SAN JOSE, Calif. -- EDA growth prospects for 2001 are excellent in spite of the semiconductor industry downturn, according to a panel of CEOs at the EDA Consortium (EDAC) annual forecast meeting. But the chief executive officers agreed that vendors must broaden their scope beyond what is currently viewed as "EDA" in order to sustain strong growth in future years.
The meeting, held Jan. 30 in San Jose, Calif., also provided first news of a new EDA awareness program that EDAC is launching. Jacques Benkoski, president and chief executive officer of Monterey Design Systems, said the program will have a "similar spirit" to the Intel Inside campaign and that it will involve a strong public relations and advertising effort to raise the EDA industry's profile.
Panel moderator John Barr, managing director at Robertson Stephens, asked the CEOs how EDA is related to the semiconductor business cycle. He also asked how vendors can "push the boundaries of EDA" to attain a consistent 20 percent annual growth rate.
Barr noted that EDAC's 2000 forecast panel predicted a 10 to 15 percent growth rate for that year, which "didn't quite happen," he said. "But, if you factor out licensing model changes, I think you'll find we pretty much hit that target," he said.
Barr also pointed to the stellar 2000 performance of EDA stocks, which gained 80 percent according to an "EDA index" of public companies. He noted, however, that semiconductor company stocks have been down since the fourth quarter of 2000, and asked whether this downturn will affect EDA companies.
Every panelist who answered that question was unconcerned. Wally Rhines, Mentor Graphics president and chief executive, said that when the semiconductor industry goes down, EDA goes up and vice versa. "When there's a semiconductor recession it's a price recession. Unit volumes do not decrease," he said. "So you redesign to get more revenues per wafer, and you design new products."
Penny Herscher, president and chief executive of Simplex Solutions, said the semiconductor downturn is primarily coming from memories, not systems-on-chip (SoCs) or ASICs. She cited Dataquest figures predicting a 50 percent growth in SoCs from 2000 to 2001.
Steve Carlson, president and chief executive of simulation accelerator startup Tharas Systems, said the semiconductor industry is exiting a period of aggressive capital spending and entering a period of excess capacity. But short of a "hard crash," he said, EDA will be relatively unaffected.
"Our semiconductor customers are in the business of designing products," said Ray Bingham, president and chief executive of Cadence Design Systems. "In good times and bad, products still have to be designed."
The EDA industry is about to reap the rewards of a 0.18-micron retooling cycle, said Aart de Geus, chairman and chief executive of Synopsys. "At 0.18 micron and below, substantial investments must be made to get chips out," he said. What most stands out for 2000, de Geus said, is the EDA vendor shift to subscription licenses.
But to sustain strong growth, some panelists said, EDA vendors need to cast a wider net. Simplex' Herscher said that design services represent a "huge" opportunity for future growth. The total available market for services today, she said, is $2 billion not far from the current $3 billion size of the EDA industry.
Buno Pati, chief executive of Numerical Technologies, said that a "technology gap" that occurs around 0.25 micron will open new opportunities for EDA vendors. The gap occurs, he said, when the feature sizes of silicon shrink below the wavelength of optical lithography tools. The economic value of "subwavelength technologies" that will allow semiconductor manufacturers to go to 0.18 micron and below will approach $60 billion by 2005, he said.
"I challenge all of us to extract that value," Pati said. "There is an opportunity here for new technologies, new infrastructures and new business models."
Mentor's Rhines said that EDA should grow into "adjacent markets" such as mechanical design, manufacturing and optical lithography correction. He also suggested new forms of distribution, such as remote use of emulation.
"We have to redefine the EDA market," said Tharas' Carlson. "We can't sell the same tools to the same people over and over." He warned, however, that it costs more to create new distribution channels than to create new EDA technologies.
"I think the nub of it is leveraging tools and services as a solution, rather than selling these things as mere products," said Cadence's Bingham. "We have to be responsible for creating design environments, not just tools or services."
At closing, Barr asked the panelists to predict EDA revenue growth for 2001. Rhines and Carlson both estimated 14 percent. Herscher said 17 to 25 percent, Bingham said "approaching 20" percent, and Pati and de Geus declined to provide a number. De Geus said later that ongoing licensing model changes continue to make meaningful year-to-year comparisons very difficult.