New process nodes spark innovation in EDA, resulting in the development of both internal and third-party tools. Proprietary tools can serve specific design needs, particularly early on. But major revenue-impacting design areas, such as design for manufacturing (DFM), call for the best tools available to address the toughest design and manufacturing issues--a major reason companies turn to third-party tools.

While internally developed tools work for large cutting-edge innovators that can afford the cost, in general third-party tools prevail. Economies of scale are the obvious reason; robustness is another factor. Employed for diverse design projects, third-party tools face just about every conceivable design challenge; thus they tend to be more robust. The R&D costs and resources needed to maintain proprietary tools also spur companies turn to third-party EDA. Most fabless semiconductor companies simply lack the scale to justify an internal EDA development team.

Market evidence suggests that EDA innovation is faring well. DFM is experiencing the fastest growth and adoption rate I have ever seen in EDA. Such growth isn't a sign of an industry that ignores the call of its customers. Designers buy tools only when the tools solve problems, so clearly today's DFM products are useful to designers.

Electronic system-level design is similarly poised for growth through innovation, as it moves from a small base and use of relatively fragmented, single-purpose tools to more-sophisticated methodologies supported by tools that provide large gains in productivity.

The EDA industry is fully engaged on today's design issues. Since the inception of the industry, innovation has evolved from, and thrived within, both large companies and small startups. Recent Gartner Dataquest market share data reveals the unique makeup of the EDA industry: three companies that each log $500 million-plus in revenue; a set of intermediate-size, $40 million to $150 million companies; and hundreds of companies with annual revenue of less than $40 million. In all, it is estimated that the industry comprises at least 400 to 500 independent companies. All coexist by virtue of the industry's segmentation; according to Gartner Dataquest, EDA consists of 63 unique product segments, supplied by tools from various companies. The large companies tend to lead in the larger revenue-producing areas; smaller ones lead in niches. New players continuously emerge to field novel methodologies and innovative tools.

As long as design complexity issues remain a reality in electronics, EDA innovation will thrive.

By Wally Rhines (wally_rhines@mentor.com), chairman and CEO of Mentor Graphics Corp. (Wilsonville, Ore.) and a past chairman of the EDA Consortium