Ripple Effects Through Value Chains

By Frank Schirrmeister
This is the inaugural post for “Frankly Speaking,” a blog focused on embedded software and system-level design technologies, their adoption as technology themselves and how they enable technology adoption in the end markets.

Tracking adoption and understanding its dynamics has been a passion of mine ever since I went to engineering school. After developing lots of embedded software and finishing several silicon designs as a developer and project lead, I started actively product managing technologies in the system-level level of Electronic Design Automation (EDA) back in 1997—when I came to the United States from Germany. This area of design technology—the next step beyond mainstream RTL design—had been looked at as emerging at that point in time. Compared to the revenues in other areas of design automation, it is probably still somewhat emerging now at least 15 years in.

Today, “software” is probably the key change in electronic design. It differentiates systems and ultimately determines the user experience of end devices. Looking at this scenario top down, we are looking in 2011 (according to market researchers Databeans and Gartner) at a very attractive electronics value chain, which is expected to grow at twice the rate of the global GDP: A $2.1 trillion systems market is enabled by a $310 billion semiconductor market, in turn enabled by a $1.78B semiconductor IP market. We in EDA, together with our brethren discipline of tools enabling and automating embedded software development, are offering the technologies to enable all this electronics development. We are, as was our slogan a while ago, “where electronics begins.” And the market expectations for the next three years look promising: Until 2014 the systems market is expected to grow to $2.7 trillion, semiconductors to $440 billion and semiconductor IP to about $2.1 billion.

The systems markets mentioned above are split between six application domains: industrial, automotive, computer, consumer, wired and wireless communications. Over time I will try to blog about the role of software and market drivers in all those domains, but let’s start with the wireless communications market, its dynamics, and their impact on design technologies for hardware and software.

What makes us buy consumer devices like tablets, smart phones, etc.? I would argue it’s the experience of using the device. That experience, in turn, is enabled by software. More specifically, it’s user interfaces such as Marvell’s Kinomo or HTCs Sense, running on operating systems like Apple’s iOS, Google’s Android or Nokia’s Symbian. What makes these markets fascinating is the fact that everything is interconnected. Technology adoption in the end markets has a profound impact on the value chain enabling them. Take the example of smart phones and tablets. Here it is all about the apps as the picture in this post shows.

In March 2011, according to this “List of digital distribution platforms for mobile devices” we had more than 700,000 applications mapping to an installed base of about 960 million device users through application stores. Apple apps accounted for 48% and Android apps 41% of the overall number of apps. The number of Apple users was still higher than the number of Android users, and the highest installed base were Symbian phones. The apps mapped to about 200 hardware devices, according to this list of “Comparison of Android Devices,” combined with a brief analysis of Nokia, Apple and Windows phones at that time. It’s a completely new world with new types of channels and monetization shifting to content in the form of applications.

So now let’s roll forward six months as the bottom portion of the graph shows. The number of applications has surpassed 1 billion, and Android is now leading with 46% over Apple’s 39%. The number of Android users also has surpassed the Apple users. OVI, i.e. Symbian, still has a large base, but it’s shrinking. On the device side growth is coming mostly from Android, now in 78% of the 283 devices on sale.

There are two immediate takeaways here. First, it is good to be Apple. And second, from a semi perspective, Android is hugely attractive because it allows other vendors to provide silicon into “the other” devices. In turn, we in EDA can provide tools to enable HW/SW integration and software development into each of these designs.

The bottom line: Understanding the dynamics in the wireless communications application domain is important for the complete electronics value chain. With applications defining the user experience and them being developed for specific operating systems, EDA’s offerings to lower software development cost and to enable software development to start earlier need to take those OSes into account, as well. So it comes as no surprise that most of the commercial offerings in this space—from virtual platforms through emulation and FPGA prototyping—show demonstrations running Android, or even provide offerings specific to Android. And this all has rippled down based on the adoption of consumer apps in the first place!

All that said, we do live in interesting times here. Software and hardware have become so intertwined that significant changes in the development processes will be required to efficiently enable this brave new electronics world.

–Frank Schirrmeister is group director of product marketing for Cadence’s SyStem & Software Realization Group.