Tech companies including Cadence have done their share of acquiring startups to access new technologies and products. Most recently Cadence bid to buy Tensilica in Silicon Valley and Cosmic Circuits in Bangalore to expand its portfolio of intellectual property cores.
Cadence has plenty in the bank for any other acquisition candidates it finds. The company has $827 million in cash, generates more cash each quarter and has a $250 million line of credit at a relatively low interest rate. “We generate a lot of cash, so liquidity is not our barrier,” said Tan.
The chip designers the EDA sector serves, however, face a tougher financial outlook. Market watcher Semico Research predicts the $108 million required to design a 28-nm chip could balloon to $210 million at the 14-nm node.
The costs will drive more consolidation in big mobile and server platforms, Tan said. Meanwhile, analog, automotive and industrial parts will avoid the bleeding edge processes, he said.
Those dynamics could dampen growth for the EDA sector. That’s one reason why Cadence is joining Synopsys in expanding its offerings of IP cores, a business Semico says is growing about 19 percent a year.
“When you show double-digit growth, people start to invest in you and when you are not growing they ask for a dividend,” said Tan, complaining the EDA sector is severely undervalued today at its current 2.4-2.5 multiples. By contrast, service companies such as Salesforce.com trade at eight times their earnings, he added.
A full service of integrated cores and tools can also help systems companies innovate faster, expanding the entire electronics pie for everyone, he believes. “If the electronics industry grows from $300 billion to $500 billion, we are all better off--otherwise we eat each other’s lunch,” he said.
EDA companies are all in the same boat. “If one stock goes down, we all go down,” he said.
“We should not let people think EDA is only a $5 to $6 billion industry,” Tan said. “We need discipline about articulating our value proposition…growing from EDA to IP to [platform] software and services,” he said.
Tan added one more item to the EDA to-do list—be more fun. “We need more excitement so that rather than join Facebook or Google we can get college kids to join EDA companies,” he said.
What does it mean painful to see your kids go to the other side of the world for US Engineer? Today, there are many Asian Engineer work in US - the other side of the world for them, and is it really painful for Asian? So when Asian Engineer relocate to US, then this is not your concern, but when US Engineer have to relocate to Asia, then this is painful in your view? Today, we talk about globalization, and open market, whereever there is market opportunity, the development will follow and heading there to, so if you think American's kid working at Asia countries is a painful matter, it's either stoping your kids to go into semiconductor, or asking your government to be more protective to your country's semiconductor industry. Oh yeah, it reminds me you really did the second, haha ... it's time to grow up, dude!
The only way the US will ever help out in any research and funding for semi technology is if it can be applied directly to civilian Drone, Military or privatized Prison uses.
All we need to do is somehow tie in consumer semiconductors to Drones, Missiles or Arizonas private prisons and the semiconductor funding would go thru the roof.
And nice shameless plug there apvkt for your car stereos, you really should be banned from these post in the future.
Rick, I would argue, from an investment dollars perspective, that you should include Abu Dhabi's investment in GloFo along with China & India. Since much of that investment has gone to fabs in NY and R&D centers in USA, there is tax breaks given to GloFo is essentially the US governments investment in Semiconductors.
Any money a government "invests" in anything is money the real experts, in the private sector, won't have to invest. I don't mind the government investing in things it is actually responsible for, but when it goes outside its area of expertise, like here, only those who stand to benefit directly can possibly approve.
All those government dollars Tan wants to see invested in his projects are dollars taken from someone else, with likely a more worthy or financially sound cause.
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Join our online Radio Show on Friday 11th July starting at 2:00pm Eastern, when EETimes editor of all things fun and interesting, Max Maxfield, and embedded systems expert, Jack Ganssle, will debate as to just what is, and is not, and embedded system.