News & Analysis
Comment
ian_teh
I have the same feeling on the kid working in the other side of the world ...
ian_teh
I agreed with you. And, i don't see any supporting statement to take Cadence's ...
China, India outspending U.S. in semiconductors
Rick Merritt
3/19/2013 2:01 AM EDT
EDA companies need to grow--and be more fun
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.
Related stories:
Tensilica acquisition to accelerate Cadence core strategy
Silicon startups get the squeeze
EE Times updates 'Silicon 60' list of emerging startups
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.
Related stories:
Tensilica acquisition to accelerate Cadence core strategy
Silicon startups get the squeeze
EE Times updates 'Silicon 60' list of emerging startups
|
|
|
|
|
Navigate to related information
eewiz
3/19/2013 3:17 AM EDT
"There's money to be made in chip startups," the big EDA companies are usually not much interested in startups where there isn't much money to be made. Atleast this is my experience in dealing with a major EDA company on behalf of a startup, several years back.
The major cost barrier for any semi startup is the EDA tool cost. Maybe the big EDA companies should do something to address this issue first. Something like give away the tools at very low cost and collect back royalties, when any money is made.
Sign in to Reply
TechGuruji
3/20/2013 11:33 AM EDT
+1 For this comment. Today for a semiconductor startup the biggest part of the funding goes to EDA tools. Can cadence do something about this?
Sign in to Reply
RGRU
3/19/2013 4:10 AM EDT
Sounds like the Chinese and Indian versions of Solyndra to me. Payoffs to the connected.
Sign in to Reply
woohoo
3/19/2013 10:54 AM EDT
"and its painful to see your kids go to the other side of the world" don't get it.. talking like a priest there, what about people who went the other way.. nothing wrong in going to India or China to work..
“but I would hate to see those countries have the most semiconductor companies." HATE, why??
Lip Bu Tan: US is not the start and end of the world. They are the biggest market, don't make it sound like a war cry just yet.
Sign in to Reply
aktion99
3/19/2013 11:18 AM EDT
Why hate, maybe cos the US is the best and famous when we think about semi. Right now us is still the king on semiconductor although US not lead in production them. About more than 500 semiconductor companies is from US from giant to start up, IDM to fabless.Its not easy to succeed in this industry although you have the right products because large boy will try to put you down in many ways. And same also in China and India, were I think much of the players is fabless not IDM and fabless companies usually face very though competition and environment to succeed. Look in the US how fabless players going right now, its very though and competition with big player is intense only a handful will benefited. Thanks
Sign in to Reply
woohoo
3/19/2013 12:22 PM EDT
Although I agree and did mention that US is a massive market and key driver of the semicond industry. All that has been possible partly due to a massive brain drain from India and China. The rhetoric where he tries to pitch it like a US vs India-China thing is unfortunate. We all know that the whole world is involved in design and development of almost every gadget, this kind of divisive talk is uninspiring to me.
Sign in to Reply
ian_teh
3/26/2013 10:16 PM EDT
I have the same feeling on the kid working in the other side of the world statements. I just feel the speaker isn't really a mature personnel in making such feeling hurting opinions.
Sign in to Reply
batavier
3/19/2013 1:17 PM EDT
Sounds like the LCD display "transfer" all over again: Developed in the US, now manufactured everywhere by everyone EXCEPT in this country by any US company.
Sign in to Reply
batavier
3/19/2013 1:27 PM EDT
Some additional reflection on this issue: In this country, investors are obsessed with quarterly returns. Oversees, there has been more of a long-term view - what is the outlook over five or ten years. The source of the funding is less relevant that this essential difference in outlook by investors in the US vs. Asia.
Sign in to Reply
chanj
3/19/2013 1:58 PM EDT
In managerial point of view, manufacturing, or even performing R&D, elsewhere isn't much of a matter. The ultimate question always come down to to where the money will come, never from where.
Previously, we have learned that production goes will trigger production related R&D is leaving. As the management, sooner or later, realizes the company might work more efficiently when R&D is actually closer to the production and QC people. As soon as China and India becomes the most profitable market, product manager will go. Now, most of the key resources are moving to elsewhere. Shall the management/ executive teams move too?
The trend is an inevitable change of market life cycle. It is a good thing that part of the semi-conductor companies go to elsewhere since it will free up the resources in US for other innovation. The question is what the next innovation is. Stay Tune! ;)
Sign in to Reply
M. Amine Essafi
3/19/2013 6:07 PM EDT
yes in deed! you can also see how far could be the role of the central government in promoting strategic industries like microelectronics and semiconductors and assisting national science and technology developement, and according to what you mentioned, I think sooner and later the R&D departements will consider more seriously to move their operations or outsourcing to China / India
Sign in to Reply
FISH123
3/19/2013 4:19 PM EDT
China spends trillions on building empty residential houses, not spending billion on building Fabs.
Sign in to Reply
M. Amine Essafi
3/19/2013 5:57 PM EDT
xactly those kind of efforts will allow china and india to assure the major role player in the world's mircoelectronics industrie,
This news will certainly encourage companies considering moving their operations or outsourcing to China and India or even for anyone planning a venture there, as well as those who still hesitate to invest or already taken their first steps...
Sign in to Reply
aktion99
3/20/2013 8:23 AM EDT
Ok, one question I want to ask here is china will become like Japan in semiconductor industry were once the former take head to head with US in memory semiconductor and than surpassing US in the market share with superior cost advantage and manufacturing quality than now we seeing number of Chinese companies involve in mobile semiconductor space will this companies also can become like Japan surpassing US in same ways and strategy. Thanks.
Sign in to Reply
LuckyStar
3/20/2013 3:19 PM EDT
We out spent in defense budget than theirs combined.
Sign in to Reply
Singar
3/21/2013 6:45 AM EDT
what difference does it make to Cadence as a company, whether the business comes from US or India/china?
Secondly, Tan has own investments in China.
The whole thing doesn't add up.
Sign in to Reply
rick.merritt
3/21/2013 11:35 AM EDT
Good points. My sense is Tan wants the US to invest like China and India in part to grow the pie.
Sign in to Reply
docdivakar
3/22/2013 3:47 PM EDT
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.
MP Divakar
Sign in to Reply
ian_teh
3/26/2013 10:14 PM EDT
I agreed with you. And, i don't see any supporting statement to take Cadence's opinion in commenting the semiconductor industry as a whole.
Sign in to Reply
apvkt
3/21/2013 7:23 AM EDT
car stereo
I like this website very much due to the attractive backgrounds and it is nice to see. All brands of http://www.vicky.in/shopping/car-stereo car stereo are available in the online shopping store.
Sign in to Reply
Bert22306
3/21/2013 3:25 PM EDT
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.
Sign in to Reply
mike_m
3/25/2013 5:39 PM EDT
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.
Sign in to Reply
ian_teh
3/26/2013 10:08 PM EDT
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!
Sign in to Reply