The roundtable was organized by Monterey Design Systems (Sunnyvale, Calif.) and hosted by Dataquest EDA senior analyst Daya Nadamuni.

Trends noted by panelists included the past slowdown in VC and investor enthusiasm for the EDA industry, the rebound over the past few months of EDA stocks and how several EDA companies — despite not wanting to be identified with the industry — are expected to make IPO bids in the coming months.

Lucio Lanza, general partner in US Venture Partners, said a reason EDA lost its spark in the venture capital community is because EDA vendors have been slow in addressing and identifying themselves as solutions providers in the emerging system-house driven design market.

Lanza outlined how the design market demands have changed. "Years ago when the rise of the semiconductor company was something new, EDA helped put designs in the hands of people who had never designed before. Today there is a huge void between the Ciscos of the world and the TSMCs of the world. EDA companies need to create business models and develop solutions that fill this void."

Lanza said he believes the EDA industry is just now identifying the new market opportunities and is still in the process of experimenting with business models to suit the change in the design industry.

Jessica Kourakos, an associate analyst with Goldman Sachs & Co., said that the technical nature of EDA has made it difficult for the industry to communicate with non-tech-savvy investors, which helps explain why EDA, despite its importance, is taking such a small piece of the semiconductor pie.

"From an analyst's and an investor's point of view, people are surprised at [how] small a percentage of overall semiconductor revenue goes into the EDA industry, given that it is a fundamental part of how you build chips," said Kourakos.

"Given the opportunities going forward, given there is increasingly this gap between what we can manufacture and what we can design with tools available, people think this segment should be growing," she said.

Jacques Benkoski, president and chief executive officer of Monterey Design said the EDA industry has wrongly been linked, compared and contrasted with the software market and suggested that EDA companies, like IP companies, need to focus and be recognized publicly as selling results instead of tools.

"It has always been believed that EDA is a software market," said Benkoski. "And the premise we have been using is that it may not be a software market. EDA doesn't have the characteristics of the software market in terms of volume, automation and having the same product in the hands of millions of people. It is a highly customized market. The focus of the customer isn't on the software itself, rather it is on the results of the software."

Benkoski essentially suggested that, like IP vendors who sell blocks of fixed functions, EDA vendors need to be seen as selling a piece of an overall system's solution.

Chris Rowen, president and chief executive officer of configurable processor core provider Tensilica (Santa Clara, Calif.), said the emphasis on design is shifting from silicon experts to application experts.

"The shift into specialized semiconductor companies that focus on specific applications is creating many opportunities for EDA," said Rowen.

"Among all the silicon enablers — IP and EDA included — the question is how do we help the system market, that applications expert, to realize their dreams more quickly and more efficiently. We have to look at how EDA is expanding its role to fill this gap."

Taylor Scanlon, president and chief executive officer of physical library vendor Virtual Silicon, pointed to the rise of the royalty model in the physical library space as a prime example of how EDA needs to evolve.

"Ten years ago if someone walked into a foundry and said we want royalties, they would have been thrown out onto the street," said Scanlon. "But it wasn't two years ago, when foundries were underutilized, that [the question of] how do I get design into my factory and participate in this growing industry became crucial to those guys. Now over the last two years, diehard VPs who don't want to know about IP have come to realize there are a lot of different parties on these wafers. Everyone has to get involved in that shared risk, shared reward kind of model, and that is what we see going on here."

Panelists and audience members, especially those representing EDA vendors, seemed in favor of sharing rewards with customers, but the mention of sharing risks brought a round of nervous laughter. Many noted that EDA companies can't be responsible for a company picking the wrong product specs or the wrong markets.

Ray Bingham, president and chief executive officer of Cadence Design Systems (San Jose, Calif.), said that the opportunities created by the void between the TSMCs and Ciscos of the world are large enough that companies in the EDA industry do not have to converge on a single business model or pricing strategy.

"At the end of the day the issue is not pricing strategies or business models, it is serving customers' needs," said Bingham. "I see customer needs changing radically as we speak, and it raises opportunities for any number of pricing models and business strategies and the capability to be successful going forward."

Panelists agreed that the recent wave of companies such as Numerical Technologies (San Jose, Calif.) and Synplicity (Sunnyvale, Calif.) shying away from being labeled EDA companies to get higher valuations is not helping the EDA industry.

Kourakos said that shunning the EDA label to get a higher valuation may look good in the short term for companies but could spell trouble when the "true numbers" come out down the road.

Benkoski said the EDA companies that have not yet filed are also worried that if IPO bids from companies like Synplicity and Simplex Solutions fall short, it will further poison the investment community's view of EDA.

"We want to go public too someday and we are very nervously waiting to see how these companies do on the market," said Benkoski, noting that Synplicity and Simplex are making their bids to pay down exorbitant debts they have built up as privately held entities.

"I think it is a joke that some companies are hiding behind their thumbs saying 'we are not an EDA company, we are an Internet infrastructure provider,'" said Lanza.

Lanza encouraged the EDA companies to stick together and to further their market as a whole.