Those same observers point out that board design is one of the few segments in electronic design automation where vendors have tools ready for new manufacturing processes before users actually need them. Vendors rely on problems' getting so out of hand that board designers will clamor for higher-level, higher-priced tools, which deliver far better margins than the mainstay shrink-wrapped products.

The vendor consolidation that began in this sector in the late 1990s was built on that premise, as Mentor, Cadence and, to some extent, Zuken and Altium began offering upgrade paths from shrink-wrapped to mainstream to power-user tools. Some engineers have even suggested that the big EDA vendors are forcing the issue by building functionality and layer limitations into tools that previously did not have them, essentially compelling users to move up to a more-expensive flow or to buy add-ons.

In the span of few years, the middle class of the board tool market-Veribest, PADS, Innoveda, Accel, DDE-has been consumed by the top four pcb tool-flow vendors, leaving a multimillion-dollar gap between the third and fourth players. Today there are several nontraditional board tool vendors, mostly from Japan. Fujitsu and Yokogawa, for example, dabble in board EDA, reselling vendor tools with their own add-ons. A handful of point-tool vendors, such as Valor, also play in this market, but only half a dozen full-flow tool vendors now exist.

Gartner Dataquest pcb tools analyst Daya Nadamuni said the sector has been shrinking since 1985, when board tools accounted for 27 percent of all EDA revenues. Today they accounts for around 14 percent.

"Pcb was one of the first technologies to hit the EDA market," said Nadamuni. "It has been around 35 or more years, so it is a pretty mature industry with mature technology. As such, it doesn't attract the kind of R&D money and engineering talent [seen for chip design products]."

Nadamuni noted that there are virtually no signs of new entrants into this market. The only company that seems to be making a serious investment in pcb R&D, she said, is Mentor Graphics Corp. (Wilsonville, Ore.), "because they have a large mil/aero business, which is doing well right now." Mentor has just integrated its Expedition pcb tool flow with Cadence Design Systems Inc.'s Allegro flow in an attempt to woo Cadence customers (see Oct. 20, page 64).

Nadamuni predicted that 2003 pcb tool revenues will be flat but believes that the industry will grow next year. The latest numbers from the EDA Consortium indicate that the market bottomed out in the first quarter but that revenues rose slightly in the second. All the board tool vendors interviewed concurred that the market is returning to growth. They maintain that when companies begin designing again and budgets rise, things will start to really turn around.

Henry Potts, general manager of Mentor's pcb division, said that while high-speed, signal-integrity and electromagnetic-interference issues remain concerns as customers confront rising chip speeds, managers at large system houses also are asking for tools that will let them maintain and transfer pcb intellectual property-not just layout IP, but design intent-to facilitate concurrent design and layout among design groups worldwide.

Vendors also said that the thermal issues of gigahertz design are becoming problematic for board designers. But thermal issues are typically addressed on the mechanical side of the design process and are handled by one or two gurus in a given organization. As such, EDA vendors don't see this area is a wellspring of revenues or a significant avenue of growth.

Potts said that when he joined Mentor in 1999, company management was seriously considering pulling back investing in board tools because the sector wasn't growing. "I started talking to customers and really looking at this space, and [I saw] great opportunity for innovation and growth in pcb," he said, adding that he convinced management to begin investing heavily in board tool development.

Doing so, said Potts, put Mentor back on top in the segment and has helped it secure major accounts. In 2002, Mentor held firm as the top board tool vendor, posting revenue of $86.93 million to Cadence's $81.22 million. Zuken held the No. 3 spot, according to Gartner Dataquest, with $39.41 million in 2002 revenue-less than half the respective revenues of Cadence and Mentor.

Board tool users tend to be loyal customers, averse to changing to unfamiliar environments. More important, they don't have the budgets, especially in the current economy, to move up from shrink-wrapped, $3,000 to $5,000 tools to high-end products priced at $10,000 or above.

As a result, said Dataquest's Nadamuni, some users have rebelled against the gentrification of the board tool industry, a phenomenon that has helped some of the smaller vendors in the shrink-wrap market. For example, she said, the user uprising has allowed Electronics Workbench and Altium to pick up former OrCAD customers.

At the other end of the complexity scale, the consolidation has also benefited small players offering products for the mainstream and power-user markets, such as Intercept Technology, which licenses a Mentor BoardStation competitor.

"For Intercept, the consolidation of the market has been a welcome change," said Craig Yano, vice president of marketing at the Atlanta company. "Fewer vendors in the market means less competition."

Yano believes acquisitions tend to weaken the technology of the acquired company and to disenfranchise some of its traditional user base. "Imagine the frustration, after 10 years of maintenance payments, of being told you must purchase the new software package outright to gain the additional functionality it brings to the table," said Yano. "What was all of that maintenance money paying for?" Intercept prices both applications and maintenance below most of its competition, Yano said, adding that the privately held company has enjoyed one of its better years to date in 2003.

With that acquisition, Cadence suddenly found itself gaining maintenance revenues from most former licensees of CCT's Specctra pcb router, including archrivals Mentor Graphics and Zuken-Redac, as Zuken was then called. But while the move vaulted Cadence into the market lead for a year, industry observers said the CCT acquisition also profoundly changed the pcb landscape, setting off a mass consolidation in which large EDA companies consumed the middle class of pure-play pcb tool flow vendors during the worst recession in electronics history.

In 1997, Zuken and Mentor enjoyed the No. 1 and No. 2 rankings in pcb tool market share, at 20 and 16 percent ,respectively, to Cadence's 6 percent. Both sold successful front-to-back pcb design flows and leveraged routing technology they separately obtained from Cooper and Chyan Technologies on an OEM basis.

When Cadence bought CCT, mainly for CCT's high-priced IC router, it also gained the Specctra pcb router, which had a fanatical following among board layout specialists because of its versatility. As a private company CCT had fostered rapid, prolific adoption of its tools by OEMing its technology to all interested vendors, securing major contracts from Zuken, Mentor and, later, Cadence. Indeed, the company seemingly worked with any vendor willing to enter into an OEM agreement, tailoring the links between the vendor's front end and its own IC or pcb routing technologies.

Before completing the CCT acquisition, the most expensive merger in EDA history at the time, Cadence first had to prove to the Federal Trade Commission that the purchase would not give Cadence a monopoly. Cadence's competitors in IC design had suggested that CCT would give Cadence too strong a position in the IC routing space. The FTC in May 1997 approved the deal, largely because Cadence had stated it would keep links to the IC router open. The company made no such promise pertaining to its pcb router, however.

In early 1998, Cadence sent those holding OEM agreements with CCT new-and some say too-demanding-terms for Specctra contract renewals, forcing large vendors like Mentor, Zuken, Viewlogic/Innoveda and others to scramble for their own routing technologies. The move sent a huge shock wave through the board tool community and even led to a nose-to-nose screaming match between Zuken's and Cadence's general managers on the floor of the PCB Design Conference that year, in front of a witness from EE Times.

"Back in the late '90s there were hardly any companies that were making money in the pcb [tool] market," said Jamie Metcalf, vice president of strategic marketing for the silicon package board division at Cadence (San Jose, Calif.). "There were 11 significant pcb suppliers when we bought CCT. Of all those vendors, today there are only four. Most of those vendors were not making money, and we were not doing really that well either. The CCT acquisition allowed us to be very competitive and to offer a full flow. Competitors no longer had an even playing field, and that's how Cadence came back to be a major player in the market."

In control of the de facto standard pcb router, Cadence within a year had gained pcb's No. 1 spot, sending Mentor, Zuken and Innoveda scrambling to their R&D labs to scrap together router replacements. Cadence still honored CCT OEM agreements with such smaller players as PADS, Dansk Data Electronik (DDE), Accel Technologies and Intercept Technology, which retains a contract today. And it tried to hold on to its lead by purchasing shrink-wrap tool vendor OrCAD Inc. in 1999.

At the time, OrCAD enjoyed EDA's largest user base, claiming more than 100,000 seats worldwide. Cadence's idea was to offer those users, who traditionally spent $3,000 to $5,000 for OrCAD tools, an upgrade path to the more expensive Allegro front end to the Specctra back-end tool flow. Prices started at $10,000 for Allegro Studio mainstream users and went past $50,000 for power users. Migrating even a small percentage of the OrCAD users to Allegro/Specctra would pay for the OrCAD acquisition and grow Cadence's share in the market.

The move did boost Cadence's pcb tool sales, but the company ceded the No. 1 spot to Mentor in 1999-only because Cadence drastically changed its licensing model from perpetual and time-based licenses to subscriptions. Whereas OrCAD had a high-volume, low-cost product line, Cadence products are sold via direct sales-high cost, low volume. That's why the company decided to hand OrCAD sales over to a value-added reseller, EMA, last year. "OrCAD has actually done better under VAR sales than it did when we were doing OrCAD sales," said Metcalf.

Cadence has also taken some heat because it moved OrCAD R&D to India, laid off most of OrCAD's employees in Portland, Ore., and moved some of the remaining sales force and customer support to EMA, which is diligently attempting to revitalize the spirit and recapture the customer base OrCAD enjoyed before the acquisition. "The change in channel has helped us a lot and has brought a lot more focus to that product line," said Metcalf. "The overall business is nicely profitable to us, due to the changes we made in R&D."

The result was a mass consolidation of the pcb industry over a three-year period, during which Mentor purchased Veribest from Intergraph for mainstream and power-user routing, and Viewlogic bought PADS to form the company now called Innoveda targeting those same markets. Meanwhile, Protel, now named Altium, purchased Accel Technologies to offer customers an upgrade path from its traditional shrink-wrap tools to Accel's more-elaborate, lower-mainstream pcb tools.

Innoveda was then purchased by Mentor-which also, this year, acquired DDE, for DDE's multichip-module and other advanced packaging-design technologies.

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