March 24, 2003
EDA in Taiwan & China
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Peggy Aycinena - Contributing Editor

by Peggy Aycinena - Contributing Editor
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Before we started to discuss the EDA market in Taiwan and China (PRC), Dataquest's Nancy Wu asked to set the stage for our discussion by describing the current state of affairs in the two countries with regards to semiconductor design, manufacturing, and test. After she set the stage, she then described the distinctions between the EDA market in Taiwan and China - with emphasis on China. Her concise and informative comments are as follows, and reflect highlights from a significant Dataquest report published in January 2003, co-authored by both Nancy Wu and Gartner/Dataquest analyst Gary Smith.

“We started looking at the specifics of the EDA market in Taiwan and China in 2001 in a joint study done with EE Times-Asia. We surveyed close to 1000 engineers across the two countries about EDA tool usage in their daily work. We wanted to understand the nature of their engagements in ASIC, FPGA, and PCB design, and other types of design as well. And in that survey, we discovered a lot. And now we've updated the study.

We had been seeing the Asia/Pacific market as the highest growth market in EDA over the past 5 years. Back in 1998, we had seen Taiwan emerge as the number one EDA marketplace in Asia, replacing Korea - which up to that point had been the number one market in Asia. But by 2000/2001, we were starting to hear that China was also becoming an EDA marketplace and that China was moving aggressively into [all aspects of] the semiconductor market.

A balancing act

Interestingly enough, the Chinese strategy has been, not just to attack the semiconductor manufacturing and test areas, but also to attack the design area as well. The Chinese approach [might have been] to copy what Taiwan had done previously - to start with manufacturing and test, and then move into design when both manufacturing and test capabilities were steady and strong - but the Chinese have clearly moved into design simultaneously with manufacturing and test. They've tried to get up to speed in the three different areas at the same time, so their approach has been [distinctly] different from what we've seen in Taiwan.

Since 1998, as Taiwan has become the leading Asian EDA market, Taiwan has shared a 'bit' of that market with China. However, as I said earlier, now we're seeing China with more than just a 'bit' of the market. [In fact], although the EDA market in Taiwan continues to grow steadily, it's actually not growing as fast as that of China and India. We're seeing the design presence moving from Taiwan - and other traditional centers of design strength such as Singapore and Korea - and gradually shifting to China and India.

[Parenthetically], I do sometimes hear of concerns from India, that China may be getting more attention [from the EDA industry] than India. However, my work has mostly been focused on China - and the market competition between Taiwan and China - so I do not know enough about India to comment in depth about that.

[Meanwhile], we know that, in Taiwan, there are lots of OEMs who have [struck] deals with big computer giants like HP, IBM, Dell, and Compaq, among others - and those OEMs are supporting a type of derivative design [intended] to carry some of the design [load] for those large companies. That's really part of the reason why Taiwan has become so involved in design.

[Additionally], we were interested to learn that the majority of the design projects in Taiwan have been engaged in producing computer peripherals and consumer electronic products. Alternatively, in China [in its brief history in design], most designs are dedicated to telecom and datacom end-users. Since China got into the design market later - when the market was hot for cell phones, PDAs, etc. - they've entered the design market from the point of telecomm, WAN, and sometimes even military [end-use type products]. Meanwhile, Taiwan continues to emphasize computer peripherals and consumer electronics-related design.

A year ago, Gary Smith and I both spoke at a CMP Media event in China. We found there, that Taiwan does not believe that the design community in China is getting ahead of them - that Taiwan is still way ahead. And I think they may be partially right.

[Of course], in the areas of manufacturing and test - companies in Japan, North American, and Europe continue to invest heavily in Taiwan - and now some in China as well. But those companies are also investing money in design, both in Taiwan and in China - and China is [quickly] becoming an even more interesting area than before.

Meanwhile, lots of Taiwanese companies are [also] investing in China. They are either investing [by way of] new companies or setting up operations of exiting Taiwanese companies in China. [Yet], those Taiwanese investors don't see companies in China getting into the high-end design area. And, even though our survey indicates that companies from Japan, North America, and Europe are supporting design efforts in China that include high-speed, high-end design - even designs with greater than 10 million [on-chip devices] - Taiwan doesn't seem to see any need for concern.

China does have local design engineering [talent] - graduates from local engineering schools capable of doing high-end design. The problem is that there's too much demand, and yet there aren't enough well trained engineers. [So] there's a lot of work going on in the local universities in China to train more engineers, to establish training facilities, and to cooperate with various EDA vendors to provide that training. China is [beginning to] emphasize getting more complex design projects into the schools, making them available to students, and also making more [on-the-job] training available to engineers who are already working. So China is working both in the universities and in
industry [to promote the designer talent pool].

Price point

[Meanwhile], design engineers - whether in Taiwan, China, or anywhere else in the world - want EDA tools that can help them with their work. And they must find the best price for the tools that will provide exactly what they need. A lot of considerations need to be taken into account before a purchase decision is made. These considerations have to be carefully [evaluated] before a designer buys and uses a tool to get a product out [the door]. Lots of tools are needed which are capable of dealing with complex designs - but these tools are extremely expensive. That's true every where in the world, no matter where [EDA tools] are sold.

Suggestions that cultural distinctions in either the Taiwanese business environment or the Chinese business environment influence the way EDA vendors pursue customers in those countries are inaccurate. In Taiwan and China, [just like in every other EDA market], it's the price point and customer support which are far more important [for the EDA customer] than the particular culture surrounding the business relationship. Pricing concerns are [always] the major issue in getting EDA products to sell - particularly in China.

If you think of the price point - and remember that China is getting into design a lot later, the cost of living is lower, the engineering costs are relatively inexpensive - and if you think of spending $500,000 on a synthesis tool, it's really more than Chinese designers can afford. Chinese design [houses] have to think of their ROI and how many projects they must engage just to cover the costs of purchasing such an expensive tool.

Meanwhile, very few EDA tools are being translated into the local languages in either Taiwan or China. For Chinese design engineers who have started to focus in the design area, they are comfortable working in English and it's not necessary for the tool vendors to translate the tool [interface] or the documentation. Again, the biggest concern for these customers is not so much the language, as the price point of the tools.

Market opportunity

I think EDA vendors are trying to open the market in China - one or two of the vendors are giving super high discounts just to get into the Chinese market. These vendors want to have at least 'someone' who can use their tools [on a design team] and who can become familiar with the product and its capability. Those vendors feel that once they have that 'someone,' they'll then launch their product officially and be able to accomplish a larger market in China. [Today], vendors are competing to get the most market share by offering deep discounts - and then they will worry about how to get the revenue out
of that market.

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-- Peggy Aycinena, Contributing Editor.

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