Analyst: China’s foreign EDA thirst to grow despite trade tensions
Needham & Partners senior analyst Rich Valera believes China is likely to remain a major customer for western EDA tools for the foreseeable future despite trade tensions and the security concerns that have seen Huawei put on a US blacklist.
Ahead of the opening of the Design Automation Conference (DAC) in Las Vegas, Valera pointed to the latest results from Cadence Design Systems as an example of how China is becoming a key user of advanced EDA. As revenue from Chinese customers surpassed 10 per cent in the last reported quarter, analysts could take confirmation that the country has become a significant contributor to EDA tool sales in recent years.
Because of the growth in sales, Valera highlighted China in addition to the automotive, AI, datacenter, and IoT sectors as the main drivers behind likely EDA growth during the next five years.
In terms of Chinese purchases of EDA, Valera acknowledged the recent announcements by several western software and IP suppliers that they felt forced to cease sales to Huawei.
“China is a big driver but there are some recent developments that could cloud that in the near term. Over the long term, I think it increases the will of the Chinese to wean themselves off foreign technology. That will require more EDA software,” he said. “China is growing much faster than the industry as a whole. We think China is motivated to continue to invest.”
Although long term tensions would encourage the development of homegrown tools, Valera said China still needs to catch up in terms of manufacturing technology and the tools to support that: “To actually get to the cutting edge of EDA is going to take a lot of years. They are going to need to use the EDA tools of US-based vendors for quite a bit.”
ADAS and AI drivers
In term of worldwide usage, Valera pointed to automotive as one of the reasons why “EDA is going through a bit of a growth renaissance”. Between 2010 and 2015, sales of semiconductors into the automotive sector grew by 6 to 7 per cent. “But things have been going on over the last five years that have really ramped up the electronics in the car. Pointing to numbers from Gartner, he said “There has been almost a doubling in semiconductor CAGR [compound annual growth rate].”
Within that advanced driver assistance system (ADAS) products have seen a 26 per cent CAGR, based primarily on systems up to level-two autonomy. “When it comes to level five, we are a long way from that but in between are a lot of new chips. The other main one is electric vehicles and hybrid-electric vehicles,” Valera said.
Valera said he saw AI as the biggest contributor to growth in advanced tool usage, with a predicted doubling in semiconductor sales from 2017 to 2020 and again from 2021 to 2025, according to McKinsey estimates. EDA will likely see a similar uptick because of the shift towards custom accelerators and away from off-the-shelf products.
“I think it’s going to be a driver for a long time,” Valera said, pointing to a comment made by Synopsys chairman Aart de Geus in April in which he had claimed that the tools supplier was engaged with some 200 companies doing their own AI chip designs.
