2009 has been a cruel year for the EDA industry. Revenue looks to be down around 9% for the year. This follows a decline of more than 11% in 2008, which was the worst year for EDA in recent memory. Though the pain hasn’t been spread evenly among all the vendors, none has escaped unscathed. Despite analysts’ recent upward revisions to their semiconductor industry forecasts for this year, projections for EDA growth became more disappointing as the year progressed.
However, the dismal EDA numbers are less a picture of how customer spending has changed from past years. Rather, they are more a reflection of individual EDA vendors’ health and performance flubs. We were clearly too optimistic about how quickly Cadence and Magma Design Automation would recover from their revenue recognition and accounting problems. Cadence, in particular, has struggled to regain its revenue footing for the second year in a row. Synopsys and Mentor Graphics, on the other hand, will likely eke out annual growth that is flat to slightly positive—still quite an accomplishment.
GLIMPSING THE SUN
While the semiconductor industry apparently is already on the mend, the EDA forecast for 2010 is looking brighter. Improvements in the economic environment should help bolster the vigor of the EDA landscape. Hopefully, the problems of Cadence and Magma are stabilizing and all of the leading vendors will reap the benefits provided by more robust market conditions.
If so, EDA has the potential to experience annual growth of over 8% in 2010 and more than 13% in 2011. Such growth is much needed to sustain the long-term wellbeing of the entire EDA customer and vendor ecosystem. It is crucial for significant investments to be made in next-generation design tools to further technological advancement.
What types of technology will benefit most from increased EDA spending in the coming years? It will be those tools critical to the continued transition to ever-smaller process geometries and multiplying gate counts. It’s no surprise that design-for-manufacturing (DFM) tools are a key element of the current EDA growth phase. This segment has become increasingly important as designs migrate to the 45-nm-and-below process nodes.
Manufacturability issues become ever more difficult at these smaller geometries, and DFM is essential to achieving successful design closure. The latest DFM issues now also require CAD tools to be able to handle parallel processing and concurrent algorithms. These capabilities aren’t minor improvements to today’s CAD tools. Instead, they mean a complete rewrite. That’s a complex job that takes years of EDA development work.
The front end of the IC design flow is also at an inflection point. The evolution of the electronic system-level (ESL) design methodology is a thornier problem. Because an ESL-based methodology involves bridging between IC designers, system designers, and embedded software designers—groups with traditionally different design needs and tool budgets—developing a full-fledged ESL flow is no small task. But creating a full suite of ESL technologies will be a necessary step for EDA to keep adequately serving electronics designers in the future.
Engineering teams have begun to employ formal ESL tools, but much more work lies ahead. Those that do use ESL technologies are still treading lightly. Meanwhile, “upper mainstream” users have just begun their migration to ESL. Thus, there is lots of room for growth.
Because of ESL’s enormous importance, expect more acquisitions in this space as EDA vendors try to cement their market positions in this vital segment. User seats have been declining in the IC CAD segment for some time. It won’t be long before ESL is the new lifeblood for EDA growth.
Cadence is a leader in ESL even in the face of its widespread revenue drops for the past couple of years. Its ESL co-verification portfolio is a strong competitor in the market. Other leading vendors in ESL include Mentor Graphics, the MathWorks, and CoWare. As more customer spending shifts from traditional EDA segments to ESL, it will be ever more critical for key EDA players to move quickly in staking out their ESL strategies.
Cutting-edge design technologies have always been required to take advantage of the most advanced design methodologies, processes, and materials. Though new tools have been introduced in the past few years, many methodology transformations remain yet to be introduced, particularly in ESL. Therefore, it is incumbent upon the EDA industry to maintain its focus on fully developing this next generation of design tools, to both serve its customers’ technology needs and to solidify its own future health.