Global revenue in the EDA segment of the electronics industry grew 8.3 percent in 2019, despite tailing off to weaker growth of just 2.2 percent in the fourth quarter of 2019, according to statistics published by Semi and the Electronic System Design (ESD) Alliance.

In 2019, the EDA market surpassed a total annual value of $10 billion for the first time.

Total fourth-quarter EDA revenue by geographic region. Total includes services and semiconductor IP (SIP). (Source: Semi, ESD Alliance)

From the start of 2019 the industry experienced fairly consistent growth, but that began to change as the year came to a close. The biggest drop in the numbers from the third quarter to the fourth quarter was in the Asia-Pacific market. The APAC segment is dominated by China. Semi breaks out Japan’s numbers separately; and Q4 activity in Japan was also weak.

Semi just compiles the numbers, and leaves reports of market trends to its individual member companies. As far as Semi and the ESD Alliance are concerned, it’s not clear if the drop in APAC was due to trade issues, to the effects of the novel coronavirus, to some other reason, or to some combination of reasons, explained Wally Rhines, CEO emeritus of Mentor Graphics, who was speaking on behalf of the ESD Alliance.

The first reports of the outbreak of the novel coronavirus weren’t until December, so the economic effects of the epidemic probably won’t begin to show up until the first quarter of 2020 anyway, Rhines noted.

One of the Q4 2019 numbers that stood out starkly was an increase of 19.4 percent in PCB revenue, compared to the fourth quarter of 2018, indicating an increase in system-level design. Rhines said that growth was concurrent with increased design activity in the automotive market. It’s reasonable, he said, to infer that the two trends are related.

We asked Rhines for his own view of what the upcoming first quarter numbers might reveal. He said, “It’s reasonable to expect that Covid-19 will cause a down-trend in the semiconductor industry, and EDA tends to go with it. Historically though, even in the worst recessions, EDA is only modestly down compared to our customers — principally the semiconductor industry.

“One of the reasons I believe that’s true is because when a recession hits and companies cut back on resources, they rarely cut back on their design activity,” Rhines continued. “They will shut down manufacturing facilities; they might reduce marketing and administrative investment; they might even cut sales sometimes, but they don’t reduce — materially — their product development. And the reason for that is, they all know someday it will be all over — maybe sooner rather than later, and the one thing they can’t afford to do is get behind on competitive products. In general, they’ll keep a steady stream of product development. “

Rhines recalled that when he was at Texas Instruments’ semiconductor operations (1972-1993), TI almost never laid off people from the design group. “It’s hard to rehire them, and it’s hard to re-start programs. So EDA is a good place to be in recession.”

He noted that employment in EDA was up in 2019, even in the fourth quarter.

The latest semiconductor numbers

Worldwide sales of semiconductors were $35.4 billion for the month of January 2020, down on both a year over year and sequential monthly basis. It’s down 0.3 percent from a year ago (January 2019), and 2.2 percent less than the December 2019 total of $36.2 billion.

(Source: SIA)

The numbers are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average.

“#8220;The global semiconductor market got off to a solid start in 2020, with the industry nearly posting positive year-to-year sales growth for the first time in more than a year,” said John Neuffer, president and CEO of the Semiconductor Industry Association (SIA). “Still, the global market faces significant macroeconomic headwinds, including global trade unrest and ongoing concerns about worldwide spread of the coronavirus, which could limit continued market recovery.”

Compared to last month, the only geographic market region to experience a sales increase was Europe (1.2 percent).

Other financial statistics

  • The global economy slowed from 3.6 percent growth in 2018 to 2.9 percent growth in 2019, according to the International Monetary Fund (IMF).
  • The world semiconductor market in 2019 was $412 billion. That was a 12.1 percent decline from 2018. The big drag came from the memory market (primarily DRAM and flash), which was down by a third from the preceding year. These stats were compiled by World Semiconductor Trades Statistics (WSTS), and reported by Semiconductor Intelligence.
  • The top notebook computer makers (HP, Lenovo, Dell, ASUS and Apple) saw combined shipments in February 2020 drop 40 percent from January, according to Digitimes.
  • Manufacturing in China is reviving, though at lower production levels. Combined January and February production of mobile phones, for example, was down 34 percent from a year ago.
  • The most recent economic projections for the semiconductor industry we’ve seen are from IDC — which basically threw its hands up in the air. The old projection was 2 percent growth for the industry as a whole. Now IDC is simply laying odds; it’s guessing there’s an 80 percent chance there will be an industry-wide contraction in revenue in 2020.
  • Apart from semiconductors, manufacturing around the globe is getting curtailed. Many automakers, for example, have shut down.
  • The most recent predictions for 2020 are that global gross domestic product (GDP) will still grow, but only 1- or 2 percent.
  • Goldman Sachs and Morgan Stanley are in agreement on what they expect for US gross domestic product in the second quarter (April-June); both firms project US GDP will drop by 30 percent in Q2.