Note: My Q&A blog post below with Charles Shi, Principal and Senior Analyst at Needham & Company, LLC., appeared in September on the SEMI website. I found Charles to be upbeat about the EDA, IP and services business. So much so, that I’m reposting the SEMI post here for your enjoyment.

Charles Shi, Principal and Senior Analyst at Needham & Company, LLC., remains upbeat about the EDA, IP and services business, or what SEMI refers to as the electronic system design (ESD) ecosystem. I recently spoke with Shi about his talk Looking Forward to the New Chip Cycle during the opening of the 2023 Design Automation Conference, collocated in July with SEMICON West in San Francisco. Following are excerpts from our conversation.

Smith: You talked about how electronic design automation (EDA) has historically been cycle-proof, whereas the semiconductor industry goes through “boom and bust” cycles. Why the difference? Why doesn’t EDA also go through similar cycles?

Shi: It’s because EDA revenue comes from the R&D expense of the semiconductor industry. Imagine a fabless semiconductor company going into a downturn. The company will cut back wafer orders to foundries to get inventory and cost of goods sold (COGS) under control. It will reduce marketing dollars, lay off salespeople, and limit employee travel to cut back on selling, general and administrative (SG&A) expenses.
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