In Memory of Steve Chidester

Steve Chidester was a class act.

EDA software can be a cutthroat place, but good luck finding someone who would even think of saying something unkind about Steve.

Known inside Cadence as “Mr. Allegro,” Steve could as well have been called Boomerang for the way over three decades he always returned to the software company. Steve did three stints in all at Cadence, totaling 17 years. He had only recently returned to the company when he passed away from cancer last week at age 55.

While I had met Steve years ago, I didn’t really get to know him until he joined Zuken as head of product marketing in 2010. He was instrumental in getting the IPC-2581 data transfer format off the ground after 40-plus years in the mire.  At Steve’s invitation, I spoke on the topic at Zuken Innovation World that year, although I resisted his repeated urging to present at the company’s user conference in Tokyo. Something about not being fluent in Japanese always held me back.

Little details like that could never stop Steve, however. He was an eternal optimist, never one to get down either on a situation, himself or others. Colleagues tell me that even after learning, in late November, that he had a particularly aggressive form of cancer, he downplayed it, saying it was treatable.

He spoke often of his family — he had nine children plus several grandchildren. That always appealed to me as well, as I like going beyond the regular job-speak and getting to know the folks I work with around the industry.

In an industry filled with generous people, Steve was a particularly kind soul. I will miss him dearly.

The New Verticals

Chasing the vertical OEMs is not a new strategy in EDA.

But it is becoming that much more widespread as the major players extend their reach from automotive (long the domain of Mentor Graphics) to other sectors.

Semiconductor design companies — the linchpin to the product development and cash flow of Synopsys, Mentor and Cadence — are expected to consolidate over the near term, and the revenue outlook from that market is being tempered.

But the “new verticals” — military, aerospace, IoT, cloud — offer the chance for the EDA titans to extend their reach by not only selling IC design software but also an ever-growing array of emulation, analysis, and system design tools to a single customer. Doing so tightens the binds between EDA firm and customer, potentially making the deal more profitable as some list price devaluation that naturally occurs with bundling is offset by a lower cost of sales (including commissions).

As Cadence CEO Lip-Bu Tan said this week, “We had been emphasizing system design development. That basis is providing the entire vertical solution spec that is from IT tool and PCB and a host of system design and verification and we strongly believe that is the strategy going forward to meet the requirement of some vertical (markets).

“IoT, the cloud infrastructure and the massive cloud infrastructure fueling up; the automotive as kind of the connective devices; some of the medical field and DNA sequencing … and a few others: those can be clear application for some of our IT portfolio and some of our EDA flow and also some of our hardware PCB and system analysis requirements.”

We are starting to hear the major EDA companies discuss the PCB segment on their quarterly conference calls. This is an emerging trend; not long ago PCB was an after-thought to most analysts because the revenues were so puny compared to those of semiconductor. Now that PCB is part of a larger strategy, as opposed to simply a (profitable) business unit, that’s changing.

As this strategy ramps, it could very well shift the scope of acquisitions by the major EDA players. For decades, Synopsys has stayed far away from owning PCB design tools  although some of its tools have been tied into Zuken’s. Its last foray into PCB came when it acquired Viewlogic in 1997; management quickly bought out the PCB design segment the next year. Would a shrinking semi customer base lure them back in?

Most PCB design M&A related deals these days are tied to filling gaps in technology. There’s still a disconnect between ECAD and MCAD, and there will be some shakeout as new disruptive hardware startups enter the field. So while Cadence and Mentor are pursuing true top-down strategies, not everyone is following suit.

Altium corporate director, technology partnerships and business development Dan Fernsebner told me at PCB West last month, “Incubators and hardware startups have to put products out very quickly, and they have to be right the first time.” Fernsebner says the model for these companies is shifting from enterprise engineering to relying on reference designs.

Does the change to entrepreneurship pose a challenge for the developers in terms of having to reevaluate their business models, I asked Fernsebner. “I think you’ll see explosive new companies changing the business model for those who have been in it for years,” he said, citing Telsa, Nest and Skully, companies that develop products that are field-upgradeable.

It’s rare that any single model wins out completely. But if the end-customers in key industries begin to flex their muscles, it won’t be long before the M&A activity gets really interesting.

CAD Software Pricing Wars Heat Up

Another price/performance battle is heating up in PCB design software, and this time Altium could feel the burn.

Altium has experienced decent growth over the past few years, reaching about $75 million in annual sales. That’s not a huge sum compared to the Big Three of Mentor Graphics, Cadence and Zuken (subsequently referred to as MCZ), but it no doubt is getting the attention of the big boys, given the fairly modest pace of PCB design layout seat growth.

After dropping pricing on its signature Altium Designer tool from $14,000 to about $5,500 in 2008, Altium then raised them more than 30% a year ago this month, with some reports indicating even larger spikes, plus support.

Mentor today fired a big shot across the bow, pricing its newly configured shrink-wrap Pads suite at an entry level  price of $5,000, including a year of support. A mid-range version is priced at $10,000, in line with Designer once support is factored in.

Mentor made its move to target so-called independent users, those who may work for corporations but have the latitude to go outside the enterprise CAD system for their tools. That sector is characterized by engineering generalists who look for lower seat costs and aren’t driven by the particular tool. Will Altium counter move, or will it take a chance that it can wait out its deeper-pocketed competitor, hoping that Mentor lacks the patience to withstand the margin pain?

No matter how this plays out, a company can only grow so large in the shrink-wrap space. Enterprise is where the big bucks come from, and that space is dominated by MCZ. And that next move is Altium’s.

 

 

 

What About PCB?

As the major CAD vendors hold their quarterly conference calls, one thing to watch is whether analysts are asking about PCB design tools.

For the most part, they aren’t.

So while Cadence’s PCB and IC packaging software lines saw good growth in 2012, with revenue climbing 11%, its hour-long call on Jan. 30 was devoted to fielding analyst questions on semiconductor and emulation products.

OK, we get it, we aren’t the tail that wags the dog. But given the market size and relative  profitability PCB tools generate, it would be nice to get a little more notice.

 

Cadence: All Sync’d Up

Cadence today announced the release of point revisions to both Allegro and OrCAD, continuing its tradition of keeping releases of its major platforms in sync. They show significant upgrades in timing speeds and simulation speeds, respectively, as well as better use of state-of-the-art collaboration tools.

To the latter point, Hemant Shah, the product marketing manager for Allegro, says the point releases are a reflection of changes Cadence sees in the user base. ODMs are evolving to “parallelism,” he told me. “That’s where we learned the EDA tools were not designed for parallelism and needed to be rethought.” As a result, Cadence adopted Microsoft’s SharePoint collaboration tools, giving users a greater control over different versions and WIP design data management.

It was interesting to hear a major software vendor acknowledge that not everything developed in-house would or could be best in class. Likewise, Shah said that the company’s recent acquisition of Sigrity reaffirms the management’s commitment to the PCB space — something its competitors have questioned from time to time.

He added that the future releases leverage Sigrity’s power and SI technology across both the existing platforms and in Sigrity’s standalone products.

Riding High on Design

The herd is riding on the EDA vendors, almost all of which are at or near 52-week high share prices.

In the past week, Cadence, Mentor and Synopsys hit or were trading just pennies off their yearlong highs. National Instruments and Ansys both traded much closer to their highs than their lows. Even Altium closed in on a high, but that’s a bit deceiving because it’s a penny stock and lightly traded on the Australian exchange.

So, is it the investor herd driving up an industry? Or is it a sign that the EDA market, which topped $5 billion for the first time in 2011, is geared up for a sustained run?

 

Behind the Sigrity Deal

Cadence’s acquisition of Sigrity, announced yesterday, is a big deal for reasons beyond the technology being acquired.

Sure, it’s great for Cadence to gets its hands on Sigrity’s power and signal integrity tools.

But what this move also underscores is something of a recommitment by Cadence to its printed circuit board software. You’d have to go back years to find the last time Cadence completed a significant deal in the PCB space (I’m not including, of course, the failed 2008 “attempt” to purchase Mentor, which eventually cost then CEO Michael Fister his job.)

Cadence’s PCB revenue jumped in 2011, growing by our estimates roughly 23% year-over-year. That makes it by far the fastest-growing player in the PCB EDA space. How long has it been since they could say that?

Coupled with its aggressive support of the IPC-2581 data transfer format, Cadence is showing a newfound vigor toward protecting and even extending its circuit board design position. Mentor remains a much larger competitor in PCB sales, but there are signs of a shift taking place.

2581 Hits a Milestone

For years one of the hangups for any data transfer format hoping to supplant Gerber has been the lack of independent validations that the output from a given CAD tool could be accurately read in CAM.

That’s why the IPC-2581 Consortium is right to herald today’s announcement of not one four independent validations as a “significant milestone.”

Today the Consortium published a validation matrix showing data output in Cadence Allegro and Zuken CR5000 has been correlated and validated against typical proprietary and multi-file manufacturing formats by Adiva, Wise, EasyLogix and DownStream. Those CAM vendors also are launching viewers — free, in most cases — to help users compare the data themselves.

The Consortium will take its show on the road next week, presenting a paper at Apex and also at the Cadence users group meeting in March. Both events represent an opportune time to question the members on their progress. If you can’t make the conferences, tune in to PCB Chat on Feb. 22, where the members will answer questions in our new online moderated chat forum.

IPC-2581 Update

It’s been a while since I updated readers on the IPC-2581 Consortium. Here’s a few tidbits:

  • The group of supporters continues to grow, and a couple large IT and test equipment OEMs are now considering joining. At least one announcement could be coming shortly.
  • The verification team, led by Ed Acheson at Cadence, is making progress. They are looking at some designs to use for test runs. At least 10 designs are expected to be validated using the members’ CAD and CAM tools.
  • Wise Solutions expects to have an IPC-2581 viewer by January. It will likely be made available through multiple websites.
  • The Consortium will have a booth at the IPC Apex show in late February and PCB West in September. Members will also have a poster at Apex and will make a presentation at PCB West.

Here’s a question: Should Mentor or Frontline (which Mentor owns a 50% stake in) join the IPC-2581 Consortium? Feel free to reply here or directly to me if you wish.

Data Transfer in the News

A couple new articles are out on the IPC-2581 and ODB++ data transfer formats.

On Oct. 2, longtime EDA journalist Richard Goering provided a well-written writeup on the “lively panel discussion” (“Data Transfer in the 21st Century”) we held during PCB West on Sept. 29. Richard does a nice job capturing the frustration of the designers present and historical give-and-take that has led us to the current situation.

And yesterday, EDN weighed in with interviews of participants from the data transfer panel held at PCB West and other key spokespersons.

Given the new support for IPC-2581 by Cadence and Zuken, among others, this issue isn’t going away.