By Ann Steffora Mutschler

Santa Clara, Calif. — Feb. 4, 2009 — A recession is a good time to question what is accepted as common wisdom, as it is a time when the greatest innovations occur, according to Mentor Graphics Corp. chairman and CEO Walden Rhines.

Rhines, in his keynote address at DesignCon, observed that the prevailing thought on the EDA industry is that it has reached its maturity point. He said some data does support this: Growth rates in the 1990s were on average more than 17%, compared to the past 10 years of approximately 5% annual growth.

However, looking at venture capital spent on EDA, it is the mirror image of the growth slide. Through the mid-1990s, there was very little spent, but in the past decade the venture community has invested approximately $200 to $300 million per year into EDA.

In terms of industry consolidation, which many point to as an indicator of EDA industry maturity, Rhines explained that based on data the number of new startups remains at about 50 companies per year, which at some point are acquired by the larger players. With that in mind, it is interesting to note that the net result is that no consolidation actually occurs, he said.

On the positive side of EDA is the fact that the largest share of revenue for EDA comes from semiconductor R&D spending, which is a remarkably stable and growing number.

“EDA is a great place to be during a recession as compared to being in a semiconductor or systems company because the one thing that companies in the electronics business continue is the design of new products,” he said. “They can cut down their factories, cut off marketing, even cut back on their sales force. But the one thing they know is someday this recession will be over, and when it is, if they don’t have competitive products, then they’re out of business. So the one thing they do is keep design activity going and that shows up in the EDA numbers.”

There are other positives to EDA as well. Previously the number of electronics-related engineers that graduated was about 5% worldwide, but in recent years that has grown to about 7%, which will also help to sustain EDA.

How does EDA grow?

Due to changes in methodologies, EDA goes through periods of relatively flat revenue until it hits a growth spurt thanks to new technology or a dramatic new capability comes along.

“If we look at where the growth has been occurring over the last five years, you find in EDA the established methodologies really don’t grow much—about 5%. The growth is in the new problems that are being solved, the things that weren’t required not so long ago. Design for manufacturing and resolution enhancement were zero revenue for the industry in 1999.
They are now a $200 million to $250 million a year business helping people improve their yields, helping them improve their photolithographic resolutions,” Rhines said. “ESL? Years of almost no revenue. Now, finally taking off in the $200 million range. So, the newer the technology, the more likely it is to represent the majority of the growth that occurs in the industry.”

What really has to happen in EDA, he believes, is that there must be new problems to solve, and the market has to grow not by selling people more of the solution for the same problem but to attack new problems. Fortunately, there are many problems to be solved. “When you change the technology, you introduce discontinuities that change the design methodology and require new tools,” he said.

Considering what has been happening with EDA over time, Rhines believes the industry has been in a phase in between major design methodology problems. “If you don’t think 22nm will be a big problem, you should talk to some design engineers about computational lithography and other things. We just need for the new technologies or the new problems to emerge and we’ll see another growth spurt in EDA in addition to the fact that there will be more designers to require software to do the design,” he said.

Tags: business, ESL, Mentor Graphics, Tools

This entry was posted on Thursday, February 5th, 2009 at 7:55 am and is filed under News Stories. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.