Electronics Globalpress Summit Conference - News roundup

The EDA industry's business model is broken, which accounts for the financial difficulties being experienced in the sector, according to Jack Harding, CEO of eSilicon and a former CEO of EDA market leader Cadence, speaking at the Globalpress Summit Conference in San Francisco, yesterday.

"In the EDA industry they sell the tools to the customer and, if the chip doesn't work, the EDA companies still get paid", said Harding, "the EDA industry is not sharing the risk of development. There's a fundamental disconnect in their business model, which is why they're having difficulty as an industry right now."

The EDA model contrasts with eSilicon's model where eSilicon develops a chip at cost, then sells it for a margin on the silicon. "We make money by shipping silicon", said Harding, "we share the economic risks of our customers."

So, if an eSilicon design doesn't work, eSilicon makes no money on its development. The same goes if the chip doesn't sell. That means eSilicon has to make a judgment call on its customers, and its customers' chip proposals, to ensure that they have a good chance of finding a market.

Harding reckons that outsourcers of chip design and production, like eSilicon, will become more popular. "Do-it-yourself is dead", he told the conference, citing the difficulties of the advanced nodes. "65nm is hard, 45nm is nearly impossible", he added. Harding said they had signed contracts for two 45nm designs.

The reason why outsourcing design and manufacturing services will grow is because, according to Harding: "You need to do six to ten designs a year to have a proper level of learning. Companies doing two to three chips a year will never understand the technology before they have to move on to the next node." eSilicon, he said, does more than 20 designs a year.

Harding said that the average time it takes eSilicon to deliver a chip is 2.9 years from contract to silicon. For consumer applications, the average time is 15 months. For storage and networking products, it's three to four years.

eSilicon has raised $86m, and needs no more capital because it's trading profitably with positive cash flow and revenues of $80m this year, according to Harding. "We're through the dark days," he said.