March 19, 2007
Fiscal Year In Review
Please note that contributed articles, blog entries, and comments posted on EDACafe.com are the views and opinion of the author and do not necessarily represent the views and opinions of the management and staff of Internet Business Systems and its subsidiary web-sites.
The February Commentaries on the IP and EDA industries written by the author and Dr. Henke and appearing on this website did provide an overview of the financial results for nominal year 2006. This article expands on that work by looking at the past five years and by adding information on two of the top users of EDA hardware and software, Intel and AMD.
2003, 5% for 2004 and 13.8% for 2005. YTD growth for 2006 is 18.2%.
The largest product category is CAE which accounted for 49% of total revenue in 2002 but only 42% in 2005. Revenue in the IP Physical Design & Verification segment has also fallen as a percentage of total revenue from 31% to 26.4%. Revenue from SIP has climbed dramatically but in large part this was due to EDAC expanding the number of firms being tracked. It has been the fastest growing segment.
North America is the clear revenue leader but as percentage of total revenue NA has fallen from 57% in 2002 to 46% in 2005. Japan and RoW have increased in terms of their percentage of total revenue.
The data for the full year 2006 has not been published yet. The data from the first three quarter is summarized in the table below in terms of YoY growth.
Table 1 Nine Month YoY Comparison 2006 to 2005
Big 3 EDA Vendors
The EDA market is an oligarchy dominated by (in order of increasing revenue).
Mentor Graphics, Synopsys and Cadence . The number four EDA vendor, Magma Design Automation, generates only about one-fifth the revenue of Mentor Graphics.
The financial results for the last five fiscal years for the EDA leaders are shown in the table below. Cadence and Mentor Graphics have the calendar year as their fiscal year while Synopsys fiscal year ends on October 31. Mentor has announced that it is shifting its fiscal year one month. They will in effect have a one month fiscal year 2007. The explanation was that it was often difficult to finalize major deals at year end due to vacation schedules of key customer executives.
If one compares 2002 to 2006, one finds revenue increases of 33% for Mentor, 21% for Synopsys and 15% for Cadence. These figures translate into CARG (compound annual growth rate) of 5.8%, 3.9% and 2.9% respectively.
There are several factors that impact all these vendors financial performance to varying degrees and at different points in time. These factors can complicate comparisons among the vendors and even for comparisons of the performance of a single vendor during different time periods.
Some time during the five years presented each vendor began accounting for stock-base compensation according to SFAS No 1213. This added to expense and reduced net income. During these five years there has been a shift from upfront or perpetual license model to time-based or subscription license model. This changes the way in which revenue is recognized from all at once to prorated throughout the term of the license. This greatly simplifies revenue forecasting as most of the revenue is in backlog and it smoothes out the revenue flow. However, initially this transition caused a drop in
revenue. Also there have been considerable fluctuations in the foreign currency exchange rate and a large percentage of the EDA business is done overseas.
In additions there are one time events such as acquisition, restructuring and legal settlements that impact the P&L. Many of the acquisitions have been of small companies for their technologies. However, there have been cases where the acquired company had significant revenue flow. A case in point would be Synopsys’ acquisition of Avant.
Over the five years Mentor’s total revenue has grown nearly 33% for a CAGR of 5.8%
In 2006 the geographic breakdown of revenue was Americas 46%, Europe 26%, Japan 15% and Pacific Rim 13%. When compared to 2002 revenue from Americas is up 19%, Europe up 31%, Japan up 45% and Pac Rim up 101%. This has caused revenue from the Americas to drop four percentage points when expressed as percent of total revenue while revenue from the Pac Rim countries has grown over four percentage points.
2006 SpiraTech Limited; Next Device Limited; Summit Design, Inc; Router Solutions; EverCAD Corporation
2005 Accelerated Technology Limited; Aptix Corporation; Embedded Performance Inc; Volcano Communication Technology
2004 0-In Design Automation
2002 IKOS Systems; Innoveda Inc.
Mentor had 4,230 employees at the end of 2006
Over the five years Synopsys’ total revenue has grown nearly 21% for a CAGR of 3.9%
During 2006 revenue breakdown by product segment was Galaxy Design Platform 52%, Discovery Verification Platform 24%, IP 8%, DFM 11%, and Professional Services and Other at 5%. From 2002 Galaxy revenue has grown 10% and IP 38%. Revenue from Discovery has declined 3.3% and revenue from Professional Services has declined 7%. IP revenue was not measured in 2002.
During 2006 revenue by geography was US 54.7% of total revenue, Europe 16%, Japan 16.8% and Asia Pacific 16.7%. This compares to the breakdown in 2002 where US accounted for 65.3% of total revenue, Europe 16.1%, Japan 10.5% and Asia Pacific 8.1%. Over this time period revenue from Europe has grown 20%, from Japan 93% and from Asia Pacific 148% while revenue from the US has declined 6.5%
Revenue derived from Intel Corporation and its subsidiaries in the aggregate accounted for approximately 11%, 13% and 11% of total revenue for the fiscal 2006, 2005 and 2004
Time-based license revenue accounted for 80% of total revenue in 2006 up from 61% in 2004 and up from 41% in 2002. Upfront license revenue was 6% of total revenue in 2006 down from 20% in 2004 and down from 27% in 2002. Maintenance revenue was 12%.
2006 HPL Technolgies, Inc; Virtio Corporation; SIGMA-C Software AG
2004 Accelrant Networks, Inc; Cascade Semiconductors, Inc
2003 Numerical Technologies
2002 Avant; Co-Design Automation; InSilicon Corporation
At the end of 2006 Synopsys had 5,100 employees
In September 2004, Synopsys filed suit against Magma Design Automation, Inc. (Magma) in U.S. District Court for the Northern District of California alleging infringement by Magma of three patents. In its answer and counterclaims, Magma asserted patents against Synopsys, and alleged that Synopsys has engaged in various practices that constitute antitrust violations and has violated various state laws.
On January 31, 2007 Synopsys announced that the United States District Court for the Northern District of California has ruled that Synopsys is the sole owner of the '114 Patent in the litigation between Synopsys and Magma Design Automation. The Court further ruled that Synopsys and IBM are co-owners of the '446 and '438 Patents. Magma has also been ordered to transfer to Synopsys and IBM a number of additional patent applications that had been pending throughout the world.
Magma corporate vice president, Corporate Affairs, said in Magma's press release on the same court ruling, "As the facts came to light in this case it became clear that IBM, one of Magma's technology partners, contributed to the technology in these two patents and is therefore a rightful owner.” He added that because Magma and IBM granted each other rights to their respective EDA patents in a 2004 licensing agreement, Magma therefore has rights to use the '446 and '438 patents.
On February 21, 2007 Synopsys announced that Magma Design Automation has requested that the Court dismiss all antitrust claims against Synopsys. In return, Synopsys would agree not to pursue Magma for malicious prosecution or any other claims related to making these anti-competitive accusations against Synopsys. The Court has been asked to dismiss all of these claims 'with prejudice,' meaning they cannot be revived.
Over the five years Cadence’s total revenue has grown nearly 15% for a CAGR of 2.9%
In 2006 Functional Verification accounted for 24% of total revenue, Digital IC Design for 24%, Custom IC Design for 27%, System Interconnect for 9%, DFM 7% and Services and Other for 9%. Revenues in theses areas increased with respect to 2002 by 46% for Functional Verification, 26% for Digital IC Design, 20% for Customer IC Design, and almost 4% for System Interconnect. Revenues in the DFM and the Services/Other areas decreased by 27% and 14% respectively with respect to 2002.
In 2006 revenue from North America accounted for 54% of total revenue. Europe accounted for 19% of total revenue, Japan 17% and Asia 10%. In comparison to 2002 revenue from the North America was up 8.4%, from Europe 9.4%, Japan 34% and Asia 46%. As a percentage of total revenue North American revenue has fallen 3 percentage points over the 5 year time period.
2004 Neoline, Inc
2003 Verplex; Get2Chip; Celestity, Innotech
2002 IBM Test Design Automation; Simplex Solutions
Cadence has 5,200 employees at the end of 2006.
The Semiconductor Industry Association, SIA, is the leading voice for the semiconductor industry and has represented U.S semiconductor companies since 1977 and SIA member companies comprise more than 85% of the U.S. semiconductor industry. Collectively, the chip industry employs a domestic workforce of 232,000 people. In 2006 worldwide sales of semiconductors reached $248 billion, an 8.9% increase over 2005. SIA President George Scalise said “Sales growth was largely driven by popular consumer products such as cell phones, MP3 players, and HDTV sets – all products that have
proliferated as semiconductor technology has enabled dramatically lower costs coupled with improved functionality.” The table below shows the figures for the last five year. Revenue has increased 76% in the last five years.
On March 15 market research firm iSuppli published their rankings for the top 25 semiconductor suppliers for 2006. The total revenue was $260 billion dollars up 9.3% from the $240 billion in 2005. The table below shows the top ten firms with the percentage change relative to 2005.
Table Top 10 Semiconductor Vendors for 2006
AMD due largely to its acquisition of ATI Technologies had a revenue increase of over 90% and consequently jumped from the number 18 position to number 8. The top 6 slots in the list remained the same with Intel the number one vendor by a factor of almost 1.6 over the number 2 vendor Samsung. This was despite a year-over-year revenue drop of 11%. Korean memory chip company Hynix Semiconductor moved from number 11 to number 8 with a 41.5% increase in revenue. Only 4 out of the top 25 had decreasing revenue compared to the previous year.
The table below shows the financial results for Intel for the last five years. Revenue in 2006 is 32% higher than in 2002 but 9% lower than the previous year. Net income is also down 42% from the prior year.
In 2006 Asia Pacific accounted for 49.4% of total revenue, Americas 21%, Europe 18.6% and Japan 10.8%. While revenue from AP has grown 73% over the five year period, it is down 9.5% from 2005. Revenue from Japan has increased almost 100% over the 5 years.
Intel divides its business into groups. The Digital Enterprise Group (DEG) designs and delivers computing and communications platforms for businesses, service providers, and consumers. DEG products are incorporated into desktop computers, enterprise computer servers, workstations, and the infrastructure for the Internet. The Mobility Group designs and delivers platforms for notebook PCs and other mobile devices. The Mobility Group’s products currently include microprocessors and related chipsets designed for the notebook market segment and wireless connectivity products. The strategy for the Flash
Memory Group is to provide advanced flash memory products for cellular phones, memory cards, digital audio players, and embedded form factors. The financial results for these groups are presented below for the last three years. Over this time period the DEG revenue has decreased nearly 20% while the Mobility revenue has increased 76%. Flash Memory has dropped 5.3%.
During these three years microprocessor revenue has average around 70% of total revenue.
At the end of January 2007,
Intel announced a new technology called "high-k metal gate” that will dramatically reduce transistor-gate leakage current which has been a major obstacle in moving to new processor nodes.
Gordon Moore, Intel co-founder, said in a statement, "The implementation of high-k and metal materials marks the biggest change in transistor technology since the introduction of polysilicon gate MOS transistors in the late 1960s.” Intel believes it has a lead of more than a year over the rest of the semiconductor industry with the first working 45nm processor of its next-generation family of products. Intel has replaced silicon dioxide with a thicker hafnium-based high-k material in the gate dielectric. Intel has also developed new metal gate materials.
Advanced Micro Devices, Inc (AMD) is a leading global provider of innovative processing solutions in the computing, graphics and consumer electronics markets. The firm’s financial results for the last five years are presented in the table below. Revenue has grown almost 110% from 2002 but dropped 3.4% from 2005.
The table below shows the revenue contribution by product segment.
Table AMD Revenue by Product Segment
On October 25, 2006, AMD completed the acquisition of all of the outstanding shares of ATI Technologies, Inc. The total purchase price for ATI was $5.6 billion of which $4.3 billion was in cash. ATI had revenue of $2.22 billion in fiscal 2005 and net income of $119 million. In fiscal 2006 they generated an estimated $2.435 billion. This figure was $100 million lower than ATI had forecast before the acquisition. This was due to lower sales volume of integrated chip sets for Intel-based platforms.
AMD has increased its long-term debt and capital lease obligations by $2.3 billion. Over the last year AMD’s stock price has dropped 60%. This translates in a drop in its market capitalization of around $10 billion. In contrast Intel shares had declined only a few percentage points.
On December 21, 2005, Spansion Inc., the former majority-owned subsidiary, completed its initial public offering, or IPO. Following the IPO, AMD’s ownership interest in Spansion was reduced from 60 percent to approximately 38 percent of Spansion’s outstanding common stock. In November 2006, they sold 21 million shares of Spansion’s Class A common stock in an underwritten public offering. As a result of this sale, as of December 31, 2006 AMD owned approximately 21 percent of Spansion’s outstanding common stock. As a result of Spansion’s IPO in December 2005, they
stopped manufacturing and selling memory products. Therefore, we did not have a Memory Products segment in 2006.
The top articles over the last two weeks as determined by the number of readers were:
PDS performance. This new solution is based on Sigrity's analysis and verification capabilities for the entire PCB and IC package structure. OptimizePI considers both component and manufacturing costs during its automated selection and placement of decoupling capacitors.
VMM Applications reduce testbench creation time by allowing architects to quickly construct more effective verification environments; and VMM Automation improves the productivity of engineers developing and using advanced testbenches.
Carbon’s Virtual Hardware Models Plug-and-Play with CoWare Platform Architect Carbon SOC-VSP software creates cycle-accurate models that provide 100% visibility for profiling and design debugging. These models support a programmer friendly view of the hardware for system validation and have transaction-level interfaces for high-speed execution.
Carbon SOC-VSP software compiles Verilog and/or VHDL hardware descriptions into Platform Architect drag-and-drop components. The openly available SystemC Modeling Library (SCML) was used to integrate Carbon’s models into CoWare’s heterogeneous simulation environment and provide full model visibility to the Platform Architect suite of analysis and debugging tools.
analysis/verification functionality, thus significantly improving their productivity and design quality.
Other EDA New
Mentor Graphics Vice President to Present Keynote at the International Symposium on Quality Electronic Design
Global Unichip Expands Use of Magma Software, Adopts Quartz Verification Products for Taiwan's First 65-nanometer Tapeout
ISQED'07 Addresses Quality Design Challenges, Trends, And Proven Techniques With Over 100 Paper Presentations
Mentor Graphics First to Provide Co-Verification Support for MIPS32 34K Multi-Threading Processor Cores
Cadence Digital IC Design Platform Enables Global Unichip to Complete Taiwan's First 65-NM Chip Design
Other IP & SoC News
OKI Develops FTTH Laser with Industry's Top-level 15mW Optical Output, Ensuring Operation over a Broad Temperature Range
NXP Semiconductors Doubles Mobile-Data Access Speed for Consumers With New 2x2 MIMO Mobile WiMAX Transceivers
Atmel Doubles On-Chip Flash Density on Its ARM7-Powered Microcontrollers, Adds Optional 256-bit AES Encryption
SNOWBUSH Announces Silicon-Proven SerDes IP in TSMC 65nm G+ Process for PCI Express, SATA & Other Serial Standards
Skyworks Expands Linear Products Portfolio with the Industry's Highest Isolation, Lowest Loss Performance Switch for Infrastructure Market
Xilinx Announces Virtex-5 System Monitor Capability - Industry's First FPGA Analog Debug and System Management Solution
ON Semiconductor's New PureEdge(TM) High-Performance, PLL-Based, Clock Generation Devices Deliver 50 Percent Better Phase Jitter Than Competitive Products
At Semico Summit, National Semiconductor CEO Brian Halla Highlights Key Trends That Will Fuel Chip Demand
New Cypress PREMIS(TM) 4-PLL Timing Chip Offers Spread Spectrum for Reduced EMI, On-Board Programming for Fast Time-to-Market and Reduced Inventory
Intersil's Synchronous Buck Regulator Reduces Filter Requirements and Footprint for 5V/12V Applications
You can find the full EDACafe event calendar here.
To read more news, click here.
-- Jack Horgan, EDACafe.com Contributing Editor.