The news that Synopsys posted a profit for its fiscal fourth quarter is good news for the industry.
The news that Synopsys posted a profit for its fiscal fourth quarter is good news for the industry. Previously, news from Cadence, Magma, and Mentor indicated that the EDA industry was not immune to the world-wide recession. Even Mentor, that has expanded its product lines and has begun to enter market segments that are outside the traditional EDA industry, had to report a soft quarter.
Magma needs good results from its expansion into the analog and mixed/signal market segment if it hopes to reverse the negative trend in its fiscal results. The fact that it competes with larger companies, like Synopsys and Cadence, forces Magma to compete mostly on technology innovation, since the other two have much larger marketing and sales organizations. Lately, back-end tools from all EDA vendors are achieving a level of equalization that makes it difficult to show significant advantages over the competition. Since it is quite expensive for a company to change methods in order to utilize a new tool, and since practically everyone is more cost conscious than normal, it is difficult for a vendor to penetrate a new account, especially a large one.
Therefore, the short term outlook for EDA vendors is challenging. Hopefully Mentor's loss is due, as the company stated, to a temporary shift in license renewals, and thus next quarter will provide a more positive picture for the company. but, in the mean time, an outside observer would have to come to the conclusion that EDA is not a wise investment. In fact, some analysts have even concluded that semiconductor companies might be better off developing their own EDA tools. They are, in fact, questioning the long term viability of the industry.
Therefore, it is good to see that it is possible to be profitable in EDA, as Synoposys shows. The results are the fruits of a very determined corporate strategy that has aimed, until very recently, to establish and keep the company as the leader in design of custom semiconductors. It is interesting that Synopsys has also understood that FPGA designs will increase in importance and complexity. Its acquisition of Synplicity and the resulting reorganization are proof that this time the company will avoid the mistakes it made in the past when trying to address FPGA design.
By keeping the acquired organization separate from the rest of Synopsys, management has admitted that both technology and marketing are different when it comes to FPGA designs, even if the degree of complexity is beginning to equal that of custom IC design. I expect Synopsys to continue to do well financially, even if we are bound to see a further softening of the custom IC design market, due to a significant decline in demand for electronic consumer goods.