The latest Electronic Design Market Data report was just published. The headline announces continued substantial growth for the sector: Electronic System Design Industry Logs Double-Digit Q2 2021 Year-Over-Year Revenue Growth, ESD Alliance Reports. While not quite the record-breaking growth reported last quarter, the news is extremely upbeat. We should be careful about getting complacent about EDA and IP growth as these segments are influenced by a lot of factors that tend to be cyclical, and at times highly variable and unpredictable. Let’s look at the data to try and understand why the hits just keep coming.

The Numbers

As reported in the press release, “Electronic System Design (ESD) industry revenue increased 14.6% year-over-year from $2,783.9 million to $3,191.4 million in Q2 2021.” First, let’s examine revenue by product and application and the year-over-year change:

• CAE revenue increased 10.1% to $1,014.6 million. The four-quarter CAE moving average increased 11%.
• IC Physical Design and Verification revenue decreased 0.4% to $581.5 million. The four-quarter moving average for the category rose 18.6%.
• Printed Circuit Board and Multi-Chip Module (PCB and MCM) revenue increased 16.8% to $284.4 million. The four-quarter moving average for PCB and MCM increased 9.4%.
• SIP revenue rose 27.1% to $1,204.9 million. The four-quarter SIP moving average grew 20.5%.
• Services revenue increased 23.1% to $106.1 million. The four-quarter Services moving average increased 8.8%.

IC physical design and verification stands out with a decrease. Dan and I spent some time chatting with Wally Rhines, Executive Sponsor, SEMI Electronic Design Market Data report. Wally pointed out that physical verification is a bit “lumpy” in terms of consumption. There are huge demands on this technology near tapeout. Wally also pointed out that the overall four quarter trend is quite healthy. If you’re looking for bad news, you will likely not find it here.

 Looking at the same trends on a regional basis, we see:

• The Americas, the largest reporting region by revenue, purchased $1,367.3 million of electronic system design products and services in Q2 2021, an 18.3% increase. The four-quarter moving average for the Americas rose 15.2%.
• Europe, Middle East, and Africa revenue increased 9.9% to $415 million. The four-quarter moving average for EMEA grew 7.8%.
• Japan revenue decreased 1% to $237.9 million. The four-quarter moving average for Japan rose 1.9%.
• Asia Pacific revenue increased 15.9% to $1,171.2 million. The four-quarter moving average for APAC increased 22.9%.

As always, the numbers tell one story. By spending time with Wally, we got some of the backstory as well.

The Narrative

Wally’s comments in the press release include, “Product categories Computer Aided Engineering (CAE), Printed Circuit Board and Multi-Chip Module (PCB and MCM), Semiconductor IP (SIP), and Services all reported double-digit growth. Geographically, all regions reported growth on a rolling four-quarter basis, with the Americas; Asia Pacific (APAC); and Europe, Middle East, and Africa (EMEA) showing a substantial year-over-year increase.”

Wally opened our conversation with more direct comments, “We hit another big one. 14.6 percent. The onslaught of demand continues.” Wally also pointed out that “PCB is back”, with higher growth numbers this quarter. We talked a bit about China. The consumption of EDA and IP is strong there. A growing percentage of that consumption is to fuel domestic demand vs. export. There is a question around how large the domestic EDA and IP segment can become in China, which could shift revenue from the US for example.

At present, it appears the growth of these industries is slow in China. We all know EDA is difficult, and so is building domestic core infrastructure and technology. That said, there is a growing number of EDA companies in China so that is worth watching. We touched on a lot of topics in search of a material downward trend and found none. As we said goodbye, I kept thinking, the hits just keep coming. You can learn more about ESD Design Alliance Electronic Design Market Data here

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