Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Cadence Design Systems aims to cash in on new custom-chip era

Stock MarketsJan 18, 2022 07:27PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. The logo of Cadence Design Systems is pictured outside the company's offices in San Jose, California, U.S., January 31, 2020. Picture taken January 31, 2020. REUTERS/Stephen Nellis

By Stephen Nellis

(Reuters) - Microchip (NASDAQ:MCHP) design software maker Cadence Design (NASDAQ:CDNS) Systems Inc is betting on growth from automakers and other chip users strapped by global supply shortages who face mounting competition from rivals such as Tesla (NASDAQ:TSLA) Inc and Apple Inc (NASDAQ:AAPL) that design their own chips.

Cadence and rivals Synopsys (NASDAQ:SNPS) Inc and Siemens EDA are at the center of a microchip industry shift as cloud computing providers, software makers and others who traditionally have bought semiconductors from a few big companies now want to draw up their chips own in-house.

Tesla, Apple and Alphabet (NASDAQ:GOOGL) Inc's Google are among the leaders of in-house design. Executives across industries have taken note of how custom chips help set products apart, said Anirudh Devgan, who became Cadence's chief executive last month. The company counts Tesla as a client and analysts say Apple is as well.

Cadence shares fell 5% on Tuesday in a down market.

Developing a chip costs around $100 million, but artificial intelligence is reducing costs, even as traditional semiconductor firms keep raising prices, with many chips selling for more than $100 each.

"How many car companies have more than 1 million units? A lot of them," Devgan said in his first interview as CEO. "At some volume, it's a no-brainer to do it because of cost, because of schedules and more importantly, for customization."

Bottlenecks in the global semiconductor supply chain that have hobbled production at most major automakers for over a year also are forcing companies like Ford Motor (NYSE:F) Co and General Motors Co (NYSE:GM) to rethink their approach to chip procurement.

The industry is consolidating hundreds of small micro-controller chips that crept into cars piecemeal over decades into a smaller number of more powerful and costlier chips.

Tesla has always used a consolidated approach, and the results contrast sharply with those of other automakers. Despite a global chip shortage, Tesla reported record fourth-quarter production, in part because close control of its chip and system designs allowed the company's engineers to quickly rewrite code to use chips that were available.

Cadence makes electronic design automation (EDA) software that translates ideas on how a chip should work into the physical layout of tens of billions of transistors crammed onto a few millimeters of silicon. The resulting chips are often manufactured by third parties like Taiwan Semiconductor Manufacturing Co.

In decades past, most of Cadence's customers were traditional semiconductor firms. But the newer breed of "systems" customers, which dream up full products in which chips play a central role, now account for about 40% of Cadence's revenue, said Jay Vleeschhouwer, head of software research for Griffin Securities.

Cadence has branched out to offer those customers software that goes beyond chip design to helping fit their custom chip into a full product. Cadence has acquired apps for tasks like packaging finished chips to put onto circuit boards and making sure the chips will not overheat and melt in daily use.

The allure of such functions "extends to automotive, aerospace, industrial equipment, all of the makers of products" in which chips eventually reside, said Joe Vruwink, analyst with Robert W. Baird & Co.

With the transformation of cars into rolling computers all but assured, automakers and other chip-design newcomers will face stiff competition when hiring chip architects, who are some of the most fought-over talent in the tech industry.

As little as four years ago, Vleeschhouwer said, EDA companies were not excited about the automotive market because it used less complex chips.

Now, multiple EDA firms "have made pilgrimages to Detroit and other centers of automotive development, and they're making investments in those areas," he said. "It's a consequence of the fact that the complexity of automotive systems, at the system level and the chip level, has become highly motivating."

Cadence Design Systems aims to cash in on new custom-chip era
 

Related Articles

Third possible case of monkeypox found in the U.S
Third possible case of monkeypox found in the U.S By Reuters - May 22, 2022 1

By Rich McKay ATLANTA (Reuters) - Health authorities said they may have found a third case of the monkeypox virus in the United States and are running tests on a patient in South...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email