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Is EDA getting its fair share in IC market?

Posted: 30 Jul 2009 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor? EDA? processor?

Top execs reignited the debate of the age-old question of whether EDA gets its fair share of semiconductor ecosystem revenue at the Design Automation Conference, with at least one suggesting that the current recession may be the catalyst for a favorable change.

EDA revenue has consistently been about 2 percent of semiconductor industry revenue throughout much of the industry's history. But many believe it should be higher. Price wars and other factors have combined to leave EDA shortchanged, they argue.

Aart de Geus, chairman and CEO of Synopsys Inc., said that only economic pressuresuch as that being exerted by the current recessioncan change the status quo. If EDA tools can help alleviate chipmakers' economic pain by enabling more efficient design, they may be able to command a higher percentage of revenue, he said.

The "economic downturn right now is our best opportunity to shake things up," de Geus said in a discussion of EDA's potential for helping bring about changes in energy consumption and the development of alternative energies.

But de Geus also suggested that the question of whether EDA was being fairly compensated was pointless. "There is no industry in the world that doesn't feel that they don't get their fair share," he said.

Walden Rhines, chairman and CEO of Mentor Graphics Corp., said he doesn't see EDA commanding a higher portion of semiconductor industry revenue anytime soon. "The easier way is to grow semiconductor revenue and get more that way," he said.

Rhines also said EDA could derive greater revenue from adjacent industries, including the military/aerospace and automotive industries. "These industries are really in their infancy in terms of using automation," he said.

Depleting VC investment
The CEO panel also touched on the shrinking amount of venture capital being invested in the chip industry and the implications for EDA. As reported, venture capital firms have largely retreated from the semiconductor industry, saying the cost of bringing a new processor or SoC to market is becoming prohibitive.

A fabless chip startup now requires an average of $75 million to $100 million in venture capital to get a product to market, according to Lip-Bu Tan, president and CEO of Cadence Design Systems Inc. But the average amount paid to acquire a chip startup is only $55 million to $60 million, he said.

"You just don't make money," said Tan, who is also chairman of VC firm Walden International.

Rhines agreed that venture capital investment in the semiconductor industry may never return to the level of the late 1990sduring the time of the dot com boomwhen VCs poured money into chip startups, helping EDA enjoy a period of growth. But he said that the actual level of VC-funded startups has not dropped all that dramatically.

"I think we should not give up so quickly on the startups," de Geus said. Startups have a "clean slate," he said, and are not working with legacy tools or methodologies. As a result, they have an opportunity to invest in efficient design methodologies from the get go, he said.

Rhines noted that while VC-funded fables startup activity is on the decline, a number of companies have transitioned to fables or fab-lite models. An increasing number of companies that rely on design for differentiation bodes well for EDA, he said.

De Geus said he was concerned about the spirit of entrepreneurism across all high-tech industries. Startups in EDA and elsewhere seem to be focused on building something that offers customers an incremental advantage, hoping to entice a buyout offer from a larger firm.

Too many young entrepreneurs are asking how they can build an exit strategy right from the beginning, de Geus said.

But, during downturns, the first things to be hurt are solutions that provide only incremental improvement. "People want the increments, but they don't want to pay for it," de Geus said.

Instead, startups should be focused on creating bigger innovations, not thinking just about how they can be acquired, de Geus suggested.

"You have to think about something that will have a bigger impact than an incremental solution," de Geus said.

- Dylan McGrath
EE Times

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