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 What Would Joe Do?
Peggy Aycinena
Peggy Aycinena
Peggy Aycinena is a freelance journalist and Editor of EDA Confidential at www.aycinena.com. She can be reached at peggy at aycinena dot com.

Means, Motives, Opportunity: why TSMC should buy Cadence, the Reunion Tour

 
July 30th, 2015 by Peggy Aycinena

It’s been 10 years since I first explained why TSMC should buy Cadence. Now a decade on, many things have changed in the world and many have not.

Among the things that have not changed? TSMC still should buy Cadence.

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Means …

First of all, let’s look at the numbers (per Yahoo Financials re: 2014):

* Taiwan Semiconductor Manufacturing Co. Ltd.

Employees: 43,500
Market Cap: $166.44 billion
Revenue: $27.31 billion
Operating margin: 39.26%
Net income: $9.70 billion
Total Cash: $16.61 billion on $7.40 billion in debt

* Cadence Design Systems Inc.

Employees: 6,100
Market Cap: $6.14 billion
Revenue: $1.61 billion
Operating margin: 11.23%
Net income: $161.1 million

* Conclusion

TSMC has got the means to buy Cadence.

By a long shot.

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Motives …

It’s easy to cite numerous motives that TSMC might have for buying Cadence:

* No.1 – TSMC throws a big shadow in the world of IP. So does Cadence. TSMC would benefit by adding Cadence IP to its own ginormous catalog.

* No. 2 – TSMC is not an EDA company, but clearly TSMC is concerned about the flow. They’re concerned about getting design for manufacturing considerations/data into the designers’ hands. They’re concerned that the job of designing chips be more thoroughly integrated into the job of making chips. That what EDA’s all about. Buy Cadence and TSMC becomes an EDA company – overtly.

* No. 3 – Disaggregation is so last century. Now it’s all about consolidation. That means IDMs. Foundries think and act like virtual IDMs, knitting the entire semiconductor design-to-manufacturing value chain into one cohesive whole. Take the ‘virtual’ out of it, buy Cadence, and TSMC moves closer to being a full-on IDM. Boom. Done.

* No. 4 – Look at the shape-shifting factions in the Global Politic. TSMC is powerful, but would be even more so if it had an even bigger footprint in the rest of the world. Buy Cadence, and you’re on your way to being an even bigger faction on the map.

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Opportunity …

Let’s look at the opportunities that TSMC would be capitalizing on if it made the move to purchase Cadence:

* No.1 – Cadence is supremely confident and headed up by one of the leading high-tech VCs in the industry. CEO Lip-Bu Tan manages investment funds of over $2 billion, above and beyond his involvement at Cadence. He understands the benefits of mergers and acquisitions more than most.

* No. 2 – Taiwan is neighbor to the PRC, and per comments made to me in the past, there’s a bunch of cash flowing back and forth between the two nation-states. Cadence, like every EDA Company currently in existence, could use additional access to that Asian channel, something TSMC could provide.

* No. 3 – TSMC is supremely confident. There would be true synergy between two companies who claim confidence, breadth, presence, and poise as their watchwords.

* No. 4 – Synopsys was able to acquire Taiwan-based SpringSoft. That precedent helps set the stage for TSMC acquiring US-based Cadence.

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Okay, there it is …

* Means.
* Motive.
* Opportunity.

The question is not … if TSMC will buy Cadence?

The question is … when will TSMC buy Cadence?

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One Response to “Means, Motives, Opportunity: why TSMC should buy Cadence, the Reunion Tour”

  1. Kevin Cameron says:

    I think while it sort-of made sense in 2005, the real change since then is the growth in Cloud computing. If TSMC ran their own private Cloud for doing IC design work on their Silicon then buying in the tools would make complete sense since they could cut out all the middlemen and weird licensing that gets in the way of the EDA tools working properly.

    Since it makes sense for TSMC, it also makes sense for Intel and GF, so the next question is who will buy an EDA company first, and can anybody else buy one after that given monopoly concerns?

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