How Low Will It Go?
By Ed Sperling
San Jose, Calif.—Jan. 15, 2008—The EDA Consortium’s annual forecast meeting this year was focused on just how deep and how long the recession will go—to the point where the panelists actually polled the audience on their thoughts.
The overriding opinion among attendees was that the downturn would be long and deep, with a second group believing it would be long but short. Considering the recession already has dragged on for 13 months, and the longest two downturns in the past 40 years were 16 months, it’s hard to imagine it going short. Only the Great Depression was longer. It lasted for 43 months.
For the EDA world, in particular, the downturn will be significant but not debilitating. Wally Rhines, Mentor Graphics’ chairman and CEO, said the EDA industry will likely post a loss of 8 percent in 2009, based upon the impact of the overall economy and the way revenue is being recognized. It will be only the fourth time that EDA has posted negative growth, and the only time it has occurred in two consecutive years. The industry had negative growth in 2000 and 2003, as well.
In the meantime, he noted that semiconductor R&D growth has only been down once since 1980, which was the year 2001. The difference that time was the huge inventory surplus. There is none this time, and while that doesn’t lessen the impact from customer buying it should make for a quicker recovery.
When that recovery will occur in earnest is anyone’s guess, however. Aart de Geus, EDAC’s chairman, as well as chairman and CEO of Synopsys, said the downturn will accelerate all trends that have occurred so far in the industry, including the push to a fabless model and changes in R&D.
“Electronics is among the most protected sector,” de Geus said. “Obama and his team will go high tech. Science is coming back to the White House.”
And even in the down numbers, some sectors will do well. Chris Rowen, founder and CTO of Tensilica, said differentiation still brings a premium, although these days it has to happen within a constrained budget. He noted that bright spots in the mix were mixed signal and analog signal processing. Those areas continue to see double-digit growth even as the rest of the industry shows problems.
But as the industry does come back to life, it may be a different world that it returns to. Rajeev Madhavan, chairman and CEO of Magma, said the PC market may not be a major source of chip revenue in the future because of a shift there from PCs to handheld devices. At the same time, he said the move to electric vehicles and Green everything will be a huge opportunity for EDA.
“There will be a change in customers and a change in chips,” Madhavan said, noting that not all companies will survive the downturn. “The challenge in the short term is that companies will have to be profitable with a limited number of customers.”
Tags: business, economics, Magma, Mentor Graphics, Synopsys, Tensilica