Without domestically developed EDA tools, China's efforts in the semiconductor manufacturing industry are not likely to fully pay off.
Electronic design automation (EDA) comprises the software, hardware and services primarily used to design integrated circuits and other sophisticated electronic systems. EDA can be seen as a tool that transfers the concept to reality, it affects the entire chip manufacturing chain – from planning to testing.
There are three major kinds of EDA tools – those for simulation, design and verification.
The simulation tools are used to predict the performance of chips before actual implementation.
The design tools are combined with logical and physical processes, of which the logical processes are involved in connecting and assembling circuits. On the other hand, the physical part shaped the inter-connected geometric space to place the circuit production.
The verification tools will determine whether the transistors are connected correctly and whether the design is optimized, based on specific power, performance and area (PPA) requirements.
Market growth drivers
The EDA industry development is hugely dependent on demand in its distant downstream areas, such as the consumer electronics domain. In recent years, the rising demand for miniature devices, digital transformation across industries, and the rapid development of artificial intelligence (AI), combined with some political and economic factors, have boosted key EDA players' revenues. According to data released by Verified Market Research, the global EDA tools market reached USD 10.8 billion in 2020 and is expected to see a 9.05% CAGR between 2021 and 2028. Meanwhile, the number of IoT-connected devices deployed worldwide is expected to exceed 50 billion by 2025; the verification and design of such devices are the primary functions of EDA. Another trend is the miniaturization of devices: the increasing density of transistors on the integrated circuits enlarges the manufacturing complexity, making it harder for EDA tools developers to come up with customized solutions to meet their customers' needs.
The global EDA sector is highly concentrated, with the three main competitors – Synopsys, Siemens EDA (Mentor Graphics) and Cadence Design Systems – controlling more than 80% of the market. The growth of the 'big three' is inseparable from their M&A strategies, which mainly aim at buying up companies with competitive advantages in niche technologies. As per statistics on Crunchbase, the three have thus far closed more than 200 M&A deals.
In an attempt to break the Western EDA monopoly and minimize the reliance on the United States-made tools, China has been investing heavily in local projects. Unfortunately for the Asian nation, the faster route to build a successful EDA business (which is through M&As) has been somewhat blocked by the latest geopolitical developments. Therefore, independent R&D remains the only way the mainland's companies can build the necessary capabilities through.
Yet, China's EDA industry has several advantages over its overseas peers. One is the authority of the state, which enables the country to run and control the key projects in a centralized fashion. Furthermore, the dynamics of the EDA sector are different from those in the foundry segment, with some tectonic shifts: from the fundamental retooling twenty years ago to migrating EDA workload to the cloud more recently. As the rules of the game here once in a while undergo a systemic reshuffle, China can seize this opportunity to catch up.
Supply chain integration might be key
The number of China-based EDA companies has been increasing rapidly over the past few years. Various organizations have pulled together resources, with support from entities spanning the whole domestic supply chain.
Empyrean, the supplier of EDA and IP solutions, has partnered with SMIC's R&D center to build customized EDA tools. In collaboration with its customers, Empyrean has developed a system for analog circuit design, grabbing 1% of the global market.
Primarius Technologies, another notable local champion, became the first domestic EDA company to go public in December 2021. The company's EDA tools support advanced process nodes up to 3 nm and various semiconductor device types, including FinFET and FD-SOI. Its products have long been adopted by tier-1 fabs such as TSMC, Samsung and SMIC. As of the end of 2021, the company holds 24 invention patents and 61 software copyrights.
Bottom line
With the burgeoning demand for semiconductor devices, increasing design complexity and the spread of algorithmic technologies in the EDA market, more tools are being vertically integrated; the focal point has moved to optimize the design by minimizing errors and reducing the energy used while increasing the overall performance. While not looking globally competitive at the moment, China's current setup in this critical field is being constantly improved. Along with the semiconductor manufacturing equipment (SME), it remains a pain point in China's pursuit of microelectronic self-sufficiency.