Good times: EDAC says Q1_2013 a solid success

Well, it looks like the industry has done it again, delivering good growth over a recent quarter. The Press Release issued by EDAC’s Market Statistics Service on August 6th detailed the numbers for Q1_2013: 8.1% growth overall, including 23.8% growth in Services, 20.2% growth in IP, and (a bit less glam) 2.4% growth in EDA. Interesting.

Meanwhile, Dr. Wally Rhines continues to contribute to the industry by making himself available for conversation about the MSS numbers as they are released each period, clarifying as always that his comments are on behalf of EDAC and do not reflect his role as CEO of Mentor Graphics. When I spoke by phone with Rhines earlier this week, I asked him if we can anticipate industry results for all of 2013 by looking at the Q1 numbers.

He said no, EDAC numbers do not portend the future, they only aggregate the results from the past. To know more about the future of the industry, Rhines referred me to the four visionary keynotes given at DAC by Synopsys’ Aart de Geus, Cadence’s Lip-Bu Tan, Jasper’s Kathryn Kranen and Rhines’ own talk.

From those highly optimistic presentations, he said, it’s clear that the future is distinctly up and to the right; there are many stimulating challenges on the table which will translate into excellent business opportunities for all involved in the business of EDA and IP going forward. In fact, he said, if you look at the 5% increase in employment in the industry over Q1_2013 – a statistic included in the MSS numbers – it’s quite impressive that the 8.1% growth in revenue is so immediately translating into more jobs.

In other words, it’s safe to say that Dr. Rhines and his colleagues are bullish on their industry, and what’s not to celebrate in that? Particularly as Rhines also noted that being involved in EDA and IP means participating in the single most exciting industry in the world.

Journalists earn their keep by inserting a bit of healthy skepticism into interviews such as this, so I asked Dr. Rhines if he was aware of my recent blog opining that it’s become an IP, IP, IP, IP World characterized by companies such as ARM whose successes have swamped the more modest gains in EDA over the last 5 years.

Rhines acknowledged that ARM’s numbers were both impressive and contributed to the MSS Q1_2013 results. However, he added, all of the major players in EDA also sell IP and therefore it’s somewhat inappropriate to distinguish between wins on the IP side versus wins on the EDA side. The sides have blurred and everybody who sells IP has seen an increase in that part of their business.

Does all of this mean EDA companies will move more and more in the direction of becoming IP companies? Rhines said it’s true that EDA companies are selling more IP, but it doesn’t mean they’re becoming IP companies.

Instead it means that where the process of differentiating design used to happen through the clever use of third-party tools, which was a company’s secret sauce, now that differentiation occurs through clever design augmented by the clever procurement and integration of third-party IP. They’re both still important, the tools and the IP, according to Rhines, but EDA companies will continue to exist distinct from IP companies, especially as the need for virtual design increases.

I asked Rhines if the move to virtual design means companies who sell models are guaranteed a sunny future. He said virtual design requires more than that just models of the system. It also requires modeling of the circumstances within which the system will eventually operate, and for that many companies are just beginning to explore the associated business opportunities.

Finally, Rhines noted the cycles in the semiconductor industry and said their current uptick is coincident with an uptick in EDA. I asked if that ran counter to his theory that the two industries are counter-cyclical. Rhines said that was never his theory. What he’s said is that EDA lags the semiconductor industry by a year, not that EDA’s cyclical.

In fact, he pointed out, EDA overall has been remarkably steady in comparison to semiconductors. No huge highs, no huge lows, and except for 2002 and 2009 which were unique for their own reasons, EDA has never really had a down year throughout its history.

Okay then. Given the track record of this industry – the steady growth, the constant allure of technical challenges, the fantastic business opportunities – once again there could only be one logical take-away from these periodic phone calls with Dr. Rhines: Get thee to EDA and/or IP and embrace the future!

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Now available …

You can watch all of the Visionary Talks and Keynotes from DAC 2013 in Austin. They’ve been posted on the DAC website and make for great viewing.

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Tags: Aart de Geus, ARM, Cadence, DAC 2013, EDAC, Jasper Design Automation, Kathryn Kranen, Lip-bu Tan, Mentor Graphics, MSS, Synopsys, Wally Rhines

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