In a down cycle, companies must continue to invest in the development of innovative new products and technology in order to remain competitive in anticipation of the upturn, which will surely come. Not to continue to invest in next-generation products would be suicide. The question is how to invest wisely.

In past semiconductor down cycles electronic companies continued to invest billions of dollars in EDA tools. The reason for this is simple: In order to even attempt the development of an innovative new electronic product, like system-on-chip (SoC) design, a minimum level of EDA tool capability is required. But in the current down cycle, such an investment in isolation may not be so wise.

While EDA tools can help address difficult technical system-on-chip challenges, they cannot address the inherent challenges within the SoC design process itself-namely, the increased need to closely collaborate with a growing supply chain of specialized external business partners.

Exacerbated in down cycles, the rising development costs associated with SoC design, combined with decreasing product life cycles, constant price pressure and a growing shortage of engineering talent, are forcing electronic companies to move away from the monolithic, vertically integrated development process of the past, in which one company attempted to design it all.

Today, in order to compete, companies are focusing on core competencies and outsourcing the tasks for which they do not have time, money or expertise to develop internally.

This shift to outsource portions of the development process represents a fundamental change in the way chips are designed. As a consequence, the chip industry is rapidly transforming itself into a network of specialized technology suppliers.

From communications intellectual-property providers like inSilicon to the gurus of efficient, affordable RISC cores, companies seeking the cost reduction and time-to-market advantages of outsourcing have a growing supply of specialized development partners with which they can collaborate.

When combined with internal engineering enterprises, this growing network of development partners forms the basis of an emerging development supply chain. For those companies that choose to exploit it, the development supply chain has the potential to be as revolutionary as its manufacturing cousin.

And the SoC supply chain is becoming a powerful competitive weapon. But to exploit its full productivity benefits, companies must invest in the collaborative infrastructure so necessary to enable and manage the complex interactions and communications that have to take place among SoC development partners. And as it turns out, by making the investment in a collaborative infrastructure, companies can also fully leverage their huge investments in EDA-a wise investment, indeed.

Dennis Harmon is CEO and founder of Synchronicity Inc. (San Jose, Calif.).