Answer’s nope: Should EDA Consortium become IP Consortium?

The news is good out of EDA this week: The industry continues up and to the right.

EDAC’s Market Statistic Services produced the numbers: “The EDA industry revenue increased 8.5 percent for Q2 2015 to $1906.5 million, compared to $1757.9 million in Q2 2014. The four-quarters moving average, which compares the most recent four quarters to the prior four quarters, also increased by 8.5 percent. Companies that were tracked employed a record 32,806 professionals in Q2 2015, an increase of 4.9 percent compared to the 31,259 people employed in Q2 2014, and up 2.1 percent compared to Q1 2015.”

Mentor CEO Walden C. Rhines provided the commentary: “The industry’s strong, and exceptionally good in CAE, where the concentration is emulation, functional verification, and test, [while] IC physical design also reported solid growth. Geographically, all regions except Japan saw revenue increases, especially Asia/Pacific. The PacRim was strong in Q2, North America was strong, and Europe was pure gold.”

“The numbers are also very good in IP,” he continued, “especially in EDA combined with IP. The external companies, dominated by ARM, showed unusually large growth in Q2, and the internal IP companies are also showing excellent growth.”

Since we were chatting by phone, I said: “We’re being told these days that IP is the future of chip design. Are we racing to the place where we’re just going to reach into an IP catalog and pick out all of the pieces we need to assemble our design?”

Rhines said that idea’s a popular misconception: “Just because we’ve got bigger Lego blocks for our designs, doesn’t mean it’s going to be any easier to put them together, because verifying [ever larger] combinations of blocks is even harder than verifying the blocks themselves.”

“Bigger designs created with more IP means good news for EDA?” I asked.

Rhines responded, “Yes, but we have to increase revenues [by significant percentages] to meet the demand, or we’ll be in trouble.”

“What would that trouble look like?” I asked.

“The semiconductor industry needs more software for verification,” he said, “but their budgets won’t support [our costs] if we get less dollars per copy [of our tools] because our costs would remain the same.”

“If the costs of tools have to climb, so shouldn’t the semiconductor industry just produce their own tools?” I asked.

“We’re way past the point where manual design is possible,” he said, “and it’s no longer a question of whether the semiconductor companies can develop their own tools. It’s a question of how many tools they have to buy. Today, the costs of the tools are a combination of having to pay a little more to the EDA industry, plus paying a little more on the customers’ side for installation and support of the tools.”

I said, “Even if one accepts your perpetually positive outlook on EDA, an outlook supported by these Q2 MSS numbers, aren’t the IP companies on the verge of overshadowing the size and impact of the EDA companies in the EDA Consortium. So much so, it seems like it’s time to change the name to the IP Consortium.”

Rhines was adamant, “It will never be the case that it’s all EDA or all IP. In fact, IP revenue is only one-third the size of the market tracked by MSS today. The other two-thirds is traditional EDA. Even ARM — although their market cap is $20 billion — their revenue is just about the same as Mentor’s.

“The EDA industry is a long way from being dominated by the IP industry, plus we’re in a very prosperous period in EDA. We’ve got 22 nanometers, 14, 10, 7 all working at the same time, so we’re meeting customer demands at all of these nodes.”

“Also,” Rhines added, “look at all the startups in EDA.”

“What?” I said. “I thought there weren’t any startups in EDA.”

“Startups can be invisible,” he countered. “Anybody with a PC and a garage can start a company, but these days they aren’t being funded by the VCs. They’re angel-funded, so you don’t know they’re there until they announce.”

“And,” Rhine concluded, proving his optimism is indeed infinite, “it’s easier to grow small companies faster, so the percentage growth [once the startups announce] promises even better growth in EDA and the EDA Consortium going forward.”

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September 28 Press Release …

The EDA Consortium (EDAC) Market Statistics Service (MSS) today announced that the Electronic Design Automation (EDA) industry revenue increased 8.5 percent for Q2 2015 to $1906.5 million, compared to $1757.9 million in Q2 2014. The four-quarters moving average, which compares the most recent four quarters to the prior four quarters, also increased by 8.5 percent.

Companies that were tracked employed a record 32,806 professionals in Q2 2015, an increase of 4.9 percent compared to the 31,259 people employed in Q2 2014, and up 2.1 percent compared to Q1 2015.

* Revenue by Product Category

The largest category, Computer Aided Engineering (CAE), generated revenue of $657.2 million in Q2 2015, which represents a 9.6 percent increase compared to Q2 2014. The four-quarters moving average for CAE decreased 0.3 percent.

IC Physical Design & Verification revenue was $379.2 million in Q2 2015, a 6 percent increase compared to Q2 2014. The four-quarters moving average increased 10 percent.

Printed Circuit Board and Multi-Chip Module (PCB & MCM) revenue of $155.3 million for Q2 2015 represents a decrease of 13 percent compared to Q2 2014. The four-quarters moving average for PCB & MCM decreased 3.1 percent.

Semiconductor Intellectual Property (SIP) revenue totaled $611.7 million in Q2 2015, a 15 percent increase compared to Q2 2014. The four-quarters moving average increased 22.1 percent.

Services revenue was $103.1 million in Q2 2015, an increase of 14.7 percent compared to Q2 2014. The four-quarters moving average increased 11.5 percent.

* Revenue by Region

The Americas, EDA’s largest region, purchased $870.3 million of EDA products and services in Q2 2015, an increase of 9.5 percent compared to Q2 2014. The four-quarters moving average for the Americas increased 11.2 percent.

Revenue in Europe, the Middle East, and Africa (EMEA) increased 5.2 percent in Q2 2015 compared to Q2 2014 on revenues of $305.4 million. The EMEA four-quarters moving average increased 0.7 percent.

Second quarter 2015 revenue from Japan decreased 3.4 percent to $182.8 million compared to Q2 2014. The four-quarters moving average for Japan decreased 10.4 percent.

The Asia/Pacific (APAC) region revenue increased to $548.1 million in Q2 2015, an increase of 13.2 percent compared to the second quarter of 2014. The four-quarters moving average increased 17.6 percent.

The complete MSS report, available to the EDA Consortium members, contains additional detail for countries in the Asia/Pacific region.

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Tags: ARM, EDA Consortium, Mentor Graphics, MSS, Wally Rhines

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