Cadence's Lip-Bu Tan on global semicon, EDA and Indian semicon industry

Here is an Outlook 2010 report on the global semiconductor industry, as well as the EDA industry, and a look at what lies ahead for India.

Lip-Bu Tan, president and CEO, Cadence Design Systems Inc., who was recently in India during the CDNLive event, is of the opinion that the global semiconductor industry is undergoing some significant changes that will further place new demands on the EDA providers.

Semicon industry trends
Speaking on the current trends in the global semiconductor industry, he said: "Semiconductor companies are becoming more focused on their core competencies, and are increasingly collaborating on a global basis. They are prioritizing capital efficiency, and they are looking for help in containing the costs of both hardware and software development."

With the emphasis on profitability, one trend that will continue to occur is consolidation. Semiconductor companies are consolidating in order to scale existing businesses, to grow by complementing existing product lines and to focus on strategic, differentiated or market-leading areas, and of course, to save costs.

He added: "The trend towards “fab lite” continued in 2009. AMD spun off GlobalFoundries, its Dresden, Germany fabrication facility, and the parent company of GlobalFoundries, based in Abu Dhabi, announced its intention to acquire Chartered Semiconductor. It appears that if this trend continues, there will be fewer integrated device manufacturers (IDMs) and fewer semiconductor manufacturers in the future, as fab costs for advanced processes soar.

"Globalization is another trend that will accelerate as economies become more interdependent. It can aid recovery, given that stimulus packages can be expected to uplift most major economies. Today, the best growth prospects appear to be in the developing countries.

"Success at globalization requires some new thinking. Companies must think “locally” in places they operate, taking advantage of local supply chains, markets, partners, and engineering talent. Cost optimization is a likely consequence of moving some operations offshore, but if it’s the only motivation, companies are likely to be disappointed. It is important that the business strategy drives globalization, not the other way around.

"Beyond consolidation and globalization, as I indicated earlier, collaboration may also continue to pick up speed. The design challenges at 45nm and below will shape the semiconductor ecosystem in 2010 and beyond. Technical challenges include process variability, signal integrity, design for manufacturability, timing closure, analog/mixed-signal circuitry, and low-power design. Solutions will require extensive collaboration between EDA, silicon IP, semiconductor, and foundry companies – no single company can do it all.

Global re-optimization of industry
Quite interesting, that Tan mentioned industry consolidation. Will there be further consolidations within the industry?

According to him, we have seen consolidation within the semiconductor industry in 2009 and it has been global in nature. What is occurring is a kind of global re-optimization of the industry. IC design, manufacturing, test, packaging, and product assembly are taking place in many different parts of the world, with multiple companies and geographically dispersed teams.

"Although, I think, we may see further consolidation in the coming year; beyond that, I can’t speculate on who will participate or when that will happen."

Semicon outlook for 2010!
How is the outlook for 2010 going to shape up now that some signs of recovery have appeared?

Lip-Bu Tan said that according to the Semiconductor Industry Association (SIA), after a decline of over 11 percent in 2009 as compared to 2008, the semiconductor industry is projected to grow by over 10 percent in 2010 and 8.4 percent in 2011.

"While an economic recovery is inevitable, and may already be taking shape, customers still remain cautious in their optimism. They are keeping a tight rein on research and development budgets. This is consistent with what we have seen with other downturns, and we expect the EDA industry recovery to lag a quarter or two behind the semiconductor industry."

Where is EDA industry headed in 2010?
On the same note, I inquired about the likely direction of the global EDA industry in 2010.

Lip-Bu Tan added: "EDA plays a central role in the design of all ICs and systems. There are many opportunities for EDA providers who understand the changing semiconductor environment.

"In 2010 and beyond, EDA providers must not only solve technology problems, but must also help customers reduce design and verification costs, differentiate themselves from competitors, and collaborate with partners on a worldwide basis. To do this, the EDA industry must focus on integrated solutions and close partnerships rather than simply selling point tools.

"One way to lower costs is by moving up in abstraction. Early attempts by EDA vendors to address system-level design started at the algorithmic level with a top-down approach, and had little connection to downstream implementation. They did not succeed. Now, however, EDA vendors such as Cadence have realized that it’s better to start with existing strengths in RTL design and move upwards incrementally to the transaction level.

"There are other critical areas for the EDA industry to address in 2010. Nearly all systems-on-chip (SoCs) today are mixed-signal, yet mixed-signal implementation and verification are increasingly becoming bottlenecks. Energy savings is a key driver of many electronics products, making low-power design a strong mandate. And functional verification, according to some studies, is a bottleneck that takes as much as 70 percent of the front-end design cycle."

To help solve these problems, Cadence offers integrated solutions in mixed-signal design, low-power design, and enterprise verification, in addition to system development and advanced nodes.

Finally, good EDA solutions must support collaboration by permitting geographically dispersed teams to communicate and work effectively together. And EDA standards are necessary so that customers can exchange IP and design data, and can outsource portions of the chip development process.

India has great potential
Finally, it is always good to hear about the estimate of the Indian semiconductor industry from global leaders.

Lip-Bu Tan said: "According to the Indian Semiconductor Association-Frost & Sullivan report update 2008-10, the total revenues of the Indian semiconductor market are poised to grow from $5.9 billion in 2008 to $7.59 billion in 2010 at a CAGR of 13.4 percent; marking a growing market despite a decline in the growth rate. India has great potential as a semiconductor market due to a huge domestic market for electronics equipment ranging from mobile phones to energy meters."

He added that growth for semiconductor companies will come from energy-related and low-power technologies that are able to drive the market share shifts. A number of semiconductor companies have already invested in or are considering investment in alternate technologies, such as green technologies like solar panels.