September 13, 2010
Whither EDA?
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.
Russ Henke - Contributing Editor


by Russ Henke - Contributing Editor
Posted anew every four weeks or so, the EDA WEEKLY delivers to its readers information concerning the latest happenings in the EDA industry, covering vendors, products, finances and new developments. Frequently, feature articles on selected public or private EDA companies are presented. Brought to you by EDACafe.com. If we miss a story or subject that you feel deserves to be included, or you just want to suggest a future topic, please contact us! Questions? Feedback? Click here. Thank you!


The projected 2010 revenue for the semiconductor industry has increased from Gartner's forecast in the second quarter of 2010, when it expected worldwide semiconductor sales to grow 27.1% in 2010.
However, analysts warned that while semiconductor revenue is still poised to hit record levels this year, second half growth is expected to be below seasonal norms as semiconductor sales align with electronic system sales.


"Semiconductor growth in the first half of 2010 was very strong, but it is becoming increasingly clear that the industry cannot maintain the momentum in the second half of 2010 and into 2011," said Bryan Lewis, research vice president at Gartner. "While the impact of the European credit crisis has subsided, the global economic recovery is slowing, and there is concern that electronic equipment vendors are adopting a cautious stance, ready to cut production at the first signs of slowing customer orders."


The PC supply chain is showing the most evidence of a correction, as can be seen by recent company announcements, including Intel's lowering its third quarter guidance. The forecast of second half 2010 PC production unit growth has been reduced in the 3Q10 update. Gartner analysts said consumer PC purchases in mature markets were slightly weaker than expected in the second quarter and the outlook for the third quarter is below seasonal growth. However, surging sales of media tablets are partially offsetting the weakness in consumer PCs, as they've begun to prove themselves a popular substitute for netbooks.


The outlook for the mobile phone market has been steadily improving throughout 2010. The forecast of total market growth has been increased slightly from the 2Q10 update. Gartner analysts stated that application-specific semiconductors for the phone market are experiencing intense competitive pressure, with revenue growing only about 13% in 2010. Smartphones continue to drive the mobile phone semiconductor market, representing 18% of units and 36% of overall 2010 mobile phone semiconductor revenue. These percentages increase to 41% of units and 64% of mobile phone semiconductor revenue by 2014 as entry-level smartphones
trigger a second wave of growth in the market.


The dramatic rise in DRAM revenue growth is set to peak in 2010. "Due to early strength in the PC market and supply constraints, the DRAM industry has been very profitable, with revenue set to increase by 82.5% to nearly $42 billion in 2010," Mr. Lewis said. "However, during the second half of 2011, this is set to change, and we expect a DRAM downturn in 2012 as sales decline 29%."


In contrast, NAND revenue is set to sustain a growth trajectory through 2013, with the NAND flash market driven by strong sales of smartphones and media tablets.


Gartner will provide more detailed analysis on the outlook for the semiconductor industry during the
Gartner Semiconductor Briefing taking place on November 4, 2010. The complimentary briefing will be held at the Doubletree Hotel San Jose, CA.




On September 01, 2010
Jon Peddie Research (JPR) reported that the workstation market posted another round of solid numbers in the second quarter of 2010, but that growth is expected to slow in Q3 2010. The technology and market research firm JPR said that the industry shipped 795,000 workstations worldwide in Q2, resulting in sequential growth of 9.6% and a year-over-year increase of 32%. The 32% year-over-year growth matched the largest JPR has seen since Q1'06, though that shouldn't be surprising when considering how dramatically the market had fallen by Q2'09.


Dell and HP once again in a deadlock for market leadership:


In the second quarter, HP and Dell were once again in a virtual tie for leadership in the workstation market. Dell just nudged HP in units, but by JPR's estimates, HP nosed out Dell in revenue. For yet another quarter, JPR calls this race a tie.


Expect future growth to moderate:


The industry has had some hints that the workstation numbers for the second quarter were going to be strong. The industry has a consistent leading indicator for workstation market performance coming from the related market for professional graphics hardware. That market for professional GPUs (graphics processing units, either add-in cards or mobile modules) had been on a hot run, exceeding growth expectations for the preceding four quarters, especially Q1'10, which posted an all-time high of 1.3 million units. All those professional GPUs have to go somewhere, and the vast majority eventually ship in workstations. As
professional GPU shipments rise, then so will workstation volume.


By contrast, the professional graphics hardware market moderated in the second quarter, essentially flat from Q1. Accordingly, while Jon Peddie Research expects workstation growth to continue into the third quarter, the firm anticipates a more moderate pace. And given concerns that the previous quarters' exceptionally hot numbers were hinting at a market getting too far ahead of itself, that moderation is probably a healthy thing.



Final Comment on, “Wither EDA?”


To wrap up this question for purposes of this article, we ask ourselves if there was anything revealed herein to suggest that the answer to the title question, “Whither EDA?” ought to be anything other than “more of the same”.


Through the end of Q2 2010, G5 revenue is up over the previous year only a couple percent, and profit YTD is improved but mostly due to a one-time tax break. Moving forward, the upper end of the revenue ranges given in Q2 as guidance for Q3's performance would yield a Q3 2010 of something in the $860 million neighborhood, but since when does every one of the G5 produce simultaneously at the top of its guidance range? Still, even if all five vendors produce revenue at the bottom if their Q3 2010 guidance, some $837 million is expected, which would be significantly higher than the $785 million of Q3 2009. And if the seasonally
positive Q4 2010 beats Q4 2009's $838 million by a similarly healthy revenue margin, then nominal 2010 the year might have created sufficient incremental revenue over 2009 to declare that the answer to, “Whither EDA?” could be something more sanguine than “same old, same old.”


Likewise, earnings of G5 in last year's Q3 were in red ink to the tune of minus $17 million and should be beaten this year, and while Q4 2010 guidance is still to come, Q4 seasonally produces black ink at 3 or more of the G5 at least. So it's possible that earnings in the 2H of 2010 may not detract from a hoped-for positive vibe of decent year over year revenue improvement. So as long as the semiconductor sales stay healthy and jobs get added in reasonable quantities across the US (as was the case for August 2010; see above), and as long as US national politics don't get more insane and
world events remain non-catastrophic, then there's a fighting chance that EDA fortunes in 2010 just might turn slightly positive by year's end. Not a blockbuster, mind you; but “feelin' pretty, pretty good.”


Nevertheless, this slight hint of optimism creeping in to this writer's prose, should be tempered with the various points of view set forth in some of the
News Highlights included in the previous section of this EDA WEEKLY.



Latest EDA CONSORTIUM REPORT {Q1 2010}



In its most recent report, on July 13, 2010
The EDA Consortium (EDAC) Market Statistics Service (MSS) announced that the Electronic Design Automation (EDA) industry revenue for
Q1 2010 was $1247 million, a 4.6% increase compared to $1192.1 million in Q1 2009. Sequential EDA revenue declined 1.2% from Q4 2009, while over the last four quarters it declined 5.9%.




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-- Russ Henke, EDACafe.com Contributing Editor.


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