Global language, local source
By Gabe Moretti, Technical Editor - November 1, 2004
EDA tools stand apart from other electronics-industry technologies when you consider global trends. EDA vendors were early players in serving designers around the globe. On the other hand, the industry leaders in EDA technology still callNorth Americahome.
Indeed, EDA is one of the few industries that positively contributes to the US trade balance. Although EDA is a global industry with vendors located outside the United States , especially in Europe and Japan , companies based in the United States generate most of the revenue. The industry revenue for 2003 totaled just more than $3.8 billion, according to Jay Vleeschhouwer, an industry analyst with Merrill Lynch. The US market accounted for 52% of the revenue, Japan contributed 20%, and Europe 19%. Sales and support revenues from the rest of Asia accounted for almost all the remaining amount.
Mainland China , Korea , India , and Taiwan constitute the four largest Asian markets outside of Japan . US-based EDA companies generated approximately $1.8 billion in revenue from outside of the United States . You would be hard-pressed to find another industry that contributed 48% of its revenue to improve the US balance of payments.
The leadership of American EDA vendors will not be challenged for a very long time, barring a catastrophic event. Three American vendors known as “the big three”—Cadence, Mentor Graphics, and Synopsys—dominate the EDA industry. Together in 2003, they accounted for almost 93% of total EDA revenue. Synopsys had the largest share, with total revenue of more than $1.4 billion, followed closely by Cadence with $1.35 billion and Mentor Graphics with $759 million.
DAC (Design Automation Conference) is the primary EDA-industry event. In 2004, the conference registered 179 EDA vendors as exhibitors. Of those, only a handful in addition to the big three are public companies, and only one, Magma Design, reported revenue in excess of $100 million in 2003.
Many American start-up companies that specialize in new market segments realize their first revenues outside of the United States , often in Japan or China . Japanese designers are focusing on system-level design and yield enhancements. Chinese designers are purchasing tools that span the entire design flow; they need retooling in order to undertake modern designs.
Smaller companies succeed by playing an important role in niche markets, which is certainly the case for companies headquartered outside of the United States . Zuken, a long-established EDA company based in Japan , generates revenue in the US market in excess of $10 million by providing tools that help pc-board designers deal with electromechanical problems that Cadence and, to a lesser extent, Mentor Graphics are just beginning to address. Australia-based Altium leads the “rest of Asia ” in US sales. It also supports pc-board designers and focuses its engineering and sales efforts on providing products that help engineers design medium- and low-complexity products. Altium grew by acquiring US companies, such as Protel and PCAD, with established users. Canadian company Electronics Workbench serves the same market.
Some European companies are also selling in theUSmarket. These vendors tend to focus on system-level or FPGA design. Esterel, a French company, and Chip Vision, based inGermany, are examples of the former; Celoxica, with headquarters inGreat Britain, focuses on the latter.
The trend toward outsourcing portions of the design is helping to grow the number of EDA companies based outside the United States . A few companies in India are nurturing an EDA service industry that provides consulting and design services worldwide.
All EDA start-up companies, whether based in the United States or abroad, have a similar personality. They all offer strong engineering solutions to leading-edge design problems but in most cases lack the marketing expertise to quickly establish a distribution and support network that would ensure their long-term dominance. If their engineering expertise is truly outstanding, they are acquired, most likely by one of the three EDA market leaders, and lose their individuality. Many European and some Asian companies have followed this pattern.