It's been roughly half a year ago since the big storms at Cadence, but the situation hasn't improved significantly. This time around, however, it is not the fault of a greedy CEO or adventurous earnings calculations. This time around the danger is coming from outside and its name is Synopsys.

Cadence and Synopsys have never have been good friends, but now observers are talking about a real war between the two companies. Synopsys understands that the time is right for putting weak Cadence its place in the EDA industry and is firing all the guns it owns to make that happen. Unfortunately, Cadence has not offered much of a response.

The most obvious argument for customers to buy from one vendor versus another is the financial position of the two companies. The market capitalization at Synopsys is nowadays twice as high as that of Cadence. Synopsys stock is trading at close to a 52-week high, and has reported no losses so far this year. Compare the Synopsys track record to that of Cadence, which is in a much worse position. The only positive financial message out of Cadence currently is about the company’s relatively high cash amounts, which should help Cadence survive the current crisis.

Meanwhile, it is very easy for the Synopsys sales team to convince potential license buyers to sign multiyear contracts with Synopsys, a financially healthy company, and not with Cadence – a company with an uncertain future. With big cash reserves, Synopsys has been able to start a price war and a vigorous "Primary EDA Partner" campaign. Even EDA veterans such as John Cooley are wondering about the Synopsys Primary EDA Partner program.

It should be clear that all companies, which sign such contracts, get big discounts on their licenses. Cadence behaves no differently here, but the number of Cadence Primary Partners are currently much smaller. Just compare Intel, National Semiconductor, Renesas, LSI, Marvell, and Tundra for Synopsys, with only Freescale and NXP for Cadence.

It’s important to note that "Primary Partner" does not mean "Single Partner", but still primary means that the flow is dictated by the primary vendor and only a few, truly indispensable tools – with as few licensees as possible – being bought from other vendors. The same pricing war can be seen in EDA services, at least in Europe. Many people know that Synopsys has tried, at all costs, to prevent Cadence Services from demonstrating their design expertise for 40-nanometer designs.

Another big win for Synopsys was the acquisition of the analog IP division from MIPS, formerly known as Chipidea. This move will undoubtedly hurt Cadence, as well, because now if a company wants to buy some IP from a third-party vendor, Synopsys is the first stop for those companies wanting to buy. Of course, Synopsys does not miss the opportunity then to talk not only about their IP, but also about their software for the whole design flow. Bundling software and IP is just less effort for the customers than dealing having to deal with different partners, and might be sufficient reason enough for companies to buy both software and IP from a single vendor – in this case, Synopsys. Cadence hardly has any IP to offer and owning ChipEstimate.com will probably not change this.

Above and beyond of inventing buzzwords such as "Frankenstein Flow" – which means software from different vendors somehow glued together as opposed to a Synopsys-only flow – the marketing department of Synopsys doesn't sleep. To prove it, just type into Google "PVS Cadence" and "Synopsys IC Validator" and count the number of pages. PVS, which is 3 years old, gets 5750 hits, while IC Validator, which was just announced last month, gets 51,800 hits, plus references to a major customer NVIDIA.

Another very important move by Synopsys was the Interoperable PDK initiative, which caused TSMC to announce the first interoperable PDK, yet another heavy canon shot into the Cadence fortress, because Virtuoso is the cash cow for Cadence. Synopsys, with its new Orion Custom design tool, wants to get a part of that analog pie. That becomes immediately possible with the introduction of their PDKs, which are not based on proprietary SKIL (from Cadence), but are written in well-known Python and handled by Ciranovas’ PyCell Studio. Now the industry sees the consequences of taking Step A and creating the OpenAccess platform, but not taking Step B and promoting SKIL as an open standard.

So, Cadence is under attacked on multiple fronts, and what has been their response so far? Unfortunately, very little. Cadence is still busy with the outcomes of its dramatic reconstruction – bringing a new CEO up to speed, changing the contract model, changing the main database from CDB to OA – and now finds itself in the role of a distant second EDA vendor in the midst of an economic downturn. While there is widespread confidence that the new Cadence CEO, Lip-Bu Tan, has the abilities to lead the company in difficult times, there seems to be few ideas about how to answer Synopsys’ aggressive campaign in the appropriate ways.

Of course, not everyone is acknowledging the cold truth, claiming that Synopsys is just taking market share from Magma, that Cadence is not affected. Adding to the problem, the Cadence marketing efforts remains quite weak. CDNLive! in Munich this spring, for instance, went by virtually unnoticed at a time when these types of self-representation should be even more important and receive even greater attention – particularly as many people are now claiming that there will be no more DATE in Europe.

But the biggest problem overall is the inability of Cadence to compete financially. Cadence officials understand this and are trying to save as much money as possible – there have been office shutdowns, with numerous savings across a range of areas, and even rumors about a next round of layoffs. But none of these efforts motivate employees, who find it very hard and difficult to work productively in this kind of environment. Demotivated soldiers hardly ever win a war.

On the other side, one has to ask – what is Synopsys trying to achieve? Do they want to become the 800 Gorilla in the EDA Zoo? It is very unlikely that Cadence will go bankrupt – they are still too strong in several markets – but they could be forced to give up some of their business in various markets, so Synopsys will have monopolies in these areas. But is this what anyone really wishes for Synopsys, or for the rest of the industry? After all, we all know what a monopoly in the software market means – high prices, lack of innovation, and unfair EULAs (end-user license agreements).

Given all of this, I truly hope that Synopsys has a real strategy here, and is not just thinking quarter to quarter, without taking into account the consequences of what might happen if Cadence loses a great deal of its market share.

June 1, 2009

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The author of this article is an independent observer of the EDA Industry who wishes to remain anonymous at this time.

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