It seems strange to me, as an ASIC design engineer, that the EDA industry could ever get into trouble. Paul McLellan put it best when he said that $3 trillion electronics industry is fully dependent on the $400 billion semiconductor industry which, in turn, is fully dependent on the $5 billion EDA industry. How can an industry that is in such a position of strength be in so much trouble? It appears that, while EDA is very important, EDA companies do not seem to have much leverage when it comes to customers. When there's an industry that provides an essential service or product and yet has no leverage, it's a good bet that the concerned service or product has become a commodity. EDA is not a true commodity like, say, milk. There's still quite a bit of technological differentiation out there. The problem is that the differentiation is not enough to defend market share. There's a magic dollar number at which design companies will switch tool suites because there's not much you can do with one tool that you can't with another. The only exception appears to be sign-off tools. That's because the differentiation is not technical. The differentiation in sign-off tools is their long history of working silicon. What is to be done?
- A change in licensing scheme or business model would not work in the long term. If the model has any merit, other EDA companies will follow suit and you're pretty much back where you started.
- You can expand the scope of EDA to genetics or aircraft design but, eventually, those markets are going to be same low margin markets as EDA faces now.
- The EDA community is gravitating to common standards (CCS, UPF, OpenAccess) and suddenly the playing field is more level than ever. The cost of switching vendors will get lower than ever.
- Building differentiation is the key.
- Differentiation (a.k.a. no one else can do what you do) is the only defense against commoditization.
- Differentiation = Increased Profit Margins. When people need your product and when they can't get it from some one else, that's leverage. Actually, even better, that's a monopoly.
1. SaaS would represent a change in packaging and delivery and might open up opportunities in certain problem domains.
ReplyDelete2. There is quite a bit of design automation and simulation in aircraft design. There is very little yet in genomics, proteomics, or the modeling and simulation of [cells, organs, organisms]. If we are really going to make more breakthroughs in medicine we need to expand beyond animal/human testing and invest CPU gigayears in simulation. We are headed there with movies, why not predicting drug effects?
3. Standards at one layer shift the axis of competition to a layer that's above or below. In this case likely into one or more layers of ESL and hardware software co-design.
4-6. I agree on differentiation. This is very different from attempting to be an end to end supplier.
SaaS should have a positive impact on the industry. If ASIC design companies are no longer forced to buy seats but rent them on-demand, the margins should be higher. SaaS unlocks revenue streams from smaller players who, until SaaS, couldn't afford a complete suite ASIC tools (or were forced to use one set of tools). That's definitely a bigger pie. Once everyone has switched to SaaS, won't margins and market share will still depend on differentiation?
ReplyDeleteWonder if anyone studied the impact of the "ratable business model" on the industry EDA? Hopefully, three phases:
#1 : Pre-Ratable EDA Industry
#2 : Advance (or decline) of Synopsys when it was the first to switch
#3 : Post-Ratable EDA industry
That would give some indicators as what to expect with SaaS.