The quarterly numbers are out from the EDAC Market Statistics Service (MSS) for Q2. The headline number is that revenue for the industry increased by 8.5% for Q2 to $1906.5M versus $1759.9M in Q2 last year. The four quarter moving average, that smooths out a lot of seasonality by comparing the most recent four quarters to the prior four quarters also increased by 8.5% (this is not an identity, the numbers are usually different). Just to emphasize, these are Q2 numbers and it is happenstance that this blog is going to occur on the first day of Q4.
The graph above shows growth by category, 2015 on the left and 2014 on the right. All categories grew except PCB.
Employment in the industry is up too. Companies that were tracked employed a record 32,806 professionals in Q2 2015, an increase of 4.9 percent compared to the 31,259 people employed in Q2 2014, and up 2.1 percent compared to Q1 2015.
Wally Rhines in his position as the EDAC board sponsor for MSS said…The EDA Industry continues to show solid revenue growth in the second quarter, with double digit growth in semiconductor IP and services. CAE and IC physical design also reported solid growth. Geographically, all regions except Japan saw revenue increases, especially Asia/Pacific.
Talking of Wally Rhines, he is also the recipient of this year’s Phil Kaufman award, which is jointly sponsored by EDAC and IEEE CEDA. I am assuming that you don’t need me to tell you that he is also the CEO of Mentor Graphics. The awards will be presented at the Phil Kaufman Award Dinner which will be held at the award presentation and dinner at 6:30 PM on November 12, 2015 at the 4th Street Summit in San Jose (address is 88 4th Street). You can register for the dinner here.
Coming up later this month is the next EDAC Emerging Companies meeting. It will be at 6-9pm on Thursday October 29th at the SEMI headquarters (also the EDAC headquarters) at 3081 Zanker Road, San Jose. This is the first of a new series on legal issues and is titled Patents and Patent Litigation: Develop, Strengthen, and Protect Your Intellectual Property. The event will be cicked off by the mayor of San Jose, Sam Liccardo, and the director of the new Silicon Valley United States Patent Office, John Cabeca. Hands up if you didn’t know that there was a Silicon Valley USPTO. It will be a West Coast regional office, serving California, Nevada, Oregon, Washington, Arizona, Alaska and Hawaii and opens on October 16th, in San Jose City Hall.
The panel session, on patents and patent litigation, will be moderated by Salumeh Loesch of Klarquist Sparkman, with panelists John Cabeca, who I just mentioned, Karna Nisewaner of Cadence, Robert Sahs of Fenwick & West and John Vandenburg, also of Klarquist Sparkman. The evening is free but space is limited and so you must register here.
I was going to reference a previous blog I wrote about patent valuations, but it is actually going out tomorrow morning. In a discussion I had with Amit Gupta and Jim Hogan last week, Jim told me:Patents are important, research shows $300-900K per patent in additional exit valuation over and above forward revenue multiple.
So that is another segue into the acquisitions that have been going on in the last few months, both in the EDA industry itself and also in the customer base.
Mentor acquired Tanner EDA and also Calypto (where they were already a majority shareholder). The biggest acquisition for sometime was Synopsys acquiring Atrenta the evening before DAC. Synopsys also enriched their IP portfolio with a number of acquisitions of Bluetooth and security technology. In a sort of cross-border acquisition involving an EDA company and a company normally perceived as a customer, Intel acquired Docea Power.
In the customer base, there have been acquisitions too. The change this year is not so much the number of acquisitions but the size of them. Intel acquired Altera (it hasn’t finally closed yet) for $16.7B.
Avago acquired LSI Logic for $6.6B last year, and broke it up, selling the flash business to Seagate, and the networking business to Intel. Then they acquired PLX Technology and Emulex. Finally, the big one: earlier this year, Avago acquired Broadcom for $37B (again, still not closed). After it closes the merged company will keep the Broadcom name. It will have annual revenue of around $15B.
The potential cloud on the horizon of all of this for EDA/IP is two fold. Firstly, in a merger the EDA budget for the merged company never goes up. Avago/Broadcom will have one of the largest IP portfolios (both IP in the patent sense and IP in the structures-on-silicon sense) which means it is likely to acquire less 3rd party interface IP from companies like Cadence and Synopsys. This probably won’t have an immediate affect, all the companies have EDA software and IP already, and designs in progress where they are not going to suddenly change the methodology, but as those contracts come up for renewal it is possible that the EDAC MSS will be reporting less rosy numbers next year and beyond.