We are fleas on a sick dog

Well it was the annual EDAC CEO panel last night. The quality of the food was much better than normal, but it turned out that this was not because the CEOs were predicting a rich future in 2009 but that the San Jose Convention center had provided it (thanks).

For the first time Rajeev Madhavan of Magma was on the panel, and ghost of Cadence didn’t show although I assume they were invited (or maybe not, are they still even in EDAC?). Predicting their own future for a few months is hard enough, for the entire industry over a year is a distraction too far. Aart and Wally were there as always. Chris Rowen of Tensilica rounded out the panel carrying the IP torch (although when asked whether IP was truly a part of EDA he gave the one-word answer “yes”).

Ron Wilson’s coverage of the panel is here.

Aart went first and had us all text what type of recession we expected, using his Recession Compiler to add up the answer. We weren’t optimistic, expecting a long recession of a couple of years in total with unemployment going over 10% which it has only done once in the last 50 years. Apparently 38% of the CEOs Aart talks to, along with a few Wall Street types, think the same. Aart seems to think that the Obama government will wisely spend our future taxes today and that this will be good for tech as we unwind the discontinuity between the way we have been living and our levels of debt. Personally I am skeptical that the right solution to not being able to make our mortgage payments is to take on a bigger mortgage. Isn’t that at least partly what got us into this problem in the first place? Aart didn’t predict a number for the whole industry but was bullish for Synopsys themselves, having been giving guidance of 3.2-5.5% to the street.

Chris Rowen insisted that EDAs troubles were nothing to do with EDA or even semiconductor. “We are fleas on a sick dog.” But there is lots of growth in IP in the dataplane so Tensilica should be OK.

Wally was next. “In God we trust, everyone else bring data”. And as usual Wally had lots of it. It turns out that semiconductor is fairly disconnected from the real economy. If the economy is bad then things might not be too bad for semiconductor because we might be short on capacity. If the economy is good, semiconductor can shoot itself in the foot by overbuilding fabs. What EDA does tie well into is semiconductor R&D, which has previously only ever had one down year. Wally’s model for last year predicted 2% growth but turned out to be -12% although a lot of the difference is due to Cadence’s implosion when its business model ran out of steam. His model predicts 12% for this year but tempered down by 10% (the downturn in semiconductor R&D spending came late in the year just like 2002) and another 8% down for Cadence’s business model change giving -6% overall.

Rajeev also thinks we can farm the subsidies of the new administration as all that money flows into green technology. Plus, hard times might make new technologies get adopted faster, although it is not clear to me how Blu-Ray not surviving would drive new EDA business, although I suppose EDA gains most from new technologies in development and there is no further upside from chips that have already been designed.

I think that the whole economy is too uncertain to have much hope of making a solid prediction and that, in particular, nobody can even make sensible decisions until the government stops doing things and everyone knows what the rules are. We were asked to predict the stock prices of Cadence, Mentor, Magma, Synopsys and MIPS at the start of 2010. My guesses were 6 for Cadence (it’s 4 today), 5 for Mentor (same as today), Magma would have gone private, MIPS would have been acquired and Synopsys would have declined to 15 (from 18 today). Let’s see how that holds up.

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