…And How to Fix It
Friday, October 8th, 2010System-Level Design sat down to discuss how to fix what’s broken with John Bruggeman, senior vice president and chief marketing officer at Cadence; Charles Janac, president and CEO of Arteris; Robert Hum, vice president and general manager of Mentor Graphics’ deep submicron division; Mike Gianfagna, vice president of marketing at Atrenta; and Bob Smith, vice president of marketing and business development at Magma. What follows are excerpts of that conversation.
SLD: Customer complaint No. 2: There are not enough tools around the edge, but the problems are now larger than what a startup can provide. How do you solve this?
Bruggeman: There are dozens of examples, but the economics don’t work. If you look at the birth of EDA, the semiconductor companies did everything, took a look at it, realized it was non-differentiating, and they spun it out. It doesn’t make sense for the EDA vendors to do it so the semiconductor companies will have to fund it. It’s the penalty for creating the EDA industry the way they did. But ultimately they’re going to spin it out and we’ll take it on. By then it will have enough maturity where it makes sense for us.
Hum: There might be some lessons out of the FPGA industry. There are a small number of players that dominate the market. They do their own place-and-route and they have their own tools. It seems the way the industry is heading there are some big players. TSMC may say for everyone who needs a standard flow that they provide one. Maybe they provide the tools, maybe they buy an EDA company. Maybe you pay for it when you produce so many chips.
Smith: The FPGA guys drove it to the point where the tools are free.
Hum: The tools are not free. They’re included. That’s a royalty model. But if things go the way they’re going, that could be one of the end points we end up with. Maybe the box standard flow comes from TSMC and GlobalFoundries.
Bruggeman: If they did that, it would be the end of the EDA industry.
Hum: It would. The ASIC industry got out of doing their own EDA because it was cheaper to use common stuff than their own proprietary stuff.
Gianfagna: If TSMC buys EDA, then we’re back to IDMs again and it will be time to spin it out in a few years. It’s a cycle. But you’ve re-created where it all started.
Bruggeman: It might not be a bad thing, but what will happen is a couple of smart EDA companies will see the industry is under massive change. We need to re-invent ourselves. Where is the new value we provide? I will argue it’s in the systems space. The same sort of solution set we provided to the ASICs and IC guys we can deliver to the systems guys, which is not anywhere close to where the TSMCs or foundry guys can play today. It is very conceivable that they could acquire an EDA company and define the flow and EDA as we know it is gone. What will happen is some other EDA companies will be very shrewd and say the next solution set is further up the stack. They will be solving a very hard and complex problem, which is not a software problem but an integration of hardware and software. And then there will be a much bigger industry.
Janac: The problem is that if the industry doesn’t make that leap it will continue to stagnate. It won’t grow, and it may shrink. There have been industries that have shrunk because they didn’t offer the customers value. The question is what’s the innovation people are willing to pay for? They’re not willing to pay for test. They’re not willing to pay for specialized hardware. But there are things people are willing to pay for, and those segments are going to grow.
Hum: The current problem we’re solving may be commoditized. We get to solve the next problem. Innovation is what drives this industry. Technology is not stopping. Von Neumann architectures are not the future. It’s all multiprocessing. How do you help people exploit multiprocessing? Things aren’t getting faster. They’re getting parallel. The software industry hasn’t done such a hot job solving this problem. There’s a whole other architectural side of the world that many companies have been reluctant to let go of because their architects are the smartest guys in the world.
Gianfagna: Maybe there’s a re-learning piece here. How good are we, as an industry, at finding new customers and selling to new customers? We have an abysmal track record there. We’re not willing to try to understand a new problem and adapt our sales. It’s a more difficult version of the same problem at 28nm vs. 180nm, and it’s the same people buying the tools. If you look up the stack at the people building the software, those are our new customers. They talk a different language and they have a different culture.
Hum: They also have a different perception of value.
Gianfagna: That’s an opportunity. We messed it up the first time.
Janac: The question is how you make a $400 million business out of a low ASP. It fundamentally operates on different dynamics than the EDA direct sales force model.
SLD: The customers say they have the EDA industry they’ve paid for. They also say they need lots more standards. And they say there’s an assumption at this point that they have to do the integration.
Janac: It has to be done, and every PCB maker integrates their PCBs. But they do it with standardized components using standardized software. It’s like building a castle out of Lego blocks. You can build it out of Lego blocks, which is what most people do, or you can carve the blocks yourself and build a castle. What they’re doing now is carving the blocks and building the castle, and it takes more money, takes more time and has more errors. We need to provide a platform on which this innovation takes place.
Gianfagna: How much standard infrastructure do you need to make that work from an industry level? And where are we today? It’s a big change.
Janac: One of the things that made Cadence was a language called Skill. Everything was standard about Cadence except for Skill. It allowed people to write features on top of the Cadence software without going to Cadence. You wound up with hundreds of thousands of lines of Skill code at major IDMs. Everything else was standard but this was sticky. I would say it was to the benefit of the industry the way Microsoft Office benefits the software industry. You can go anywhere in the world, fire it up on any system, and it works. Skill would work on any system and it was a marketplace standard. It was the same with Verilog. These standards have to be set, but they cannot be legislated. They have to be established by a powerful company behind them that manages to get it adopted on an industry basis. While Skill benefitted Cadence it also benefitted the industry.
SLD: The business model of the whole industry, coupled with disaggregation, are causing problems. For a company like ST, they can fill in the pieces and write their own tools. But is that the future.
Janac: ST also loses money, which is not a good model. So the question is how much of an R&D footprint do you want to have? That’s decreasing, which is why the industry is disintermediating.
The market decides. The question is what is your core value.
Gianfagna: One of the ways MediaTek became popular is they sell both hardware and software. And they sell into the Chinese marketplace like mad.
Hum: They also don’t take on new things.
Gianfagna: But they level of integration they provide is a value add.
Hum: They do cost reductions.
Gianfagna: It’s not just cost reductions.
Janac: I disagree. Saying someone is an innovator and a copier is misleading. When they get profitable they begin to innovate.
Bruggeman: I would argue they are an innovator now. They have a level of innovation we don’t associate with.
Hum: That’s cost innovation.
Janac: But their path to getting bigger is functional innovation.

