The Great Unknowns

Gauging the impact of the Japanese earthquake on the tools and services business won’t be easy.

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Across the semiconductor industry—as well as many other end-product industries—there have been some well-documented and sober assessments of what impact the damage in Japan will have on business.

In the EDA business, these kinds of numbers will be much harder to determine. Japan is a big consumer of EDA tools for the leading-edge process nodes, but with disruptions in power it will be difficult for Japanese companies to keep their simulation and verification farms on schedule. That will cause a slowdown at the front end of the flow all the way back to the architectural modeling stage. How long that slowdown lasts ultimately will determine what tools these companies buy and when.

Most of these chipmakers have foreign offices, but transferring operations to those offices takes time. Even utilization of cloud-based infrastructures will take time. These are just being mapped out by major EDA companies. Ramp-up time will be measured in months, at best. Moreover, those kinds of shifts will require some significant attitude changes among chipmakers about sending proprietary data to an outside company—something they have been reluctant to do in the past.

Professional services to help with these kinds of very complex transitions also are likely to be in significant demand once Japanese companies regain their footing. The question is whether enough expertise can be provided by existing companies to bridge the gap until Japanese companies are back to normal, or whether those kinds of services will have to be augmented with additional skills, training and hiring, which will slow down the whole process.

For Japan, this is like running a competitive race with leg weights. The sheer magnitude of the devastation means that even the best-crafted disaster plans don’t suffice. That raises short-term questions about the effect on the overall Japanese chip industry, as well as long-term issues about what solutions it will choose. And that ripples back into the EDA world, where different scenarios are under discussion about how to best serve their Japanese partners—and how those partners are likely to fare. There are chipmakers in other regions of the globe, including South Korea, China, Taiwan, and even North America and Europe, that are running these scenarios, as well, trying to figure out just what this means to them.

There are no clear answers here, just as there are no clear answers inside of Japan about when the crisis will subside. But there certainly are a lot more questions being asked.

–Ed Sperling