After 23 years working in the EDA industry, it is quite difficult to walk away without imparting some words of insight on an industry that has truly helped make the electronics age ubiquitous and modernize our lives. So, from the sidelines, let me share some of my thoughts on EDA and its future, with my EDA colleagues and semiconductor customers.
We’ve all anecdotally bemoaned at the prospect of EDA being in stagnation. Indeed, revenues have been stuck at approximately $4 billion per year for about five years now. Dataquest shows us that the EDA expenditure among semiconductor companies shrunk from 2 percent to 1.75 percent. In the overall scheme, EDA business has been losing its ground.
Looking deeper, we can see several contributing factors to the degradation of EDA’s value in the customer minds.
First, as nanometer processes move rapidly into mainstream IC production, EDA tools have been generally behind schedule or not mature enough to meet users’ needs and expectation. As a result, several resourceful semiconductor companies chartered their internal CAD departments to develop in-house tools, which did work for them in several cases. Dataquest estimates that such in-house development investment increased to 27 percent, the highest since the inception of the commercial EDA industry in the early 1980s.
Secondly, the increasing influence of the large EDA companies might have stifled EDA innovation and also impacted EDA economics and growth. Large EDA companies often offered packaged deals to major accounts for deepening their account penetration. The average selling price (ASP), however, decreased substantially in all such volume purchases. When customers grew accustomed to these prices and habitually demanded such low ASPs in follow-on purchases, total EDA revenues began suffering.
Moreover, customers would use these higher discount rates to push other EDA vendors, including startups for similar prices. The result? Lower ASPs for startups, which need to fund innovation, slows companies and product development. Product and price competition have injured EDA startups severely due to their lack of staying power and limited competitive capacity.
The EDA industry can become strong and prosperous once again only if we work together constructively and do all right things as an industry. Admittedly, this will require a sea of change in EDA mentality. Since EDA’s inception, we have been mired by company-provincial insularity at the cost of action to instigate the growth of the EDA market. This must change.
Conducting “status-quo” EDA business will inevitably lead to industry-wide decay or very limited EDA growth at best. We already see the signs of this decay. Four billion dollars should not be EDA’s total revenue ceiling. It takes discipline and sacrifice among EDA companies and strong cooperation from our customers and the semiconductor foundries to build a healthy and prosperous EDA future. The key is to uphold and vigorously defend EDA’s product value, even under heavy pressure from users, investors and competitors alike.
Large EDA companies must take the leadership in adhere to certain pricing rules agreed among the EDA Consortium members. This is not about price-fixing, nor cartel decision making. Nor is it about regulatory action from the EDA Consortium. But we know that unconstrained price cutting can invariably destroy any industry and EDA is showing some of those signs. That is why product dumping, such as memory chips selling below production cost to gain market share, is illegal.