SANTA CRUZ, Calif. - A growing trend towards FPGA design and a "precipitous" drop in ASIC design starts spells trouble for the EDA industry, according to a new market update issued by Erach Desai, analyst at American Technology Research. But Desai's predictions clash with a much more optimistic scenario from Gartner Dataquest.
In his Nov. 25 industry update, Desai said that the EDA market has "shifted from a market-expansion phase to a market-share retention phase." The primary culprit is fewer ASIC design starts. According to Desai's research, ASIC design starts peaked at an annualized rate of 10,500 in 1996 and will decline to under 2,500 in 2005.
What this means, Desai said, is that EDA revenues for ASIC design will peak in 2003, decline by four percent in 2004, and decline further by nine percent in 2005. Thus, he said, overall EDA revenues will likely be flat in 2004 and 2005.
Desai's update cites a "pervasive and accelerated trend towards FPGAs" as a primary reason for the decline in ASIC design starts. However, his update notes that FPGA design tools are "essentially freeware." Although commercial companies like Mentor Graphics and Synplicity derive some revenues from FPGA tools, Desai said, the bulk of FPGA tools still comes from FPGA vendors as an adjunct for selling silicon.
"If our thesis on the decline of ASIC design starts proves to be correct, it is very likely that a decent component of EDA software for ASIC design will vanish from the addressable market space for the EDA vendors," the update states.
Desai's report, however, contrasts sharply with a Dataquest forecast released in August. That forecast actually lowers expected 2003 market growth to one percent, but it expects 14.9 percent growth for 2004. And as electronic system level (ESL) tools come on line in 2005, Dataquest expects ESL to drive the EDA industry to 20 percent annualized growth from 2005 to 2007.
"By 2007, we expect the EDA market to reach approximately $5.5 billion in product revenue, approximately double its level today," the Dataquest report states. This report will be updated in early December.