The electronics industry is in a conundrum. I witnessed it firsthand last month when Zenasis exhibited for the first time at the Design Automation Conference (DAC). We met a variety of hardware and system designers, all researching the latest product entries from a variety of new, emerging and well-established electronic design-automation players.

While designers appeared to be genuinely excited by some of the technological breakthroughs exhibited during DAC, I was struck by how cautious they were about spending money because of their concerns about market conditions. Many of these designers explained that they want to explore alternative methods to improve design performance because it is considered a key product differentiator.

Design activity has not stalled during the last year, and designers have a mounting need for the latest tools to design for the next process technologies. Additionally, designs using newer process nodes are expensive, and the general production of 0.13-micron technology may be delayed due to manufacturing and yield issues. The need for new design tools and methodologies has never been greater and their return on investment is easily justified.

Though corporate profits last year took a severe beating, positive economic trends show a better-than-expected rise in the index of leading indicators that include the money supply and consumer confidence. We're seeing notable gains in manufacturing, according to the Phila-

delphia Fed index. Home-construction starts are up 12 percent, while jobless claims are down. Inflation remains low.

Media reports paint a decidedly different picture. We've read that consumers are much more cautious because of the market downturn in 2001. As a result, the economy shows signs of being ahead of the market and corporate conservatism rules. This means that consumers of semiconductor-design and EDA tools-the electronics industry itself-will continue to be cautious in their spending for the short term. Even though new process nodes require a large investment in tools and capabilities, designers will look for ways to extend the performance and life of their designs. I expect that they will initially use current process nodes to keep expenses under control while accomplishing the needed performance targets.

Prevailing wisdom notes that during cyclical downturns, electronics companies tend to invest in the next upturn, designing the next generation of products and spending R&D money on EDA tools. This, in turn, produces products that encourage consumer spending, driving an upturn in the economy. I believe the market upturn is just around the corner.