Why EDA Invests in IP

Randy Smith, Sonics
EETimes (4/7/2015 07:00 AM EDT)

Do the differences between the semiconductor IP and EDA industries really outweigh the similarities as one recent EE Times blog post claimed? Or, is it possible that the two industries hold greater business growth opportunities as complementary partners?

When you examine key customer value propositions that the two industries share, such as improving design performance, increasing quality of design results, accelerating time-to-market, and raising engineering productivity, it is not hard to see why EDA companies invest in IP. From the user and customer perspective, the benefits of IP and EDA products are similar and the business outcomes they deliver are synergistic. So, the trend of EDA companies pursuing development and acquisition of IP is one that should be expected to continue.

It has been well documented that the industries apply different technology monetization models. EDA is primarily a software tools business with a subscription-based model. IP is primarily a soft programmable block or hardened core business with a license fee and royalty per chip model. Traditionally, IP companies have received higher market valuations due to their monetization models and their relatively more visible and quantifiable contribution to customers’ chip design projects. The extensive software/hardware ecosystems that companies like ARM create around their IP are also a strong reason for the higher valuation of these companies.

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