Gary Smith, chief EDA analyst at Gartner Dataquest, and Daya Nadamuni, senior analyst, both presented their views of the EDA industry at the annual Sunday evening Dataquest forecast meeting. Smith opened by saying that the two were using a "good cop, bad cop" strategy and that he was the "bad cop" giving the EDA industry a "reality check."

Smith said that the EDA business model has always been an outsourcing model, but people forgot that in the late 1990's. Because it's an outsourcing model, Smith said, in-house tool development both precedes and defines commercial tool development and pricing. "Customers really don't care how much value you [EDA vendors] bring to the design process," he said.

Further, Smith said, EDA tools today are undervalued because of an "incredibly stupid price war" among EDA vendors.

Smith also said that mainstream EDA users, who bought half of EDA tools in 2001, are getting out of IC physical design, and leaving that to ASIC vendors or consultants. These designers, said Smith, would really like to work at the electronic system level and sign off at the register-transfer level.

But Smith foresees a pickup in the EDA market after five years of nearly flat growth. He predicted EDA worldwide revenues will rise from $3.97 billion in 2005 to $7.46 billion in 2009.

Figure 1 — Gartner Dataquest projections of EDA industry revenue

Even so, Smith said, the use of in-house tools is growing. He said that 27 percent of designers use in-house tools today, up from 20 percent in 2001. One reason, he said, is the lack of available tools for the 65 and 45 nm process nodes.

"Tools should be on the market 18 to 36 months before the first production on the new node," he said. "We're late. We should have the 65 and 45 nm tools now, and we're just starting to see them."