Panel Discussion: A View Beyond 2002

When the going gets tough, the tough get tougher.

Six CEOs, a chairman and a professor spoke with optimism last week about the future of the business of EDA, IP, and design infrastructure at a panel discussion in Santa Clara hosted by VitalCom PR and Business Wire. To a man, they predicted solid profitability for high-tech companies that carefully marshal financial resources and maintain focused product strategies. In light of recent Silicon Valley headlines detailing $93 billion dollars in losses over this past year for local technology players, the determinedly positive outlook of the panel members was either wishful thinking or an indication that hard economic times separates the men from the boys. Only time will tell.

Providing the keynote address, Professor Fred Hoar of Santa Clara University, former Chairman of Weber/Shandwick Technologies, knit together a string of one-liners and war analogies to emphasize that boom and bust are not new to high-tech. “When you're going through hell, keep going,” Hoar quoted Churchill as saying. Hoar said long-term players in the technology sector must stay “addicted to hope,” although he advised the battle for survival is best fought by young men with old men providing council. He argued that we now stand on the cusp of an EDA-driven era, and linking technology advances with the post-September 11th era said, “God willing, we'll win.”

Acting as panel moderator, Moshe Gavrielov, President and CEO of Verisity, Ltd., reflected on the change in mindset towards EDA over the past four years. According to Gavrielov, the common wisdom in 1998 said EDA was a small industry, only two companies could dominate, there would be no more IPOs, and that few investors were interested because the business models were confusing and there was too much competition from capable in-house tools. However, history has proven the naysayers wrong, he said. The 25 top-performing IPOs in 2001 included such EDA stalwarts as Verisity, Magma, Nassda, PDF Solutions, and Logic Vision – and the Cadence purchase of Simplex, Silicon Perspective, and Plato, the Synopsys purchase of Avanti, and the Mentor Graphics purchase of Innoveda, and Ikos – all prove the robust nature of EDA. Gavrielov said innovation and growth are pervasive in EDA today, and the emerging era of complex chips designs and the accompanying performance, power and gate-density issues will provide the killer app guaranteeing huge profitability for the industry going forward.

Taylor Scanlon, President, CEO and Chairman of the Board of IP-provider Virtual Silicon Technology, Inc., reported growing revenues and blue-chip customers for the company, as well as several successful rounds of funding in the last 9 months. He said IP (pre-designed blocks which can be purchased and embedded in larger designs) is mysterious to some investors because “they can't see what I deliver.” However, Scanlon said IP is indeed very real and provides very high value, particularly as Moore's law pushes the complexity of designs, but the numbers of available designers remains limited.

Grant Pierce, President and CEO of IP-integrator Sonics, Inc., admonished product developers to “integrate or die” if they hope to compete, particularly as new products have a shelf life of less than a year. The only way to stay ahead, he said, was to purchase parts of the design and thus facilitate time-to-market schedules. Pierce laid out an aggressive roadmap of profitability for IP providers, predicting $31 billion in revenue by 2005. He said Sonics is on that roadmap by facilitating IP integration for ARM, MIPS, Virtual Silicon, and other IP providers. “Integrate and win,” he said.

Alan Naumann, President and CEO of EDA-vendor CoWare, Inc., asked that the industry term “system on a chip” be enlarged to a more inclusive: “system and software on a single chip” – to more accurately reflect the complex nature of the products being designed and marketed today. He illustrated his point by holding up a 3-year-old analog camcorder and comparing it to the latest Sony hand-held device, which, despite its small form factor, is gifted with enormous video and connectivity capability. Naumann said products such as the Sony device prove that adopting the new SOC technologies invites competitive advantage, and that companies such as CoWare that facilitate hardware/software co-development provide significant investment opportunities. He reminded the audience that big players such as Cisco and Nokia may be at the top of the $200 billion semiconductor food chain, but the whole infrastructure is supported by EDA.

Alain Labat, President, CEO and Chairman of the Board of EDA-vendor Sequence Design, Inc., lamented that EDA continues to be a complex sell to investors, despite its pivotal role in the food chain. For instance, he said his products for solving on-chip power issues are critical in today's high-performance designs. Like many EDA companies, Labat said Sequence has multiple mega-customers who depend on Sequence – that the level of reliance of such customers is way out of proportion to the ratio of the size of his company to those large players. He said recent patents awarded to Sequence validate the crucial, innovative nature of his technology and should act as vital proof to the investment community of the worth of such developments within EDA.

Jacques Benkoski, President and CEO of EDA-vendor Monterey Design Systems, Inc., proselytized with characteristic dignity about the link between small start-ups and technical creativity. By his argument, when companies reach a size – or an age – where they've lost the ability to innovate, they no longer push the envelope as required by a needy customer base, desperate for solutions. He said today's design complexities have an architectural analogy. Solutions currently available from the big EDA vendors were developed in the distant past with a 10-story structure in mind and have little relevance to the 100-story structures that designers are now developing. He said Monterey exemplifies forward-thinking EDA companies who strive to completely restructure the design process to meet increased complexity.

Finally, Dennis Harmon, Chairman of design-infrastructure vendor Synchronicity, Inc., said that his company's efforts are orthogonal to the other companies on the panel. He said that in the previous era, companies like Intel could be vertically integrated and successful. However, vertical integration is no longer a competitive business model – and the disaggregation of the semiconductor supply chain is creating huge opportunities for information management and project control software. He said investments in Synchronicity from big guns Cadence and Synopsys reflect the importance the EDA community places on his offerings, and provides visibility to a wide spectrum of potential customers for Synchronicity. He said he sees “huge opportunities for the company moving forward.”

Having touched on principle themes dominating the industry today for the analysts and potential investors in the audience, the panel then turned to the perpetual enigma that always haunts such discussions. Who will answer the messianic call to be the next “big player” in EDA? And why would anyone want to answer that call if the big players are “elephants and dinosaurs” – no longer nimble, quick, or able to respond to the unique problems of each customer?

Not surprisingly, the panel members differed a bit in their perception of the conundrum. Synchronicity's Harmon sensed little threat from becoming bigger and badder, indicating that growth for his company would further enhance a unique position within EDA. CoWare's Naumann said the big players provide important focus for the industry, which can then be capitalized on by the smaller players. He argued no one wants the big players to go away; the small players so easily learn from their mistakes and are, therefore, prevented from falling prey to those errors. Sequence's Labat said supporting a legacy customer base is part of the problem plaguing the big players in EDA; they don't have the bandwidth left to deal with small, demanding start-up customers and leading edge problems. He said Sequence knows to maintain that responsiveness even as it works to grow larger.

Monterey's Benkoski said the ultimate solution to growing larger while maintaining nimbleness lies in the business model, linking the profitability of a company to the success of its customers. It's that crucial feedback, he said, which keeps a high-tech vendor permanently agile and responsive even as it grows and its technology matures.