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Is automotive industry the 'next big wave' for EDA?

Posted: 26 Aug 2005 ?? ?Print Version ?Bookmark and Share

Keywords:automotive? eda? ic design tools?

Largely missed in the rubble after Mentor Graphics Corp. slashed second half guidance following disappointing second quarter bookings last month was a statement by Chairman and CEO Walden Rhines that could offer a ray of future hope for the company and the EDA industry as a whole.

Speaking to analysts and investors on a conference call following the earnings statement, Rhines singled out the automotive industry as one with the potential to generate a "major new wave of growth for EDA."

In a recent interview with EE Times, Rhines expanded on his comments, saying that EDA tools for automotive cabling and wire harness should account for more than $100 million in Mentor Graphics revenue annually by the close of the decade and could eventually be worth as much as $500 million per year to the EDA industry as a whole. On top of that, the automotive industry is expected to need a growing assortment of system tools, not to mention IC design tools for the growing automotive IC market. All told, Rhines believes the automotive industry could one day be worth more than $1 billion per year to the EDA industry.

Echoing comments he made during a keynote address at the 2004 Design Automation Conference, Rhines said that because traditional EDA revenue has not been growing in recent years, tool vendors must search for growth in adjacent markets that have not traditionally been large customers, such as automotive and embedded software.

"It becomes necessary to look beyond traditional applications to applications of electronic systems that have growing amounts of electronic content," Rhines said.

Rhines said Mentor (Wilsonville, Ore.) is high on the market opportunity provided by the automotive industry, which is being driven by the increasing complexity of automotive electronics ! he added that it is not uncommon to see cars that include between 30 and 50 microcontrollers, necessitating more sophisticated busing, reliability and safety requirements. Meanwhile, he said, the way that the automotive industry typically handles system verification is similar to what the semiconductor industry did 30 years ago ! build it, test it, and, if it doesn't work, re-design.

"It's a market with designers who use very little electronic design automation software today, but will have to use a lot in the future because of growing complexity and increased safety and environmental issues," Rhines said.

"The automotive segment is probably growing faster than some others and is considered an opportunity area as a result of the growing electronic content in cars," said Garo Toomajanian, EDA analyst for RBC Capital Markets Inc. Toomajanian estimated that automotive is about 5 percent of the current EDA market, with the majority of customers being suppliers to automakers like Bosh, Siemens, Visteon and Delco.

According to Insights Inc. (Scottsdale, Ariz.), the number of electronic subsystems found in a typical car has grown from three in the 1970s to 20 or more today. IC Insights said the electronic content of cars has grown from 2 percent in the 1970s to 23 percent today and is projected to grow to 40 percent by 2010, while semiconductor consumption by automotive electronics continues to grow at a rate of 10 percent per year.

The increased prominence of the automotive market ! particularly in Mentor's case ! is compelling. While Mentor's overall second quarter bookings were down 10 percent, automotive product bookings were up 170 percent compared with the second quarter of 2004. Rhines said automotive products have accounted for roughly 10 percent of Mentor's overall revenue for the past several years. While the company does not provide specific product-by-product revenue breakouts, simple math reveals that 10 percent of Mentor's $711 million 2004 revenue equals $71 million, a significant sum for any EDA company.

Mentor is a major player in cabling and wire harness design tools for the automotive and aerospace markets. Earlier this month, in what the company said would be the first of a number of forthcoming product enhancements and introductions targeting the automotive market, Mentor released a new version of its Capital Harness Systems (CHS) design suite for complicated electrical interconnect systems, which contains more than 140 enhancements over the previous version.

Rhines said the automotive market has attracted very little interest from most other EDA companies. "Principally, it's a system design business, and Mentor has been much more of a system design company," he said.

Rhines added that other EDA players may be intimidated by the long-term investment required to play in this space. He noted that Mentor introduced its first cabling and wire harness design products in the early 1990s, but has only recently begun generating significant revenue from them.

Saber Senior Business Manager
Paul Latiolais

Synopsys Inc.'s Saber product line is used by the automotive and aerospace industries for simulation and ! competing head-to-head with Mentor's offering ! for wire harness design. The product has been around since the mid-1980s and is well-established in the automotive industry. Saber was acquired by Synopsys

(Mountain View, Calif.) in 2002.

"I think that a lot of the EDA companies are waking up to the fact that the automotive is a growing market for EDA," said Paul Latiolais, senior business manager for the Saber product line. Latiolais acknowledged that Mentor had a head start in recognizing the potential of the automotive market for EDA in the mid-1990s, but said that Synopsys has "definitely awakened" to it.

Cadence Design Systems Inc. (San Jose, Calif.), the world's largest EDA company, purports to be the leader in design tools for the automotive IC market. According to IC Insights, the automotive IC market was worth $11.5 billion in 2004 and is projected to be worth more than $18 billion by 2008. Automotive ICs made up 6.4 percent of the overall IC market in 2004, according to IC Insights, led by companies such as Freescale Semiconductor, Infineon Technologies, ST Microelectronics and NEC Corp.

Olaf Zinke, a senior product marketing manager at Cadence and a for automotive IC designer, said the automotive market opportunity is significant one for EDA and that EDA vendors have begun paying more attention to it over the past few years.

"The good thing about the automotive market is that it?s a very stable market," Zinke said. "It's not like telecom where you have a lot of ups and downs and a lot of turnover. [Automotive] is a steady growth industry."

Toomajanian said he suspects that Mentor could be making more noise about the automotive industry than other EDA vendors because the company has more system tools, including wire-harness design tools and they embedded systems software tools that can serve the automotive market, too.

"Though I am sure Cadence and Synopsys are selling to this market, as well, and do in fact take it seriously," Toomajanian said.

Longtime EDA analyst Erach Desai, currently working with his own company, Desaisive Technology Research (Hingham, Mass.), believes that the biggest obstacle to EDA companies cashing in on the opportunity offered by cabling and wire harness and other aspects of automotive could come from mechanical computer aided design (CAD) companies like Parametric Technology Corp. (PTC) and Autodesk, which are already heavily entrenched in the auto industry.

"Those [mechanical CAD companies] already have a huge presence," Desai said. "The question is, are they in a better position to take the cabling and wire harness business than an EDA company which doesn't have as big a presence in the auto industry?"

To date, EDA and mechanical CAD companies seem to be largely cooperating, each content to focus on their respective position in the market. Latiolais said Synopsys maintains working relationships with many mechanical CAD vendors, including PTC and Unigraphics. Both companies are also members of Mentor's Open Door partner program.

Dylan McGrath
EE Times




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