EDA Revenue Up Again

The EDA industry reached $3.963 billion in revenue in Q2, boosted by a 17.6% increase in computer-aided engineering and a 17.2% increase in IP physical design and verification, according to a just-released ESD Alliance Electronic Market Data report.

The overall growth was offset by an accounting change in the IP business, which resulted in a 11.6% decline to $1.255 billion, as well as some weakness in Japan, according to Walden Rhines, executive sponsor of the report.

Despite the anomalies, the numbers still point to a healthy EDA and IP industry. “There is big growth in new designs, and all companies want AI,” said Rhines. The EDA companies are selling AI to their designers. In addition, the ‘Magnificent Seven’ (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla) are buying everything, from [schematic] capture to simulation, and their support needs are minimal. System companies have gone from 0% to 23% of all wafers, and they’re less cost-sensitive than other end users.”

Unlike a chipmaker, which typically has a tight budget for complex designs, system companies can justify higher design costs because they result in savings elsewhere in the data center. For example, what would be a high investment cost for a chipmaker may result in substantially larger savings in power costs, or faster time-to-results, which can allow higher utilization of servers.

In addition, China continues to buy tools and technology that are not cutting-edge, but which can still be used to manufacture chips at advanced nodes. Rhines said SMIC develolped its 7nm chips using multiple patterning, rather than EUV, which increased the mask count to about 100 and raised the cost per chip, but didn’t slow progress significantly. “If you look at China quarter-to-quarter, it showed 45.6% growth overall, and 71% growth in tools,” he said.

EDA also was in hiring mode, as demand for talent continues to grow. About 59,000 people were employed globally in EDA and IP in Q2, up 11.8% over the same period in 2022, and 2.5% sequentially from Q1.

By region for ESD products and services:

• Americas revenue declined 0.6% to $1.628 billion for the quarter. The four-quarter moving average for the region grew 7.5%.
• EMEA revenue increased 7.8%, with a four-quarter moving average up 8.2%.
• Japanese EDA/IP revenue dropped 4.3% to $241.6 million, with the four-quarter average down 0.3%.
• Asia/Pacific grew 13.1% to $1.584 billion, with a four-quarter moving average up 14.4%.
  Fig. 1: Four-quarter moving average. Source: SEMI ESDA Electronic Design Market Data