Tool firms' diversification efforts starting to pay dividends as market enters downturn
A long, slow march by EDA's three largest vendors to diversify their businesses is coming into sharper focus, even as the EDA market softens after nearly three years of growth.
Market leader Synopsys has for several years been making inroads into the market for software security and software tools, snapping up more than 10 firms in this arena, from the acquisition of Coverity in 2014 to the acquisition of Black Duck Software in 2017. Cadence has been broadening its reach into the embedded software space, as evidenced by a strategic partnership with Green Hills Software in February that included Cadence taking a 16% stake in the firm.
Mentor Graphics, meanwhile, has long been considered the most broadline supplier of EDA's "Big Three," with strength in chip design tools as well as PCB design and embedded software. Since its acquisition by Siemens in 2017, Mentor has also increased its integrations with Siemens PLM's mechanical design tools and automotive products.
Mentor CEO Wally Rhines — who has long advocated diversification among the Big Three — considers the trend encouraging. "I think EDA has had the problem that too much time is spent on focusing on taking market share from each other and too little time on figuring ways to create new value for our customers," Rhines said in a recent interview with EE Times.
According to Laurie Balch, research director at Pedestal Research, each the Big Three are staking out very different strategies for where they see themselves in the overall technology tools space beyond traditional EDA. "I think they all have a different vision, but they are all bolstering their position in EDA by pursuing the various paths they are taking," Balch told EE Times.
After remaining relatively stagnant for much of the 2000s, the EDA market has now grown for nine consecutive years through 2018. Most recently, the market grew by 3.7% last year, according to the Electronic System Design Alliance.
But the market contracted on a quarterly basis in the fourth quarter after 11 straight quarters of growth, leading many to speculate that EDA may be headed for a downturn in light of a darkening conditions in the semiconductor industry. EDA revenue fell 3.1% to $2.57 billion in the fourth quarter, according to the ESD Alliance. Meanwhile, most major forecasters are now projecting that semiconductor sales will be down for 2019.
While the immediate future for EDA may be clouded, most in the industry — including both Rhines and Balch — still believe that the future is bright, particularly given the prospects for advanced AI chips, the increasing semiconductor content in cars and moves by big OEMs to design more of their own custom chips.
Still, the EDA market of the future is likely to look very different than it does today. Diversification of the Big Three "ties into the fact that no one really knows exactly what the next era of EDA is going to look like," said Balch.
Many — including Balch — see the future being defined by system design. Rather than offering tools that focus on one component of a system — be it just the hardware, or just the chip, or just a board — tool vendors must offer the capability to actually understand the full system, including mechanical components and software, she said. "It's a very complex problem with lots of other stakeholders involved in the design process," Balch said.
"All three of these vendors are dipping their toes in the water in slightly different ways," Balch said. "I don't think anyone knows exactly what the winning solution will be. It's probably some combination of all of the things that the three players are doing, but they are all moving in interesting and useful directions."