Chip woes, credit crunch gang up on EDA

I wish I did not have to write about the financial situation in EDA. I wish we had a dull growth that follows the rate of inflation. I wish I could look at the next process node and think about all the new exciting tool functionalities to be introduced at this year's DAC.

Unfortunately, the above is mostly impossible, since our best customers, the semiconductor houses, have experienced a serious setback in their own business. You can read about it in the news section. A 28% drop in revenue from a year ago is a serious setback. CEOs of EDA vendors like to say that their customers buy during bad times in order to develop the products that will lead the recovery. But those customers need money for the purchase, and they are experiencing both a lack of internal cash and a severe reduction in their ability to borrow. This is not good news for the EDA industry.

After the very accurate report from Cadence predicting a slow recovery from their financial problems, and an optimistic forecast from Synopsys based on their very good results reported not long ago, we heard from Mentor and Magma. Mentor reported acceptable fiscal results, but they were very realistic in their expectations for the rest of the year and stated that they will trim their workforce where necessary to meet the business conditions of their various divisions. Magma is facing a difficult accounting period, with their results impacted not just by their sales but also by regulations regarding their status as a publicly traded company. Magma is still recovering from the mistake of introducing a product too early, running into difficulties with the customers that were targeting 65-nm processes, and loosing some of them to the competition (I am told that means Synopsys).

Last week a took a brief trip and attended DVCon. The attendance was good but not great, and was down from the previous year. Many of the European companies that had sent attendees in the past, did not send anyone this year, and even some of the American companies drastically diminished the list of people authorized to attend. The good news is that the event did not loose money. The bad news is that everyone is trying to save money, not invest in the future. And the reason is that this recession is unlike any other. It is not of our making and the electronics industry does not appear to have any way to participate in constructing a recovery.

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