Since Part 1 of this article was
published on October 13th, events have begun to overwhelm. The dramatic speed with which the economic situation has further deteriorated in the past 5 weeks is shocking – globally, nationally, and within the tech sector. The global impact is evidenced by the G20 meeting that took place this past weekend in Washington, D.C. Whether the leaders of these countries are just putting on a show of solidarity or really intend to lay down
ground rules for a unified response is unclear, but the intricate interconnectivity of the teetering global economy is obvious either way.
At the national level since October 13th, Congress has begun to express doubts as to the efficacy and transparency of the $700 billion financial sector bailout, and are resisting bailing out the withering American auto industry, the Dow has fallen an additional 6% (32% since 1 January), and the Nasdaq has lost an additional 18% (42% since 1 January). Meanwhile, October saw the sharpest drop on record in U.S. retail sales, while among other developments, Circuit City declared Chapter 11 bankruptcy, and announced it will lay off 20 percent of its workforce and shut 155 stores as increasingly frugal consumers have
slowed consumption of high-tech gadgets and gizmos.
Meanwhile, those in the tech sector who thought they understood the dynamics of a downturn, having survived 2001, are now expressing concern that this time around, it may be deeper, scarier, and more impactful. Last Friday,
Sun Microsystems reported an 18 percent workforce reduction, and unnerving tech news goes on from there.
Specific to EDA since Part 1 of this article was published,
SNPS has lost an additional 12% (36% since 1 January);
MENT has lost an additional 40% (49% since 1 January);
LAVA has lost an additional 33% (82% since 1 January); and
CDNS has lost an additional 24% (77% since 1 January).
In closely related news since October 13th, Mentor announced third quarter losses, and sharply reduced the company’s 2009 outlook. Cadence lost its CEO, all 4 Executive Vice Presidents, unexpectedly postponed its quarterly earnings statement citing potentially mis-allocated revenue from early 2008, announced layoffs of 625 employees plus unspecified numbers of contractors, and has been named in 11 class action lawsuits alleging inflated stock valuations based on inaccurate financials. At this writing, the company is under the direction of the Board, while names from the past and present are floated about in the
industry as to who should lead the company going forward. Meanwhile, Magma stock has dropped sharply, as well, perhaps based on further fallout from a restructuring plan announced in early October and related layoffs.
Take a chance on the future …
In this midst of this turmoil,
ICCAD took place in Silicon Valley this past week. While there, I had a chance to speak with IBM’s
Juan-Antonio Carballo, an expert on global tech investing. I asked him if EDA as an independent industry could survive, given the present circumstances in the semiconductor industry.
Carballo told me: “While the semiconductor industry is going through a tremendous transformation, with changes in the business model, nonetheless EDA is part of the economics of the industry and will survive –even if a number of players seem to be broken.
“EDA is a supplier to the semiconductor industry, where the reaction in EDA to [upheavals in] semiconductors is a second-order effect. Cyclic oscillations in the EDA industry are smaller than those in semiconductors, but if the semiconductor industry doesn’t return to double-digit growth again, it’s unlikely that EDA will either. So, it is difficult today to justify investing in EDA. Having said that, I see a tremendous amounts of innovation happening in EDA, although not as much as some might desire, of course.”
I asked Carballo, if double-digit growth is mandatory for success in EDA. He said, “It’s not mandatory, but that
is the VC model. You have to see that kind of growth – whether in semiconductors or in EDA – if you want to attract venture capital. Yet, there is still room for growth around the edges of EDA, at the system level and software, and at the other end in tools for manufacturability.
“But, the real excitement today is in the areas of completely new materials, and design and technology related to clean technology. For example, solar materials, technologies, and systems – at some point there will be EDA tools to evaluate these systems, but again, it will be a while. Biotech will also need EDA at some point – new tools and software – but all of this is a ways off as yet, and will take a substantial number of years.
“My rule of thumb is an ‘investment constant,’ which is a multiple of the core industry to calculate the requisite growth of the smaller, supplier industry. For example, EDA is approximately a $5 billion industry today, while the semiconductor industry is approximately $250 billion to $300 billion. Divide those two numbers and apply them to solar technology, and you’ll see how large the solar industry has to grow before [solar] EDA can expect to attract [robust amounts of] venture capital.”
I asked Carballo if he had advice for the several hundred graduate students flowing around us in the hallway of the DoubleTree Hotel in San Jose between ICCAD sessions. He said, “They should be working on the tools and technology needed to address new problems. Grad students today need to be sure they’re not working on the problems of the past. If they’re working in the past, they’re not taking chances. More importantly, they need to learn to do research today, so they can do development later, and eventually succeed at sales!”
Events of interest in the coming months …
* November 18th - IEEE SFBA Nanotech: Fueling Transportation (San Jose)
* November 19th - Panel Discussion: Making It through Tough Times (Santa Clara)
* November 19th - High-Level Design Validation & Test Workshop (Lake Tahoe)
* December 3rd & 4th - DDR3 DRAM Technology Training (Silicon Valley)
* December 3rd & 4th - IP08 Conference & Exhibition (Grenoble)
* December 9th to 11th - FPGA Summit (San Francisco)
* December 11th & 12th - edaForum08 (Dresden)
* December 15th to 17th - IEEE IEDM (San Francisco)
* January 19th to 22nd - ASP-DAC (Yokohama)
* February 8th to 12th - IEEE ISSCC (San Francisco)
Best of Times …
Although I missed both the
Synopsys Interoperability Forum and
Mentor’s U2U event in November, I did have a chance to attend numerous other events over the last 5 weeks. There is a lot going on in and around our industry, downturn or no downturn!
UC Santa Cruz on October 17 – The
Baskin School Engineering at UCSC hosted a Research Review Day on campus in mid-October. The campus itself is a gem, set among the redwoods overlooking the Pacific, and the Engineering School is ramping up at a remarkable rate. Previously, students wanting to access an excellent engineering undergraduate program could start at UCSC, and transition to U.C. Berkeley as juniors to complete their degree. The caliber of the engineering program at Santa Cruz, however, has prompted that strategy of transition to Berkeley to cease.
You can find the full EDACafe event calendar here.
To read more news, click here.
-- Peggy Aycinena, EDACafe.com Contributing Editor.