Are 'primary vendor' deals bad for EDA?

SAN FRANCISCO—Critics charge that the current fad for customers of Synopsys Inc. to consent to public announcements saying they've selected the No. 1 EDA vendor as their primary supplier of design tools is bad for EDA, stifling innovation and hurting overall tool pricing. But are these complaints about a competitor legitimate, or just sour grapes?

In recent years, several chip companies have consented to public announcements proclaiming that they have selected a primary vendor—first Cadence Design Systems Inc. and, more recently, Synopsys.

In a recent interview with EE Times, Rajeev Madhavan, chairman and CEO of Magma Design Automation Inc., criticized the trend and said it is the type of "irresponsible" behavior that has resulted in EDA doing poor job of maintaining adequate pricing for its products.

"This industry has done a poor job on pricing because of a revolving door where one EDA vendor or another goes into the model of shooting itself it in the foot" by offering deep discounts on tools in order to gain market share, Madhavan said.

Madhavan declined to point the finger at a particular company, but Synopsys has been designated a primary EDA supplier by at least nine companies since August 2007, including Intel. On Tuesday (April 7), fabless chip vendor Marvell Technology Group Ltd. joined the list, saying in an announcement issued by Synopsys that it choose Mountain View, Calif.-based company because of its broad product portfolio and its ability to help Marvell meet aggressive product schedules.

According to Madhavan, such deals stifle innovation by cutting other vendors out of a design flow, particularly EDA startups. Madhavan claimed to have first-hand knowledge that companies offer discounts of up to 60 percent on tools in exchange for the right to publicize this type of arrangement.

Aart de Geus, chairman and CEO of Synopsys, defended the primary vendor announcements and declined to comment on rumors of deep discounts offered in exchange for publicity, citing company policy against discussing the financial terms of deals. "Whenever people complain about stifling innovation, that typically means they have stopped innovating themselves," de Geus said.

Madhavan is not alone in criticizing the practice, though many in the industry shy away from doing so publicly. Rumors of huge discounts on tools in exchange for the publicity and increased market share that comes with such arrangements circulate on Internet chat boards and at industry events.

The downside of such deals, critics say, is that they consolidate market share in fewer hands and that customers will eventually become even more beholden to the large vendors with complete tool flows who can supply them.