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Cadence CEO sees opportunities in fabless trend

Posted: 08 Jun 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Cadence CEO? analog? R&D? fabless?

Lip-Bu Tan: Fabless companies have to rely more on EDA partners such as Cadence.

EE Times Europe's Christoph Hammerschmidt caught up Cadence Design Systems Inc. CEO Lip-Bu Tan at the recent CDN Live company event held in Munich, Germany.

EE Times: Cadence is currently emerging from a major management shake-up, accompanied by a loss of management talent. In addition, Cadence has lost its long-term position as the market leader in the EDA software market. Is Cadence falling back in terms of innovation and product quality?
Lip-Bu Tan
: These are two questions. One refers to the management and one to market leadership. First of all, we are very committed to engineering leadership. Among the EDA software vendors we have the highest R&D budgetmore than $450 millionand a strong focus to our core product offering. We have a clear leadership in the analog/mixed signal realm, and the same holds true when it comes to verification and IC packaging as well as PCB packaging. We will continue to maintain this leadership.

In terms of market share, after having conducted extensive talks to our customers, I don't think we have lost much market share so far. I think we have to re-classify our revenue recognition. We went to a 90/10 three-year ratable model [with regard to our accounting method] and so far I think we hold on to what we have in terms of market share. It is very hard to tell who has the strongest market shareone year we are ahead of our competitors and then in certain years they are ahead. For this reason, I think it very hard to classify the market-share shift.

With regard to our management changes: they took place in October and I am very pleased with our current executive management team. The two leaders in the engineering team are superb, and I have a lot of faith in both, Chi-Ping Hsu [senior VP, R&D implementation group] and Nimish Modi [senior VP, R&D, front-end group]. In terms of the field organization, I am very impressed with the leadership Tom Cooley [senior VP, worldwide field operations] has with the team and the chief strategy officer Charlie Huang " he is a very great supporter and my right-hand person. Again, I am very pleased with the organization.

Over many years, there was a kind of business model established in the EDA industry in which the larger companies drove their innovation by taking over enterprising startups. Is this business model running out of steam?
When we think about acquisitions, we want to walk first before we run. We are very focused on the EDA space and our core products and not on any adjacent area. Nevertheless, we continue to look for takeover opportunities. Chief strategy officer Charlie Huang is taking care of this topic. Will we do any investment or acquisition into a technology that fits into our core product? Absolutely, we are very actively looking. Are we currently planning any major acquisition? The answer is no.

How does the industry move towards the fab-lite and fabless business models affect the EDA industry and Cadence?
The market has become very efficient. Every player focuses on the area where he can differentiate. In certain areas you have to rely on partners. In the good old days, there was a saying that "real men have fabs." But now, fabs are becoming very expensive if one moves down the geometry. This trend affects even big IDMs, they move to fab-lite. For this reason, fewer companies will run fabsexcept in analog where they don't have to run leading-edge processes.

So how would that trend impact Cadence? Actually, this creates opportunities for us. Fabless design companies have to become more capital efficient. The typical startup company requires almost a $100 million to get a design to tape-out. This is too expensive. You have to be really capital-efficient to make your business profitable. You have to rely on your foundry, on your EDA partners, on IP which you can re-use or licence or acquire. With all these factors in mind, you have to be a lot more efficient. For this reasons, fabless companies have to rely more on EDA partners such as Cadence.

We want to be their open, trusted partner. Our goal is that they don't need to be afraid to open up to us and view us as a partner. That's what we'd like to do.

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