Santa Cruz, Calif. - EDA revenue fell for the first time in at least nine years in 2002, declining 7 percent overall and 13 percent in the fourth quarter, the EDA Consortium said last week.
The 7 percent dip was the first annual decline since EDAC launched its Market Statistics Service in 1994. While it suggests that high tech's stubborn slowdown has finally overtaken electronic design automation, one analyst pointed out that EDA's slump is almost as prolonged as that of semiconductors.
Total EDA revenue for products, maintenance and services last year was $3.7 billion, a drop of some 7 percent from 2001, when the sector took in about $4 billion and eked out a 6 percent gain, EDAC said.
Six quarters and counting
However, analyst Jay Vleeschhouwer said EDA's decline really dates to mid-2001, about two quarters after the semiconductor industry downturn. "We've had an adverse effect on R&D spending and EDA budgets for the last six quarters or more," he said.
Consortium chairman Wally Rhines called 2002's figures "disappointing but not unexpected" and emphasized the positives. Factoring out services, which plunged 40 percent in 2002, he said, product and maintenance revenue fell only 3 percent.
"When you see that product and maintenance was down 3 percent year-to-year, that's a relatively small decline, especially when you consider how much high technology overall was down," Rhines remarked.
Other bright spots also appeared. While revenue fell all year in North America, Europe and Japan, it rose for the "rest of world, " primarily China, Taiwan, Korea and Singapore. Rhines said the rest-of-world category's collective revenue increase, 14 percent for all of 2002 and 20 percent in the fourth quarter, may reflect the increasing design of consumer products in those countries.
Rhines said he thought the 13 percent fourth-quarter decline in worldwide revenue was exaggerated by "larger-than-expected declines in certain areas" and that it did not necessarily reflect an accelerating decline.
In fact, he said, most EDA chief executives expect the market to grow in 2003. At a recent EDAC CEO panel, Rhines, chief executive officer of Mentor Graphics Corp., predicted a 5 percent revenue uptick for this year, while other growth estimates ranged from none to 12 percent.
Vleeschhouwer, a Merrill Lynch vice president, thinks zero growth will be closer to the mark. "Growth could be difficult, to the extent that we are anticipating a 15 percent decline in Cadence's revenue this year," Vleeschhouwer said. Cadence Design Systems Inc. is the EDA industry's largest supplier.
In the EDAC report, revenue in the computer-assisted engineering category, which includes front-end tools for design creation and verification, fell 6 percent in 2002. But analysis tools were up 17 percent and synthesis was up 5 percent.
IC physical design and verification revenue grew 2 percent in 2002 but declined 16 percent in the fourth quarter. One big plus in this category was design planning and floor planning tools, up 60 percent for the year, to $177 million.
While revenue rose 80 percent in the fourth quarter for semiconductor intellectual property, the comparison was skewed by including more companies' results than from previous reports, Rhines said. Revenue from InSilicon Corp., for example, hadn't been counted as EDA income before that company was acquired by Synopsys Inc., he said.
It's not yet clear, Rhines said, whether the EDA industry will be affected by the war in Iraq. "The fourth-quarter numbers may reflect some effect from the war," he said. "Primarily the effect is to create uncertainty, which tends to discourage investment. I think we'll all be better served when we get through this period of uncertainty."