Mike Fister, Cadence Design Systems CEO, opened the discussion by noting that Cadence has already predicted 5 percent growth for the year for itself. He cited several reasons why he's optimistic about the EDA industry. These include the rise of multi-processor systems-on-chip (SoCs), the "crazy physics" of 65 nm design, the growth of silicon-in-package (SiP), the need for manufacturing-aware design, and the move to "value-based engagements" with customers.

"Watch and see," he said. "These will change the perception of the industry and its ability to extract value."

Sanjay Srivastava, Denali Software CEO, said that deep submicron implementation is "under control" but that there are a lot of unsolved issues in the front end. He pointed to electronic system level (ESL) design and silicon intellectual property (IP) as big growth areas.

One challenge, he said, is the prevalence of "not so standard interfaces." Srivastava predicted that new business models and companies will emerge to provide "interface enablement."

A somewhat more pessimistic view came from Jim Douglas, Reshape CEO. He noted that it's one thing to build a 65 nm chip, and another to find an application that can support $500 million in revenue. He also noted that semiconductor industry R&D is not growing, but EDA R&D is. This is not a "win" model, he said.

Douglas said that the real drivers for EDA growth will not be core applications, but new business models aimed at 65 nm designs and an abstraction level change that goes beyond ESL. "I'm mildly bullish. I just think this is a year of transition," he said.

Wally Rhines, Mentor Graphics CEO, discussed the impact of the switch from perpetual to three-year licenses. This switch, he noted, has resulted in a continuous stream of revenue, a transition to a strong cash flow, and predictable growth for EDA vendors. Three-year licenses renewed in 2005, he said, will likely involve more tool purchases, since 2002 was a low point for the semiconductor industry.

Rhines estimated 3.3 percent EDA industry growth for 2004 after the EDA Consortium's fourth-quarter numbers come in, and 5.5 percent growth in 2005 and 8.5 percent growth in 2006. "We are in an up trend," he said.

Globalization will have a major impact on the EDA industry, said Aart de Geus, CEO of Synopsys. But one of those impacts, he said, will be increased cost pressure, since people now joining the world marketplace have much lower incomes than those already here. He also noted that the semiconductor industry is coming out of a "mid-life crisis" with a heightened cost consciousness.

But that's good news for EDA, he insisted, because EDA vendors play a vital role in cutting customers' costs. He predicted that the semiconductor market will be flat this year, plus or minus five percent, and that the EDA industry will grow 5 percent better than the semiconductor industry.

Chris Rowan, CEO of Tensilica, noted fast growth for the IP industry — on the order of 20 percent per year over the next few years, according to Dataquest forecasts. He said that the EDA and IP industries are merging, and that the focus is moving in two directions: one towards design for manufacturability (DFM), the other towards system-level design.

"The hot issues in design automation are increasingly where hardware meets software," Rowan said. In that context, he said, the processor becomes "the new NAND gate, a basic building block."

Moderator Jay Vleeschhouwer, vice president at Merrill Lynch, asked the CEOs about the move to "adjacent" markets. "The reality of EDA is that growth only occurs with a new methodology, a new set of customers, or new applications," said Rhines.

"With an adjacency that's not quite adjacent, you lose your shirt in most cases," warned De Geus. He said, however, that "DFM is an adjacency whose time as come."