The recession just can’t seem to sufficiently loosen its grip on the global economy, leaving most markets stuck in neutral. Consumer spending is weak, corporate spending is lackluster, and there doesn’t appear to be any rising tide on the immediate horizon to lift everyone’s boat. Yet despite all of the turmoil in the big picture, the EDA industry has held its own during the past year.
Though 2008 and 2009 were both big disappointments for market-wide growth, much of this was due to the accounting quagmire in which Cadence has been involved. Market-wide revenue dropped more than 11% in 2008. Then in 2009 the other top EDA companies also suffered from poor growth numbers when cautious spending became the norm for practically all customers. The market size dropped another 6.6% in 2009.
Remarkably, EDA spending seems to have resumed “normal” cyclical patterns even though an end to the recession is still a far-off hope. EDA market growth (see the figure) has bounced back considerably in 2010 and is expected to exceed 10%. This will continue into 2011, which is also projected to experience solid growth of nearly 10%. The five-year compound annual growth rate (CAGR) for EDA is forecast to top 8% through 2014.
Even without the gangbusters consumer and corporate spending environment of a few years ago, the need to invest in upgraded design technology is crucial for the electronics industry. Remaining on the forefront of design is the only way for electronics and semiconductor vendors to stay in the game with the short lifecycle of today’s ultra-competitive high-tech products.
Key Trends In 2011
It is interesting to look at which areas of EDA are the hotspots in the market. The move up the design flow to a higher abstraction level is indisputably underway. Adoption of electronic system-level (ESL) tools is accelerating, while register transfer-level (RTL) tools are becoming more commoditized and feeling the resultant pricing pressures.
As growth of RTL tools, which has long been the mainstay of the leading EDA vendors, is leveling off, there have been quite a few acquisitions of key ESL tool providers by EDA as well as semiconductor companies. It is widely recognized that ESL will be a strategic growth area going forward.
When the semiconductor industry was flooded with fabless chip companies and IC startups were popping up everywhere back in the booming dotcom era, tools for IC layout were in especially hot demand by a large customer base. Now that the concentration of back-end chip design is being reconsolidated in the hands of fewer companies (primarily the large integrated device manufacturers and foundries), fewer seats of IC layout tools are required.
However, the escalating complexities of the chips being designed mean that there is an intensifying need for design-for-manufacturing (DFM) tools to deal with the yield complications that arise. Resolution enhancement technology (RET) and design-for-yield (DFY) will be drivers of IC layout segment growth.
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The printed-circuit board (PCB) tools segment has been fairly stagnant for some time. Maturity of the technology and vendor consolidation have been the primary hallmarks of the PCB segment. We are seeing now that PCB vendors have begun to eye non-traditional, but related, markets to pursue.
Cable and wire harness tools, analysis tools for thermal and fluid flow characteristics, and tie-ins with mechanical CAD design tools are some of the directions beyond core PCB technology to which EDA vendors are already turning. These new avenues should help to revive the vitality of the PCB segment.
Long-Term Projections
Transformation is underway, and the mix of tools in the EDA market will be changing in the coming years. There has long been concern among some that the EDA market is maturing and becoming unworthy of much attention. What is rather frightening is that many investors seem to have taken this viewpoint, too.
These investors perceive EDA as too dull and unexciting to warrant much interest, let alone their investment capital. It’s tough enough for semiconductor startups to get noticed by investors. With even less of a “sexy” factor, EDA startups often have an even more uphill road with venture capitalists.
The problem is that EDA is the cornerstone of the electronics industry. Designing and manufacturing the next great revolutionary electronics products will require powerful, innovative EDA technology at your fingertips. And those innovations usually originate not from the entrenched EDA behemoths, but from the small startup companies pushing the boundaries of design technology and testing new design approaches.
Unfortunately, launching an EDA startup requires backing from the investment community. It’s not quite as easy as bootstrapping a new iPhone app startup. Yet without EDA, that next generation of smart phones and portable devices won’t ever exist.
EDA is on the right track to broaden the scope of its products for electronics design. It may be necessary to pick up the pace a bit, finding ways of more quickly integrating with other parts of the electronics design tool chain.
Linking EDA more closely with software development platforms would potentially increase EDA’s influence in markets like wireless and consumer devices. Tying in more directly with mechanical design tools would amplify the impact of EDA in markets like medical devices and automotive.
Raising the perception of EDA across all the industries it touches would help EDA become even more pervasive. And the greater the awareness of EDA, and the more entrenched it is in technology industries across the board, the better the future growth prospects for EDA everywhere.