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EDAC: IP, EDA to help stir economic recovery

Posted: 19 Jan 2009 ?? ?Print Version ?Bookmark and Share

Keywords:intellectual property? EDA? IC market recovery?

Top executives from some of EDA's biggest companies delivered a sober message that could have surprised few, given the economy!business will be mired in difficult conditions for the foreseeable future.

But participants remained upbeat!even jovial at times!and voiced optimism that EDA and intellectual property would help to power an eventual economic recovery as governments enact stimulus packages and the world pushes for greener technologies.

"I have very high hopes that we are part of the solution going forward," said Aart de Geus, chairman and CEO of Synopsys Inc. He said there is "no question" that much of U.S. President-elect Barack Obama's proposed $800 billion stimulus would go to high-tech.

Walden Rhines, chairman and CEO of Mentor Graphics Corp., offered the evening's most straightforward prediction for EDA, saying he believed the final numbers would show that EDA revenue declined by 12 percent in 2008. He predicted EDA revenue would decline another 6 percent in 2009.

But Rhines!who is also chair of panel organizer the EDA Consortium (EDAC)!said much of the decline could be attributed to a change in the revenue recognition model of Cadence Design Systems Inc. He said the "intrinsic decline" for 2008!which he defined as the actual difference in product and services revenue for the year!would be about 1 percent.

If not for the ongoing impact of the change in Cadence's revenue recognition model, EDA would achieve nominal growth of 1 percent in 2009, Rhines predicted. He said this was a more meaningful gage of the industry's performance because "it removes the effect of changing revenue recognition and focuses on the real growth in demand by customers."

Cadence, which last year lost its status as the leader in EDA revenue to Synopsys, is in the process of transitioning to a more ratable model, an accounting term for recognizing revenue over the life of a contract rather than at the time of booking. The change of business model means lower near-term revenue.

Still, Rhines said, 2008 would be the third year when EDA revenue declined, joining 1999 and 2003. It would be the first time that the decline could not be entirely attributed to a change in the revenue recognition model of a major vendor, he said.

More consolidations
EDAC panelists said they expected the downturn to result in consolidation for EDA, though not immediately. Rajeev Madhavan, chairman and CEO of Magma Design Automation Inc., said consolidation tends to occur when the industry begins to emerge from a downturn.

"Now we'll see consolidation that is more like asset sales," said Chris Rowen, chief technology officer of Tensilica Inc. "Companies without money buying other companies with less money." Noteworthy consolidation will only occur when some companies start to feel healthy and accumulate cash to make key acquisitions, he said.

De Geus said there is a "tremendous amount of duplication in EDA." For example, he said, simulators offered by the various EDA vendors are each very different, but fundamentally they are about 90 percent the same. "Downturns tend to push that out of the system," he said, predicting that meaningful EDA consolidation will accelerate in the second half of this year.

Going green
Panelists expressed hope that the momentum behind so-called green technologies would be a major driver for electronics and, by extension, EDA.

De Geus spoke about the money likely to be invested in developing a new "smart grid" for distributing electricity in the United States more efficiently. Obama has expressed interest in making this a priority.

De Geus said proposed and enacted government stimulus packages throughout the world total $2.6 million. Emergency loan guarantees by governments amount to another $2.7 trillion, he said.

Madhavan talked of looking under the hood of an electric car and seeing "10 times the electronics of a regular car." He also said electronics would play a vital role in decreasing U.S. gasoline consumption and reducing the more than $700 billion that the country spends annually on foreign oil.

Panelists also expressed agreement that!unlike 2001, when the industry downturn was largely self-inflicted through overcapacity and poor inventory management!electronics is this time at the mercy of larger economic forces.

In a theme that was echoed!often in jest!through the panel, Rowen said, "This [downturn] is not about the electronics industry. We are really a flea on a sick dog at this point."

- Dylan McGrath
EE Times

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