Return on Investment - December 19, 2005

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Introduction

The lead article in the business section of a recent Los Angels Times issue was on Dassault Aviation. The firm known for its Rafale and Mirage military jets diversified into business jets and is now the fourth largest manufacturer of business jets behind Gulfstream, Bombardier and Cessna. There are over 1,700 Falcon in service in 70 countries since the rollout of the first Falcon 20 in 1963. Dassault Falcon Jet, a subsidiary of the French company, is headquartered near the Teterboro airport in New Jersey. The company has assembly and production plants in both France and the United States and service facilities on both continents. It employs a total workforce of over 12,000. The company is currently developing the Falcon 7X. The first order is expected to be delivered next year and full production rate of about 30 planes per year is expected in 2007 or 2008. The 7X will be the first business jet to be flown with Fly by Wire (FBW) technology. FBW replaces mechanical linkage between the controls in the cockpit and the moving surfaces with electrical wires and circuits, thereby reducing pilot workload and increases safety.

The Falcon will have a range of 5,700 nautical miles non-stop. This is enough to fly from Los Angels to Paris. The plane contains over 50,000 parts and 15 miles of wiring. The first Falcon 7X was assembled in seven months compared with sixteen months for previous business jets. The overall development costs were cut by one-third to around $300 million. Dassault had promised that the jet will be approximately 20% less expensive to operate because of lower maintenance cost.

How has Dassault Falcon archived these dramatic cost reductions and time to market acceleration for so complex a product? The answer is 3D Computer Aided Design (CAD), Computer Aided Manufacturing (CAM), Computer Aided Analysis (CAE) - collectively CAX - and Product Data Management (PDM). This combination is generally referred to as Product Lifecycle Management (PLM). The firm uses CATIA software from Dassault Systemes, a French publicly traded company that spun off from the aviation firm years ago. IBM and IBM Business Partners (BPs) have been the exclusive sales and marketing arm for CATIA and CATIA related products since the 1980s. IBM pays Dassault Systems royalties which amounted to nearly $1B in 2004. Current software capabilities highlighted in the Times article include the ability of engineers wearing 3D glasses to “walk through” the aircraft's design. This visualization capability helps designers to discover the best way to route wires and pipes and to fit components.

This demonstrates in an industry parallel to EDA how the ability to visualize, analyze and simulate a design prior to manufacturing, fabrication or even prototype testing can generate tremendous savings in development costs and future product support costs while simultaneously decreasing TTM. It seems somewhat obvious that if one could accurately and timely evaluate designs, discover errors both of omission and commissions and investigate design alternatives before manufacturing, that it would yield considerable benefits. However, it is not always easy to get end users to go on the record especially with quantitative data about the savings from using these tools and methodologies. EDA firms often are prevented from even naming their customers.

PLM and EDA have many parallels and some major differences. Both industries are dominated by a few vendors. The leading PLM vendors (Dassault with CATIA, UGS with Unigraphics and PTC with Pro/Engineer) have annual revenues in the range of $1B each. Most of the sales are by a direct sales force or in the case of Dassault by the IBM sales force. Selling to major new accounts is a long benchmark involved process. Autodesk dominates the 2D low end with its AutoCAD product. While Autodesk's total revenue is higher than the other firms much of it is from products in industries outside of the mechanical world such as AEC, GIS and Media & Entertainment. The PLM industry has had lots of acquisitions over the years. The leading firms have acquired older, slumping CAX firms to gain access to the installed customer base. They have acquired so called midrange players (Dassault acquired SolidWorks and UGS acquired SolidEdge) to protect against lower cost competition. They have acquired PDM firms for their technology (UGS acquired SDRC who had acquired Sherpa, PTC acquired Windchill, Dassault acquired Product Manager from IBM and SmarTeam).

While mechanical CAD systems sold for over $100K a seat (hardware + software) in the eighties, the prices have plummeted. Today PLM products are much less expensive than EDA products. The average price for a basic high end mechanical CAD seat is around $12K. The list price of AutoCad is $3,750 although price competition among dealers is fierce. There are several mid range 3D offerings with seat prices round $4,500.

Electronics design is language based. Early CAM systems, notably Numeric Control (NC) systems, were also language based, e.g. APT and Compact II. An NC program contains part geometry, toolpath motion and machine commands. Early Finite Element Modeling and Analysis programs such as NASTRAN and ANSYS were also language based. Today CAX systems will automatically generate language decks for NC and analysis applications due to this legacy but a user does not write in these languages. Mechanical CAD is not a language based tool, although one can take a history command file as a starting point for creating a parameterized macro.

Electronic design involves synthesis. Mechanical design is an iterative process of design, analyze and modify. A 3D part is interactively defined by Boolean combination of basic shapes such as extrusions and revolutes and features such as holes, slots and cutouts. An assembly is defined by a combination of parts that mate with points and/or surfaces of contact and alignment of axes. All mechanical CAD systems provide first order analysis through calculation of mass properties and determination of clearance and interference. Optional add-on products or third party products perform more sophisticated analysis such as structural, thermal, electromagnetic, aerodynamic, kinematics and dynamics. Several of these analyses are based upon finite element analysis (FEA) technology. Geometric models must be converted by a combination of automated and interactive techniques into discrete finite element modeling (FEM) models that FEA requires. Leading CAE companies such as MSC.Software and ANSYS have annual revenues in excess of $100 million. They have grown and expanded their product portfolios largely by gobbling up smaller CAE firms.

Both EDA and PLM involve the support of standards. A drawing created by a CAX system must comply with drafting standards, e.g. ANSI, ISO or JES. Data can be exchanged between PLM systems according to the IGES (Initial Graphics Exchange Standard, ANSI Y14.26M-1981) or STEP (STandard for the Exchange of Product model data, ISO 103033) standard, although considerable intelligence is usually lost in the transfer of data between disparate CAD systems.

Major aerospace and automotive companies are outsourcing an increasing percentage of their product designs. While an IC can contain millions of gates, a complex mechanical product can contain tens of thousands of components that are independently designed and manufactured. Many of these components are themselves very complex assemblies such as an aircraft engine or landing gear system consisting of components from other third parties. This creates a significant data management problem. A product like an automobile may have multiple models and multiple options within any given model. Over time there may be variants due to ECOs for various reasons. The length of the product development cycle and the lifetime of major mechanical products are considerable longer than most consumer electronic products. Keeping track of all this data during design as well as during manufacturing and the post sales period is a daunting task. That is why the leading PLM vendors have invested so heavily in Product Data Management which must interface into ERP (Enterprise Resource Planning) systems. PDM offers a significant opportunity for service revenue which explains the involvement of IBM and EDS.

Consulting and research firm CIMdata partitions the PLM market into two primary segments: cPDm and Tools. Tools include the primary design authoring tools such as mechanical computer-aided design (MCAD), computer-aided software engineering (CASE), and technical publishing. cPDm is focused on collaboration, visualization, management, and sharing of product related information.

According to Ken Amann, CIMdata Director of Research, “The 2004 overall PLM market grew by 8% over 2003 to approximately $16.7 billion. Approximately 68% or $11.4 billion was invested in Tools while 32% or $5.3 billion was invested in cPDm. Both PLM segments grew in 2004, with cPDm investments increasing more rapidly with a growth of approximately 15% over 2003.”

CIMdata forecasts cPDm to be the fastest-growing segment of the PLM market with a 15+% CAGR to exceed $10.5 billion in 2009. The Tools segment is forecast to grow at a slower 4+% CAGR over the next five years, reaching approximately $13.8 billion during 2009.

In the PDM arena Dassault offers Enovia for the high end and Smarteam for the midrange, PTC offers Windchill and Unigraphics offers Teamcenter (initially a combination of SDRC's Metaphase and their own iMAN) and more recently Teamcenter Express for smaller firms. Other vendors in this marketplace include MatrixOne ($124 million in fiscal 2005), Agile ($31 million last quarter) and SAP. SAP is the ERP industry leader and the third-largest independent software provider overall. SAP reported £31 million in PLM software last quarter out of £2 billion in total revenue.

Historical Background

Several leading PLM vendors can trace their lineage back to major aerospace and automotive companies. CADAM, a 2D drafting system was developed internally at Lockheed in the 1970s to run on IBM mainframe computers with 3270 and later 5080 graphics terminals. IBM and Lockheed signed an agreement whereby Lockheed would continue to develop and maintain the software while IBM would be the exclusive sales and marketing arm for the product. Lockheed also acquired Calcomp the manufacturer of graphics terminals and plotters. The CADAM software was sold in source code form to several large companies. One of the source code licensees was Dassault, a major French aerospace firm. Dassault developed a 3D add-on to CADAM called CATIA. IBM and Dassault entered in a business arrangement similar to one IBM had with Lockheed. Years later IBM acquired CADAM, then a wholly owned subsidiary of Lockheed. IBM subsequently sold most of this business to Dassault.

In 1976 McDonnell Douglas Corporation acquired United Computing, a small CAD/CAM company along with its Unigraphics product. United Computing became the CAD/CAM division of McDonnell Douglas Automation; a Unigraphics Group was part of the CAD/CAM division, as well. McAuto had its own internal development, called CADD. In 1991 EDS acquired this group and establishes a wholly owned subsidiary. In 1998 EDS sold a 14% minority stake through an IPO. In September 2001 EDS bought back the outstanding public shares, acquired SDRC and merged it with Unigraphics. In March 2004 a private equity group acquired the firm.

Patrick Hanratty is often considered the father of mechanical CAD/CAM. He was responsible for internal CAD development at GM. He left the company and established Manufacturing and Consulting Services, Inc. (MCS). In 1972 he introduced ADAM (Automated Drafting and Machining), the first commercially available integrated graphics design, drafting and manufacturing system. Over time he sold OEM licensees to ComputerVision, Gerber Scientific, McDonnell Douglas, Autotrol, Control Data and others spawning the CAD industry.

In the eighties GM hired EDS as a consultant to among other things rationalize its CAD operations. There were several internal CAD development groups and systems from several commercial vendors. These systems did not communicate with one another and often ran on proprietary hardware. EDS published a standards based RFP and conducted extensive benchmarks. In particular the requirements included the capability to run on multiple UNIX platforms. They chose CADAM and Unigraphics. Soon thereafter IBM acquired CADAM. The then available IBM workstation was not high on EDS' list of preferred platforms. The arrangement unraveled. EDS then purchased Unigraphics.

SDRC (Structural Dynamics Research Corporation) was found in 1967 by professor from the mechanical engineering department of the University of Cincinnati as a consulting firm for machine tool and automotive industries. The firm decided to commercialize the software tools that they had developed in support of their consulting activities. Software revenue soon outstripped the consulting revenue. SDRC went public in 1987. In 1995 Ford Motor Company selected SDRC software as its corporate standard. Internally developed code at Ford found its way into SDRC software. SDRC was acquired and merged with Unigraphics by EDS in 2001.

There are several other CAD companies that were started by former employees of firms mentioned above. For example Sam Geisberg, a Russian immigrant and the founder of PTC worked for both ComputerVision and Applicon (in a group that I managed). Many CAD companies have been acquired over the years by the leaders: PTC acquired ComputerVision who had acquired Calma. Unigraphics acquired SDRC, Applicon and Tecnomatics. Dassault acquired MatraDatavision and Abacus.

The top articles over the last two weeks as determined by the number of readers were

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Synopsys Completes Acquisition of HPL Technologies, Inc. Synopsys acquired HPL in an all-cash deal valued at approximately $13 million. HPL Technologies, Inc. is a leader in yield management software and test chip solutions

Sequence Design One Of siliconindia's Top 100 The firm has been named one of siliconindia magazine's top 100 companies founded and managed by Indians. Sequence president and CEO Vic Kulkarni has shown leadership and innovation in his establishment of a strong international corporate culture. The company has a growing customer base of multinational semiconductor companies in India, particularly in Bangalore's technology-rich environment, and has recently expanded its "Center of Excellence”

Sequence Showcases Low-Power Design Expertise at India's VLSI Design Conference Sequence will return as an exhibitor for next month's VLSI Design Conference Jan. 3-7, 2006 in Hyderabad, India. The conference theme, "Mobile Embedded Systems," ties in perfectly with Sequence's show offerings in managing and optimizing power in a variety of portable applications.

Atmel Announces Sale of Nantes Fab The firm announced that it has concluded the sale of its Nantes, France manufacturing facility and the related foundry activities to XbyBus, a French corporation.

MatrixOne Granted Patent for Semiconductor IP Management; Comprehensive Patent Enables Collaborative Development and Component Reuse in Advanced Semiconductor Design The patent defines a comprehensive software application that provides a secure, high performance distributed library for cataloging, distributing, tracking, reporting and managing IP. This enables effective design reuse and the use of commercial components to meet the needs of increasing design complexity and faster time-to-market in advanced semiconductor design.

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Keynote Interview at MicroVentures 2005 Conference Features Cadence CEO Mike Fister

Inphi Tapes Out High-Speed Flip-Chip Design with Cadence Encounter Platform; Encounter Global Synthesis and Physical Implementation Help Inphi Corp. Achieve 666 MHz at 130-nm with Flip-Chip Package

CORRECTING and REPLACING Sequence Closes $5.3 Million Funding Round; Expands Into Fast-Growing International Markets, Boosts R&D To Maintain Low-Power Tech Lead

Sequence Closes $5.3 Million Funding Round; Expands Into Fast-Growing International Markets, Boosts R&D To Maintain Low-Power Tech Lead

Teradyne and Cadence Address Improved Test and Diagnostic Flow for Nanometer Devices

IEEE Ratifies SystemC 2.1 Standard for System-Level Chip Design; IEEE(R) 1666 Allows Faster System-on-Chip Design, Intellectual Property Exchange

eSilicon Accelerates Design Cycles with Novas Verdi Debug System; Debug System's Ability to Navigate Large, Complex Designs Streamlines eSilicon's Custom IC Design Flows

MatrixOne to Host PLM Live Web Seminar Tomorrow In Europe to Discuss Synchronous Product Development for High Tech Companies

Keynote Interview at MicroVentures 2005 Conference Features Cadence CEO Mike Fister

Altium Strengthens US Presence in Response to Customer Demand

Cadence Delivers New RF Design Kit Targeting Customer Design Challenges in Wireless; Latest Kit Continues Cadence Execution on Strategy to Address Key Vertical Market Applications

Other IP & SoC News

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TI Introduces Family of Programmable Analog Video Signal Processors With I2C, Integrated Filters and 3.3-V Operation

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STMicroelectronics Unveils Innovative Network-on-Chip Technology for New System-on-Chip Interconnect Paradigm

Rambus Inc. Adopts Register Description Language and Licenses Denali's Blueprint Software for IP Development Process

ON Semiconductor Raises Revenue Guidance for Fourth Quarter 2005

IBM Takes Next Step in Opening Power Architecture to Research and Education Community

Maintaining Low-power Consumption is Critical to Drive Wireless Internet on a Chip Technology

Texas Instruments Announces Availability of Denali's Databahn(TM) DDR Controller IP to TI ASIC Customers

Atmel's High-performance UHF IDIC Demo Kit Supports Long-range RFID Applications

Vitesse Introduces Grooming Switches That Enable Lowest Cost, Next-generation Access and Metro Equipment; Scalable, Low Power Design Ideal for Growing Broadband Services While Maintaining Compatibility with Existing Equipment

Texas Instruments Expands Tag-it ISO/IEC 15693 RFID Product Line

Novel DC/DC Converter from STMicroelectronics Provides Two Regulated Supply Rails Using Only One External Coil

NVIDIA to Acquire ULi Electronics, a Leading Developer of Core Logic Technology

FEI Company and PDF Solutions(R) Release Powerful New Semiconductor Defect Analysis Solution

Atmel Extends Its AVR CAN Microcontroller Family for Industrial CAN Applications

Hitachi and Renesas Technology Develop Low-Power MOS Phase-Change Memory Cells for On-Chip Memory of Microcontrollers

Ramtron Introduces the Versa Mix 8051 Family of Highly Integrated Mixed-Signal Microcontrollers for the Embedded Data Acquisition Market

Semtech's RailClamp Device Sets New Size and Performance Standards for Protection of High-Speed Data Interfaces

Among Makers of Memory Chips for Gadgets, Fierce Scrum Takes Shape (The New York Times)

Analog Devices Introduces Fastest 14-Bit Analog Front End for High-Definition Image Processing Applications; Canon selects ADI's AD9970 analog front end to enable its HDV camcorder.

ANADIGICS Announces New Family of WLAN Front-End Solutions for Mobile and MIMO Markets

Sigma Designs to Work on Full-Featured Blu-ray Player with Pioneer; New Player Utilizes Sigma's Industry-Leading SMP8630 Family of Media Processors

Avago Technologies Introduces Industry's First Quad Bi-Directional Digital Optocoupler

Unlocking New Possibilities in System Development, Actel Ships World's First Mixed-Signal FPGA

National Semiconductor Introduces Industry's First Stereo Audio Subsystem With Both Digital and Analog Inputs

Mobilic Introduces New Multimedia SoC Processor Family

Semiconductors Up 95% From 2003; Are Silicon Cycles a Thing of the Past?

Ambarella Launches Industry's First HD H.264 System-on-Chip for Hybrid Digital Cameras

Vitesse Extends Leadership in Managed Layer 2 Gigabit Ethernet Switching With the Production Availability of the VSC737x Family; VSC737x Family Offers Scalable, Inexpensive, Managed, Layer 2 Switch Solutions for OEMs and ODMs

AMI Semiconductor Launches Stepper Motor Controller ICs with Sensorless Stall Detection; LIN and Serial Interface ICs Improve Reliability and Reduce Component Count, Cost and Complexity of Automotive and Industrial Motion Control Applications

Sun Microsystems and Synopsys Collaborate to Certify VCS Verification Solution for the Solaris 10 OS on x64 Platforms

Synopsys Expands Mixed-Signal IP Portfolio With Interface Cell Libraries Featuring DDR2 SDRAM I/Os

Keynote Interview at MicroVentures 2005 Conference Features Cadence CEO Mike Fister

Inphi Tapes Out High-Speed Flip-Chip Design with Cadence Encounter Platform; Encounter Global Synthesis and Physical Implementation Help Inphi Corp. Achieve 666 MHz at 130-nm with Flip-Chip Package

CORRECTING and REPLACING Sequence Closes $5.3 Million Funding Round; Expands Into Fast-Growing International Markets, Boosts R&D To Maintain Low-Power Tech Lead

Sequence Closes $5.3 Million Funding Round; Expands Into Fast-Growing International Markets, Boosts R&D To Maintain Low-Power Tech Lead

Teradyne and Cadence Address Improved Test and Diagnostic Flow for Nanometer Devices

IEEE Ratifies SystemC 2.1 Standard for System-Level Chip Design; IEEE(R) 1666 Allows Faster System-on-Chip Design, Intellectual Property Exchange

eSilicon Accelerates Design Cycles with Novas Verdi Debug System; Debug System's Ability to Navigate Large, Complex Designs Streamlines eSilicon's Custom IC Design Flows

MatrixOne to Host PLM Live Web Seminar Tomorrow In Europe to Discuss Synchronous Product Development for High Tech Companies

Keynote Interview at MicroVentures 2005 Conference Features Cadence CEO Mike Fister

Altium Strengthens US Presence in Response to Customer Demand

Cadence Delivers New RF Design Kit Targeting Customer Design Challenges in Wireless; Latest Kit Continues Cadence Execution on Strategy to Address Key Vertical Market Applications

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-- Jack Horgan, EDACafe.com Contributing Editor.