'Disruptive events' could change EDA landscape, panelists say

SANTA CLARA, Calif. — EDA may be on the verge of "disruptive events" that could change the landscape and result in a changing of the guard among the top companies in the space, according to a panel of EDA insiders at the DesignCon 2006 conference here Tuesday (Feb. 7).

Echoing findings contained in his firm's 2005 worldwide EDA market trends report, issued late last year, Gary Smith, chief EDA analyst at Garter Dataquest, said he expects two or three new companies — possibly including Magma Design Automation Inc. — to emerge as leaders in the EDA space over the next three years as customers adopt electronic system level (ESL) tools. He likened it to the shift that occurred in the 1980s, when a move to register-transfer level (RTL) methodologies resulted in a new set of EDA leaders.

Over the next three years, Smith said he expects new companies to emerge and substantial acquisitions to take place, including mergers between significant companies of equal size.

According to Jim Hogan, who was a general partner at Telos Venture partners until it was dissolved by partner Cadence Design Systems Inc. last year, EDA is on the verge of a new wave of startup innovation by small companies that formed when the economy began to improve in 2003. With EDA startups typically requiring a three- to four-year incubation period, Hogan argued, promising startups formed during this period will begin to emerge in the next year or two.

"There is going to be a ton of stuff happening," Hogan said.

Though EDA revenue has been stagnant for the past four years, panelists argued that the pending move to ESL methodologies presents great opportunity for innovation among EDA and embedded software tool vendors. But panelists noted a number of challenges and criticized companies in both spaces for not fully embracing new opportunities.

Citing the results of a Gartner Dataquest study issued last year, Smith said that 27 percent of engineers were using tools developed internally. Smith said this figure, up from a typical 12 percent, reflects that companies were developing their own ESL tools because those tools are not yet commercially available. He said this situation exists because there have been no ESL "evangelists" — no major companies have had a financial stake in pushing the industry to adopt ESL methodologies.

In a normal environment, Smith said, only "power users" make their own tools because they are running three to four years ahead of the rest of the market. Big EDA companies, Smith said, have not developed these tools because there are not yet enough companies using them.

"We are [developing tools] internally because we want to be the best at what we do, and can't buy it from someone else because it's not available," said Richard Tobias, chief technology officer and vice president of engineering at Pixelworks.

"There is an opportunity for the EDA companies to recognize that a whole new family of products is needed to solve these problems," said Len Perham, chairman of Optimal Corp. "Customers need new [system level] products. If they don't come up with the new products, someone is going to step around them."