After The Ball Drops

Growing up in New York City leaves lasting memories. The coming holiday season evokes some strong ones. The Christmas tree in Rockefeller Center is an example. Christmas always seemed to radiate in all directions from that huge tree perched above the ice skating rink behind Radio City Music Hall. And then there was the ball dropping on New Year’s Eve in Times Square. For the most part, New Yorkers don’t understand time zones on that evening. Midnight in Times Square ushers in the New Year for the entire planet, at that instant in time, period. All these memories are colored with a combination of fantasy and reality.

As New Year’s Eve approaches once again, I begin thinking about the future. What will 2012 bring? Will the economy continue to mend? What will the presidential election mean to all of us? These are important questions, but I would like to focus on something closer to home: What will the EDA landscape look like in December 2012? OK, not as lofty a topic, but nonetheless important for at least some of the readers of this blog. I would like to make some rather bold predictions that have a helping of both fantasy and reality. This seems appropriate for the holiday season. Here we go…

Foundry consolidation will certainly continue to occur. Will we be able to count the number of companies building 45nm and below material on one hand? And if that consolidation continues, what will become of the business we currently call “mainstream EDA?” Today, the mainstream of EDA is defined by the tool chain that starts at logic synthesis and ends at mask data preparation. That tool chain is getting more focused and tuned to the manufacturing process every day. So, what if there are only five or less process targets? Is that really a market, or simply another opportunity for consolidation?

I see consolidation as a distinct possibility. With that in mind, here are my “predictions” for what the EDA landscape will look like in December 2012:

TMSC will buy Synopsys and spin out everything above logic synthesis, forming New Company No. 1.

Not to be left out, GlobalFoundries will acquire Cadence and do the same thing. Now we have New Company No. 2.

All this M&A activity will attract a group of “EDA insider” private investors to pool resources. They will collectively decide that it’s time to do an EDA roll-up. That roll-up will include select parts of Mentor Graphics, as well as a few other small EDA firms. New Company No. 3 is born. As part of that transaction, the remaining foundries will bid against each other to acquire the Calibre business from our investment group, and that one will be fun to watch. Who will win? It may not be TSMC or GlobalFoundries.

So who are the Big Three in EDA when all this settles down? It’s a different landscape for sure. Who knows what the names will be, but EDA will be different and hopefully better. Better in the sense that the focus will now be on higher levels of abstraction, an area that could find new customers and new budget. I’ll be the first to admit that these predictions are a bit “out there.” Recall my comments about blending fantasy and reality. The logic that leads me to these outcomes has holes—quite a few, in fact. Regardless, all of this *could* happen. I’d like to hear your views on the subject.

In the meantime, have a great holiday season. If you work in investor relations at Synopsys, Cadence or Mentor, don’t wander too far from the telephone though.