Photo by Mohamed Nohassi on Unsplash

What Is Electronic Design Automation (EDA) Software?

Chips contain more than a hundred billion transistors these days compared only a few thousand back in the 1970s so it is now impossible to create these designs manually like it was done back then. Electronic design automation (EDA) software is used today to help electrical engineers design and develop ever more complex chips using this specialized software.

What Are the Market Shares of the Major EDA Companies?

The category is concentrated primarily in the hands of three vendors, two pure-play providers, Cadence Design Systems (CDNS) with 40% market share, Synopsys (SNPS) with 30% and Siemens EDA with approximately 20%. Ansys (ANSS), while not a pure-play operation, has about a 6% market share with another 10 companies making up the remaining 4%.  Synopsys has announced that it is acquiring ANSS (see here) which will increase its market share to approximately 36% at that time.  Siemens EDA operates within Siemens Aktiengesellschaft (SIEGY) so no specific financial information is available on Siemens EDA and, as such, is not included in our new Pure-Play Custom Design Software Stocks Portfolio.

How Big is the Total EDA Addressable Market?

The market size increased to $13B in 2023 and, according to research by Deloitte, is anticipated to reach $21.6B by 2028 which represents a compound annual growth rate (CAGR) of 11% between now and then.

What are the Major Factors Contributing to EDA's Expected Growth?

New chip manufacturing foundries will be coming online around the world over the next few years to reduce the dependence on the current few plants (primarily TSM, UMC and GFS) in operation and to meet the dramatic growth in the use of chips and they will all have to integrate EDA tools to do so. According to Deloitte, for example, the 12-fold increase in electric vehicle (EV) sales by 2030 will require 2-5x more chips than current combustion engine automobiles.

The Pure-Play Custom Design (EDA) Software Stocks Portfolio

Below are the performances of the only pure-play EDA stocks last week and YTD plus some interesting commentary on each:

1. Cadence Design Systems (CDNS): UP 9.7% last week; UP 40.4% YTD
   • Design Software Stocks: Cadence Vs The Rest
2. Synopsys (SNPS): UP 3.3% last week; UP 14.6% YTD  
   • Synopsys Fueling the AI Revolution

Portfolio Average: UP 5.4%, on average, last week and is now UP 22.4% YTD, on average.

Conclusion

The demand for EDA software is anticipated to maintain robust growth, with double-digit increases expected to continue throughout the decade as the major semiconductor companies begin to require, and acquire, custom-designed chips for their new products. This growth trajectory is likely to be stable, as the demand for EDA software is less susceptible to the fluctuations of economic cycles than semiconductor demand while chip. This makes the EDA software market a strategic investment avenue for those looking to capitalize on the AI chip industry’s expansion.

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