage would be to acquire this company. […]
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