DAC, day 1

I went to the CEO panel today. But it wasn’t very illuminating since everyone was being too nice. When someone asked the question about what advice there was for the roughly 250 EDA startup CEOs in the audience, Wally said “Make sure you don’t run out of cash.” That was the nearest anyone would come to “most of you are screwed.” Lip Bu pointed out that the investment needed for a fabless semiconductor company has got too high for VCs to be able to see a return. For both EDA and fabless semi, the only possible hope is to keep burn rate so low that the money in is tiny by the time the company starts to generate cash. That’s a clever trick, however, in 45nm process where the cost of the masks alone could consume all the money.

All 3 CEOs said that they were meeting with CEOs of customer companies in a way that they didn’t used to. It was always a major criticism of EDA that they didn’t have boardroom access. SAP and Oracle were hobnobbing with the CEO, Cadence and Synopsys were talking to the CAD manager. But now customers are apparently much more open to wide-ranging discussions on what EDA can do for their customers beyond cutting their prices. If this is true, it is potentially a genuine opportunity, analogous to when IT in the late 1990s became regarded as a strategic weapon not just an expense line to be managed down. Companies like Walmart, never mind companies like Ebay and Amazon, use IT to outcompete their rivals. Semiconductor companies, increasingly fab lite or fabless, need to outcompete their rivals on design.

The most mysterious piece of the puzzle is software. Where does embedded software fit into EDA? Gary Smith pointed out that EDA would double if it could raise the software investment per embedded software engineer by just $15K. He reckons this is the key year, but outside of virtual platform technology it’s not clear what EDA has on the shelf or in development to achieve that type of uplift. But as more and more of a system is in software, and as semiconductor companies continue to have more software engineers than designers, it is clearly the critical piece of the puzzle to understand.

One bit of news today was that Magma’s auditors raised doubt about whether Magma was a going concern. Basically, Magma needs to succeed in re-negotiating its debt or else it may be insolvent. I guess people are basically optimistic they’ll do this since the stock closed up slightly.

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