EDA, IP Show Strong Growth

EDA and IP revenue increased 6.7% worldwide in Q3 2018 to $2.44 billion, compared to $2.28 billion in the same period in 2017. The growth was fueled by rising investments in startups in AI and 5G, as well as a stampede of new and existing companies targeting automotive electrification and autonomous vehicles.

While startup funding ultimately will run out as these new markets mature and consolidate, all of them need design tools to build complex semiconductors and electronics. This has driven sustained growth in both EDA and IP, even though the IP numbers may appear lower due to accounting changes. In addition, because these markets are well-funded across the globe, they are somewhat resistant to the wild gyrations in the stock market and, to some extent, the ongoing trade war between the U.S. and China.

“There is enormous investment in startups,” said Wally Rhines, CEO Emeritus of Mentor, a Siemens Business, and member of the ESD Alliance Governing Council. “Worldwide, the level of funding is the same or higher as what it was at the height of the dot-com boom, with the majority of that in China. There are a lot of fabless startups that need design tools and IP.”

Unlike the dot-com boom, though, the majority of this activity isn’t based on any single growth market. Much of the momentum is on the server and automotive side, with a new push toward edge computing and 5G communication. These are all well-funded markets, and demand is being driven by a mix of newcomers (startups and systems companies) and well-established semiconductor companies. Even if a global slowdown does occur, much of the design activity will continue because these companies need to have competitive products in these markets when the worldwide economy stabilizes.

“Semiconductor revenue has been driven heavily by memory, but that’s not where a lot of EDA activity is,” said Rhines. “Automotive and cloud should have a stabilizing effect, and that includes AI startups, IoT, 5G, analysis tools and IP.”

Fig. 1: Revenue by segment and region. Source: ESD Alliance MSS

By the numbers
The largest of the various segments tracked by the ESD Alliance, computer-aided engineering, grew by 5.6% to $756.6 million in Q3, up 5.6% compared to Q3 2017. IC physical design grew 3.9% to $475.8 million.

PCB and MCM revenue also grew in Q3 globally, but the growth is more significant when viewed in the context of a four-quarter moving average. In the Americas, PCB and MCM revenue grew 20.2% to $83.6 million, while in Asia/Pacific it grew 10.4% to $42.7 million. Rhines said growth was strong in PCB schematics, PCB/MCM physical design, and advanced packaging.

Services revenue also increased 11.3% in Q3 of 2018 to $119.1 million compared to Q3 of 2017, and EDA/IP employment grew 8% to 42,162 professions, compared to 39,044 in 2017.

By region, revenue in the Americas grew 7.4% to $1.059 billion, and in Asia/Pacific revenue rose 7 percent to $782.9 million. In Japan, revenue incrased 4.1% to $242 million, and in Europe, the Middle East and Africa, it was up 5.5% to $350.8 million.

Fig. 2: Growth by segment. Source: ESD Alliance MSS