Convergence, Capacity, and Cost Offer Opportunities in 2006

Looking into 2006, product convergence, physical capacity, cost and the European financial markets will offer opportunity for future growth in the electronic design automation (EDA) industry, a welcome sign indeed.

Let's begin with convergence. Research and development, as ever, will be heavily influenced by the consumer. The expected convergence of technologies found in household electronics will find greater integration into products such as media centers and games consoles with Internet connectivity, video playback, music storage, and intelligent interoperability between devices. Consumer equipment sales will also be driven by the continued switch over to digital terrestrial television, units of which will become further integrated into wide format flat-screen LCD television.

At the higher end of this consumer electronics spectrum, High Definition (HD) media and broadcast television will drive greater processing capabilities for playback devices. With these technologies will come greater levels of consumer experience, as will further introductions of next-generation games console machines. With, for example, HD capabilities, consumers will be able to experience next-generation film and recording formats without the purchase of separate hardware. They will enjoy benefits afforded by this convergence and will provide an incentive to migrate to these newer technologies.

2006 industry challenges include slow bring-up of 65-nm (and 90-nm for mixed-signal) designs. This may coincide with a global economic decline, with less consumer demand, and manufacturers will seek to combine design methodologies and fabrication facilities to conserve costs. Evidence of this is already apparent—the hugely popular Flash-based MP3 players have seen collaboration amongst memory suppliers. Influence on raw material supplies and rising energy costs both for manufacturers and the impact upon the consumer may become influential external factors, as well.

We expect consumer demand to drive next-generation Flash-based storage devices to integrate higher capacities. Flash read/write cycle limitations and cost per GB with comparable magnetic drives will not be resolved short term despite lower prices; moreover, higher bandwidth interfaces and capacities greater than 16 GB per chip will be seen as the major goals. Consequences of collaboration amongst makers, will lead to reduced time to market—making design for manufacturability (DFM) efficiencies paramount—keeping designs current and meeting the demands of these ever "space-needy" consumer electronics.

More widespread use of field upgradeable/configurable hardware to reduce equipment redundancy will become increasingly important for future production. RoHS (Restriction of Hazardous Substances) will address long established environmental concerns. The EC WEEE (Waste Electrical and Electronic Equipment) recycling directive will continue to be implemented with timetables set by the U.K. government from August 2005, this amid producers facing increasing difficulties to remain compliant—largely due to the majority of leading components being sourced and manufactured from outside of the European Union (EU).

Financially, 2005 has seen significant stimulation of new investments in the technology sector and has made Europe, and in particular the U.K., one of the best places to raise funding from a public market. With new U.S. regulations and the expense attached to launching companies, we can expect some additional interest in the London AIM market in 2006. However, in the last few months the market has cooled somewhat. This may be short term with new interest occurring in the first half of 2006 for both European and U.S. markets Venture Capital funds have also become more risk averse. Anyone planning to raise money will need to have a well developed "go to market" plan and be able to demonstrate early revenue. The bridge between revenues and "how to get there" will be key.