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The global electronic design automation tools market was valued at $9.76 billion in 2018 and is projected to reach $17.35 billion by 2024, registering a CAGR of 10.1% during the forecast period of 2019-2024.
Electronic design automation (EDA) tools have provided the silicon industry with the ability to innovate over the past few years. EDA is responsible for developing the design tools that enable the IC design process to be achieved at a design cost that allows the ecosystem to operate at a profit.
EDA is an integral component of semiconductor design. Therefore, the growth of the semiconductor industry positively impacts the EDA market studied. The booming automotive, IoT, and AI sectors drive the growth of the semiconductor market, which requires electronic devices with complex designs.
Since the inception of semiconductors, Moore's Law—the prediction that the number of transistors in an integrated circuit will increase two-fold every 18-24 months—has held true. However, in the recent years, scientists have increasingly come to believe that fundamental physical limits may soon make it hard to place additional elements on the same small area in an economical way, which could ultimately prove that Moore's Law is faulty.
The increasing demand for advanced electronic devices with complex designs and the need to reduce the size while improving the performance of ICs compel IC manufacturers to increase their R&D investments and adopt EDA tools. Therefore, the demand for EDA tools, compared to the other sectors, is expected to be high.
Key Market Trends
Automotive Expected to Be a Significant Application
Semiconductor foundries are accelerating their efforts in automotive chip production in preparing for a surge in semiconductors used in advanced driver-assistance systems (ADAS) and autonomous driving.
All of the major EDA vendors are scrambling to expand their process portfolios for automotive customers. The companies are seeing a growing demand from automotive IC customers amid the push toward traditional cars with more connectivity features - ADAS, and electric/hybrid vehicles. The automotive sector is also attractive because many devices don't require leading-edge processes, and hence, a large number of vendors can participate with less effort.
Virtual verification of designs has become an inevitable part of chip manufacturing because of the increased requirement for safety and performance. The verification process involves testing the electrical and electronic components under various temperature and pressure conditions. The test ensures that the failure of a device does not lead to any mishap. The increasing complexity in the automotive industry is positively impacting the demand for EDA tools across the industry.
EDA vendors have started to offer their tools and software online. Increased Internet penetration worldwide has made it easy for potential customers to access these tools online, and use them to design and fabricate chips. Consequently, the capital expenditure for companies has reduced because of reduced TCO and infrastructure costs to accommodate these tools. This also helps improve SCM as the total number of resellers and distributors reduces considerably.
Asia-Pacific Expected to Witness Significant Growth
The semiconductor industry of China has been showing an upward trend for the past ten years. The objective has been to become competitive with the Taiwanese semiconductor industry. The strength of the sector comes from fabless companies. The fabless segment of China's semiconductor industry accounted for revenues that exceeded USD 20 billion for the first time. China represents one-quarter of the global fabless industry.
China's growth in foundry services is reflected by the capital spending of Semiconductor Manufacturing International Corporation (SMIC). SMIC's capital spending was USD 2.3 billion in 2017, up by 87% from 2016 and the fastest growth rate of the top eleven spenders.
Taiwan maintained its position of no.2 in the global fabless market with 16% market share of the total chip-design sales in 2017, and it has been consistent from 2010. Companies, like Realtek, MediaTek, and Novatek each had more than USD 1 billion in IC sales in 2017, and each ranked among the world's top-20 fabless IC companies.
The Asia-Pacific semiconductors market has been boosted by a strong domestic demand, causing the market to become the largest in the world. A particular trend in the Chinese market has been that of consolidation, wherein state supervised Chinese players have been amalgamated to increase their manufacturing capacity and ability to compete with foreign rivals. Through a process of consolidation, new Chinese semiconductor giants are emerging and have been able to utilize their financial power and production capacities to augment domestic production and reduce the country's reliance on imports.
The EDA market is highly fragmented. New opportunities in the automotive, IoT, artificial intelligence, and virtual/augmented reality sectors have allowed semiconductor companies throughout all phases of the IC production cycle to prosper, with sizable revenue increases. This has occurred despite significant gains in chip performance, but at relatively flat unit sales prices.
One of the main reasons why firms can minimize the impact of competitive rivalry and sustain profitability is concentration. On the whole, the competitive rivalry of the industry is high. Moving forward, acquisitions are expected, through which, the three key companies are expected to gain competitive advantages over their rivals.
Some of the key players in the industry include Mentor Graphics, Synopsis, IBM.
Some of the key developments in the EDA market are as follows:
- Synopsys announced its investment in AI design solutions, to address the extreme complexities of leading-edge design. The AI implementation was aimed at expanding the Synopsys Design Platform, accelerating time-to-results (TTR), achieving new levels of push-button automation, and setting new standards for quality-of-results (QoR) in digital and custom design.
- Mentor announced that its Tanner EDA group is partnering with VPIphotonics and a pioneer of photonics simulation and to deliver dynamic and cost-effective design and analysis solutions, for companies that develop devices for the emerging silicon photonics market. Through this partnership, Mentor is leveraging VPIphotonics' 20-plus years of photonic simulation, for active/passive/hybrid integrated circuits and systems.