Rhines: Q3 2012 EDAC stats drive optimism

EDA veteran Dr. Walden Rhines, Mentor Graphics CEO & Board Chairman, is one of the keenest and most optimistic observers of the industry. We spoke this week about the recent EDAC Market Statistics Service [MSS] numbers for Q3 2012.

Per Rhines: “EDA is growing at a rate almost a percentage greater than a year ago and most strongly in the Asia Pacific region, while also growing in other regions as well. [Only] Japan is not growing.”

He said there is growth in all product areas, but the “biggest growth is in the areas of new methodologies. ESL is very strong, and interestingly on the PCB side [growth was seen in] analysis tools such as signal integrity. But packaging is also growing, strongly consistent [with growth] in the new methodologies.”

Rhines also noted that CAE strength was largely influenced by growth in hardware-assisted verification (a.k.a. emulation), as well as the already mentioned ESL design.

“There’s actually healthy growth in everything,” he said, “except design verification and physical design and verification, which are both a little bit down. That’s largely caused by place-and-route, although detailed layout continues to be strong. [To be specific], the big category in physical design and verification is fine, and yield enhancement is fine, but standard place-and-route is weaker. If I had to come up with a reason, everything tends to have its ups and downs, so [in the long run] even place-and-route is still a good growth area.”

I asked Rhines if his enthusiasm implies several hundred thousand graduate students in EECS are counting the days until they can get into the industry. Or instead, are there only two such graduate students, both of whom are considering switching to law school?

Dr. Rhines chuckled and said, given the current unemployment statistics in the legal profession, if EDA-centric grad students made such a switch they would be “going from the frying pan to the fire. [Instead], the headcount in EDA is growing faster than revenue, with an increase of 6.3 percent versus a year ago. That’s a steady increase. EDA is still a growing area for employment, and better than the larger semiconductor industry.

“In the PacRim, the headcount is growing even faster, which is what you would expect. Overall, EDA revenue in the PacRim is up 20-plus percent. The entire chart for the region is absolutely green, with everything in double-digit growth.”

I asked if those statistics mean Mentor Graphics might consider relocating to Shanghai.

Dr. Rhines again chuckled and said, “Although I was in Shanghai in December and will be there again in a few weeks, EDA is interesting because 95 percent of the industry revenue still comes from U.S.-based companies.”

So why are the numbers so green in Asia?

Rhines responded, “It’s my interpretation that the PacRim [numbers] consist of a lot of multi-national companies doing design in the region, as well as local companies that have become significant [centers of design]. The difficulty here is in the data.

“There are hundreds of names of companies in China that design integrated circuits, yet there are less than 20 among them that actually generate significant amounts of revenue by our standards, meaning in the $20-million to $50-million range. [Instead], the biggest EDA customers in Asia are in Korea and Taiwan; both countries have enormous design [centers].”

Rhines continued: “It used to be that the U.S. was first [in geographic ranking of EDA revenues], with Europe being second, Japan being third, and then Asia. Now Asia is ahead of both Japan and Europe.”

Nonetheless, he said, as far as Mentor relocating to Shanghai: “Twenty years ago, you might have asked when are we going to relocate to Japan. But companies like ours don’t relocate because there are all sorts of things that keep us [in place], yet we still go all over the world.

“If you look at our employment worldwide, it is a little skewed to the U.S. in terms of employees, but Asia is not far off. I would guess that our employment in the PacRim has grown faster than other regions, because our revenue is growing there. [Of course], today you can be a U.S. corporation, but appear like a local corporation to your customers and that’s always the objective.”

I asked Rhines, who has served four times as EDAC Chair, if it’s discouraging to see the reduced membership in the consortium currently.

He replied, “EDAC membership has always been volatile because of waves of acquisitions, [which] is bound to deplete membership ranks. But new startups are always emerging. That’s reflected in EDAC in that there are always in excess of 50 member companies.”

“As far as the longer-term trend, certainly VC-based EDA companies are not as plentiful as they used to be. The peak was in 2000 and the industry is still off that peak. But there are certainly far more EDA startups today than fabless startups, because people keep coming up with new ideas. Whenever there are new technical challenges, there are the greatest opportunities to bring new ideas to market.

“The capital costs for an EDA startup are relatively low, people in this industry are willing to work hard, and innovation can generate opportunities for revenue relatively easily. And, as you say, there is an exit path for startups where they tend to be acquired and generate [rewards for the founders].”

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About EDAC’s MSS …

“Each quarter, the EDA Consortium publishes the Market Statistics Service (MSS) report containing detailed revenue data for the EDA industry. The report compiles data submitted confidentially by both public and private EDA companies into tables and charts listing the data by both EDA category and geographic region.

“Beginning in Q1 2011, Synopsys is no longer providing revenue information to the MSS. The EDA Consortium Market Statistics Service is providing estimated category data based on current public financial statements and an average of the specific category data for previous quarters as reported by Synopsys. The EDA Consortium Market Statistics Service will evaluate the effectiveness of this methodology going forward and respond as circumstances dictate.”

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Tags: EDA Consortium, EDAC Market Statistics Services, Mentor Graphics, Wally Rhines

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