A number of categories set revenue records in Q4 2021 including PCB.
Electronic System Design (ESD) industry revenue increased 14.4% from $3.03 billion in Q4 2020 to $3.5 billion in Q4 2021, according to the latest Electronic Design Market Data (EDMD) report by ESD Alliance, a SEMI Technology Community.
Walden C. Rhines, executive sponsor of the SEMI Electronic Design Market Data report noted, “The industry continued to report double-digit year-over-year revenue growth for Q4 2021 and ended 2021 with $13.2 billion total market revenue. Product categories Computer-Aided Engineering, Printed Circuit Board and Multi-Chip Module, Semiconductor Intellectual Property, and Services recorded double-digit growth for the quarter. Geographically, the Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific (APAC) all reported revenue growth.”
Rhines also said the results continue to be surprising almost every quarter for the magnitude, and pointed to some revenue records. “The total annual growth was almost tied with the previous record, the 15.8% as compared to 15.8%, basically one is 0.77 and one is 0.82. Then, PCB was in fact, an all time record surpassing for the full year the total annual growth for both of them: for total EDA, and just under the all time record for PCB. It was an all time record that was previously set in 2019. The total EDA, the last time we were close to this was 2011.”
Total SiP was the highest recorded growth ever 23.9%, with the last record set for annual growth in 2006.
“Worldwide services revenue were at the highest dollar level that they’ve been and in growth rate ever, so the fourth quarter was very strong,” Rhines said.
By product and application category, the year-over-year change was as follows:
Fig. 1: Q4 revenue by segment and geographic region, in $M. Source: ESD Alliance
Within the subcategories, Rhines said for Q4 2021, the biggest, strongest subcategory was analysis, which includes EMI, thermal, etc., and that grew 30%.
Another strong category in Q4 2021 was package design that he does believe says something about what’s going on in the industry, which is that package design is becoming a more significant activity for EDA.
“Then, for the full year 2021, the biggest standout category is analysis, which says that as you do more complex PCB designs, you need to do more analysis of power and interference and thermal effects and things like that,” Rhines said.
Services also seemed to be a standout with a 43.1% increase. “We used to think this there was a lot of information in the services line because of the fact that services years ago used to be an indicator of how the economy was changing. It’s not so clear anymore what actually goes there. You throw in COVID where people can’t be on site so easily, and that makes it even more confusing. For worldwide services at 43%, the total number was $455 million so big growth versus last year, and Europe was a big driver there. What we used to expect is that when times were really good people did more outsourcing. And then as a recession came on, then they pulled that work in house so you’d see a decline in services revenue. Now, you don’t have so much on site, you didn’t have any on site during COVID or at least greatly reduced. But you do outsource stuff. And the difficulty in hiring people suggests that services ought to be strong, you ought to be outsourcing more things and getting more done elsewhere. And if this were a big negative I think you could say it’s a concern because that means people are doing it more in house. I think the way it is it’s really hard to get a message from it.”
On the other side, the IC physical design and verification subcategory decreased, which has been the case, Rhines said. “If you look at the total year IC layout as a total category of only 7% growth when the overall EDA was 15.8%, on the quarter, it was a slight decrease of minus 2%. We’ve seen that the last couple quarters and the actually the weakness, while greatest in Japan, there was weakness in North America and Europe, Asia Pacific was fine for the full year. This time Asia Pacific joined in the game and came down. There are other things to consider. One is this is layout and verification. There is a mixture of companies that do upfront revenue recognition versus companies that do ratable, and that tends to exaggerate the ups and downs. They tend to have strong quarters. Another thing is the fact that you’ve had an enormous strength as people had to take on the 7nm/5nm/3nm and that may be stabilizing now. It seems to have been this year.”
Year-over-year change in revenue by region
According to EDSA, the Americas, which is the largest reporting region by revenue, procured $1.6 billion of electronic system design products and services in Q4 2021, a 21% increase, while the four-quarter moving average for the Americas rose 17.2%.
Europe, Middle East, and Africa (EMEA) procured $482.5 million of electronic system design products and services in Q4 2021, a 5.5% increase. The four-quarter moving average for EMEA grew 12.6%. Japan’s procurement of electronic system design products and services decreased 2.4% to $222.8 million. The four-quarter moving average for Japan rose 1%. Asia Pacific (APAC) procured $1.2 billion of electronic system design products and services in Q4 2021, a 13.8% increase. The four-quarter moving average for APAC increased 18.9%.
Rhines noted some interesting regionally results. “North America was the strongest market, and the only one to be positive in all categories. North America and Asia had positive growth for the full year in all categories. However, the region to keep our eye on is China. The fact that China, which is approaching a billion dollars in purchases, and has a great number for the year 26%, is in fact negative in the fourth quarter. I get a lot of questions on whether China is trying to a develop its own EDA and how’s that would affect the industry, and are we feeling pushed back in any sense? Are they going back to more piracy? Those questions come up when you get a quarter, where all of a sudden, you have the strongest growth region go negative. It’s a very early warning sign, but it’s not to be totally ignored. Normally we’re used to them growing at +20%. Still, we can’t take one quarter and ask that much information from it. There are lots of other reasons why you can have a quarter be down and the full year be strong. We’re so used to seeing high percentage growth rates every quarter in China, that it’s worth watching.”
Impact of Russia-Ukraine war
With many questions are also being raised as to whether there will be any impact from the conflict between Russia and Ukraine on EDA.
From the perspective of a longtime EDA executive, Rhines said there’s nothing in the numbers to show one way or another as it’s just much too recent. “It’s certainly possible that there can be disruption. People in Europe may in fact, alter their investment plans for developing new products. Or they may have difficulty with travel or communication or other things. But EDA is a very stable business. You don’t modulate the design you’re doing that isn’t going to be available for another year, just because this week there was trouble in the Ukraine. I’m guessing there will be very little, if any, impact from Ukraine. Second of all, Russia is not a big consumer of EDA software so the restrictions that exist now on Russia are a very minor effect.”
“When you look broader at industry, there are a lot of companies that are saying they’re ceasing their operations in Russia, or they’re divesting their subsidiaries and the ones you see that have employees well, McDonald’s for example, are saying we’re going to continue to pay our employees but we’re shutting down our operations. For EDA companies, it would make sense to continue to pay your employees, but communications may be shut down or they may have to terminate activity. But I think all the EDA companies have some at least minor exposure there because Russia has a lot of talented mathematicians and physicists, and it would be unfortunate if they lost those people.”
According to a Siemens spokesperson, “Siemens currently employs approximately 3,000 employees in Russia; a small number of these are part of Siemens Digital Industries Software, and Russia accounts for around 1 percent of Siemens’ global sales. Finding the best approach is not simple: we have been in Russia for more than 150 years and have a duty of care for our employees, so any decision about our future approach needs to protect them. We have a clear responsibility to our Russian employees. We will fulfill this responsibility as far as sanctions allow.”
Future opportunities for EDA
Looking ahead, there are a number of categories that Rhines sees as being exciting opportunities for EDA. “Overall, I’m very excited about the fact that the EDA market has expanded so dramatically with the addition of systems companies, hyper scalars, and all these big spenders, Google, Facebook, Amazon, Alibaba. That has allowed incremental revenue without incremental cost. It’s been a tremendous boon in terms of profitability, revenue growth. It’s very exciting stuff that’s happening. And while inevitably those people eventually become fully equipped with tools they need, then they renew just like any other company, it’s still causing growth in double digits for most of the EDA industry.”
On the technology side, excitement number two for Rhines is the spur of enhancements to products using AI and machine learning. “Each of the EDA companies has more than a dozen announcements I’ve seen for how they are using various AI related techniques to improve the capability of tools or even introduce new ones. Mentors acquisition of Solido was a tremendous success in SPICE simulation and there are lots of examples like that.”
Also exciting is the amount of system simulation that is taking off, complemented by the increase in the amount of system simulation that’s going on. “All the major EDA companies have jumped on thermal analysis and system level computational fluid dynamics and EMI and a variety of system kinds of analysis. And because of this tremendous wave of automotive manufacturers, OEMs and tier ones designing the next generation of electric vehicle and putting autonomous drive in place, the interest in simulating more of the system than simply a single IC, just to get to the point where an ECU could be simulated is still stretch goal, and yet there we are, where people are claiming to have bridged some of that in some remarkable advances in system level simulation,” he added.
Fig. 2: Quarterly EDA, SiP and services revenue, by category, Q1 1996 to Q4 2021. Source: ESD Alliance
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