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Wednesday, March 10, 2010

Real Men Have CAD

“Real men have fabs.” That famous quote from the early 1990s, is usually attributed to Jerry Sanders, Chairman of Advanced Micro Devices, and was used to underscore the belief that owning a semiconductor manufacturing facility, or fab, was the only way a semiconductor company could be successful.

Many innovative chip companies saw things differently, however, and by the mid-1990s there were many successful “fabless” semiconductor companies. These pioneers realized that the $1-2B it cost for the construction of a new fab every couple of years was not only prohibitive from a cost perspective, but also not necessary at all.

These chip makers turned to TSMC, UMC, Seiko-Epson and even IBM for the manufacturing of the wafers and chips, while focusing their efforts on design innovation, testing and marketing.

By the mid-1990s, many of these fabless chip makers were among the most profitable companies in the semiconductor industry.

Fast forward to today.

The continuing economic downturn has forced all companies to take a hard look at cutting, or at least managing, costs. The semiconductor industry is no different from other markets, and every chip maker is looking for a way to turn fixed costs into variable costs.

In his post on Xuropa last year James Colgan said that one way semiconductor companies plan to turn fixed costs into variable costs is by moving parts of the EDA (electronic design automation) flow to a SaaS model, where components of the semiconductor design software reside in the cloud.

Clearly there is a trend in the semiconductor industry to take advantage of cloud computing as a way to reduce costs. The chart below shows the adoption curve for many of the EDA modules migrating to the cloud.

This will have ramifications for how EDA companies such as Cadence, Synopsys and Mentor Graphics market their products to customers. No longer will customers want to purchase costly software design tools, or even licenses to those tools, if they can use them via the cloud on a pay-per-use model. This trend is just now in its infancy, as is the way EDA companies talk about their relationship to cloud computing.
But as rapid as other software applications have moved the cloud, we're probably not too far away from hearing some stubborn semiconductor executive stand up and proclaim that "real men have CAD."

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