Company Profile
Synopsis Introduction
Synopsys is an American electronic design automation company and IC interface IP supplier, focusing on chip design and verification, chip intellectual property rights and computer security.
Company founded
Synopsis was born in the 1980s, when increasingly complex integrated circuits and electronic systems, coupled with the scarcity of qualified integrated circuit engineers, created demand for EDA software.
Synopsys founder Aart de Geus established an EDA team while working at General Electric’s Microelectronics Center. The team invented its own logic synthesis technology to replace the manual design process. With this new tool, GE can complete design work that previously took weeks, in minutes or hours, with better results.
Aart de Geus believes that “it completely changes the concept of digital design.”
Not long after, in 1986, General Electric decided to close the Microelectronics Center because it wanted to completely withdraw from the semiconductor business. Aart de Geus and his colleagues decided to go it alone and succeeded in convincing GE to invest them with logic synthesis technology and hundreds of thousands of dollars. The name of this company is Optimal Solutions, which is the predecessor of Synopsys.
A year later, the company was renamed Synopsys, the name coming from the English combination of synthesis optimization systems. As the company’s name suggests, Synopsys has had almost no competitors in the logic synthesis market since its establishment.
Importance of this company
As a company with a history of nearly 40 years, Synopsys can be said to have promoted the improvement of chip design productivity. The company makes software that is used to design and test chips used in everything from smartphones to cars to all forms of artificial intelligence. Almost all major chip manufacturers are using Synopsys’ design software.
The company’s main business
Synopsys uses Synopsys.ai’s full-end artificial intelligence-driven EDA suite and Synopsys Interface, Security and Silicon Lifecycle Management to manage IP services and help joint customers accelerate chip development.
The EDA industry is very important
What is EDA?
If you really don’t understand what EDA is, please be sure to read the introduction to EDA in another article I published before: “Three EDA oligopoly vendors: Synopsys, Cadence, and Mentor Graphics“.
The future is bright
The complexity of semiconductor production has also benefited software companies Synopsys and Cadence (ticker: CDNS), one of the two major software design automation software companies. In fact, despite being the leader in the field, Synopsys has not only maintained its growth rate over the past decade, it’s actually accelerated it.
Semiconductors are the oil of the 21st century, and EDA software is indispensable and the most important design tool in the early stage of semiconductor design. And given that Synopsys is one of only two major EDA software vendors, it should also be able to maintain solid profitability and strong long-term growth.
The most special thing about the EDA software industry is that its business has the rare characteristics of strong growth and low cyclicality at the same time, making it a coveted target for investors.
How big is the market?
The EDA and design intellectual property market will generate approximately $14.1 billion in sales this year. Risks to the market include the possibility that the U.S. government may impose more restrictions on the sale of technology products to China. Shares in Synopsys and Cadence have also been boycotted by investors for being overvalued.
M&A and become no. 1
Strategic acquisition
In the past 40 years, it can be said that the reason why Synopsys has reached its current position is inseparable from “buy, buy, buy”. Its status as an industry giant is largely due to a large number of strategic acquisitions. Since its birth in 1986, its historical acquisitions have exceeded one hundred times (including technology acquisitions).
Continuous mergers and acquisitions
In the 1990s, Synopsys made a total of about 20 acquisitions, of which major events included the acquisition of EPIC, the acquisition of deep sub-micron analysis technology and NanoSim simulation products. By the late 1990s, Synopsys had established an industry position in logic synthesis, simulation, and testing.
At the same time,Synopsys’ revenue is also growing rapidly. Revenue in 1990 was US$22.1 million, and by 1999 it had exceeded US$800 million. The growth rate was astonishing.
Entering the 21st century, Xinsi, which has tasted the benefits, has launched larger-scale mergers and acquisitions.
In 2002, it acquired Avanti for US$830 million. Taking advantage of the Avanti Astro tool, it has been integrated with Physical Compile and Physical Compile into a powerful IC Compiler, which can perform physical synthesis, clock tree synthesis, layout, wiring, yield optimization and correction in parallel. Function, directly connects Synopsys front-end and back-end tools.
So far, Synopsys has become the first leading EDA tool supplier in the history of EDA that can provide top-level front-end and complete IC design solutions, firmly occupying the second position in the EDA industry, and surpassed Cadence in 2008 to become the world’s largest EDA tool manufacturer.
In 2008, Synopsys merged with Synplicity, a leader in FPGA implementation and debugging, to enter the FPGA and rapidly growing prototyping market.
Since then, Synopsys has successively acquired a series of related companies such as ORA, Magma, and SpringSoft, and integrated technologies to create the powerful Synopsys today.
It is worth noting that Synopsys also completed another important acquisition this year.
On December 12, Synopsys officially acquired Imperas Software. Imperas is a British company specializing in virtual software simulation. It has strong technical strength in the field of RISC-V processor technology, with its advanced technology and free RISC-V software. V instruction set simulator riscvOVPsim is famous. This simulator allows engineers to model and simulate RISC-V processors without the need for actual hardware equipment, providing convenience for software development and testing.
This acquisition marks another important step in Synopsys’ strategic layout in the RISC-V field, making full use of Imperas’s technical advantages and expertise, and combining it with its own VCS simulation and Verdi debugging tools to better meet the needs of RISC-V The needs of customers in the processor verification field further consolidate Synopsys’ position in the RISC-V ecosystem.
On January 16, 2024, it was announced that it had acquired Ansys, the fourth largest EDA company, for US$35 billion. Ansys has a considerable market share of 42% in the field of simulation software, and it also holds the top spot in the field of CAE. Even in the field of EDA, Ansys has successfully ranked fourth in the industry.
Market share no. 1
Synopsys has a very long history of mergers and acquisitions, and it was during this turbulent acquisition process that it slowly succeeded in leaping from the second place in the industry, surpassing Cadence, to becoming the leader in the EDA industry.
Synopsys accounts for 32.14% of the global EDA market, far exceeding the 23.4% of Cadence, and the 14% of Siemens EDA. Synopsys’ market dominance is difficult to shake for the time being.
Today, Synopsys is a member of the S&P 500 Index, with fiscal 2023 revenue of $58.43 billion and non-GAAP net profit of $1.737 billion.
Acquisition of SpringSoft
Synopsys established a branch in Taiwan in 1991 and acquired SpringSoft in 2012, including verification tool Verdi and design tool Laker.
How does Synopsys make money?
Main products
Its business mainly has three major segments: first, EDA tools, including advanced chip design, verification, system integration and IC design software; second, design IP; third, software integrity, covering software security and quality solutions, as well as professional services.
Among them, EDA tool revenue accounts for a full 60%. Design IP revenue accounts for approximately 30%, while software integrity revenue accounts for approximately 10%. In terms of regional distribution, North America accounts for half of Synopsys’ revenue, Europe, South Korea, and China each account for 10%, and the rest is a weak corner of other regions.
Revenue sources
Synopsys generates revenue through its EDA software and design intellectual property (IP) products, which license optimized Synopsys designs that designers integrate as building blocks for more complex chipsets. Subscription and licensing revenue combined is a very capital-light business, resulting in operating margins in excess of 20%.
Of course, chip complexity is not slowing down, but accelerating, with the emergence of new innovations such as “dielets,” full-gate transistors, and other novel design features for artificial intelligence and other new applications. This is good news for Synopsys’ EDA software and licensing revenue in the next few years.
RISC-V
In November 2023, Synopsys officially announced its entry into RISC-V: releasing a new processor and joining the RISC-V International Board of Directors. Expanding its ARC processor IP portfolio to include new RISC-V ARC-V processor IP enables customers to choose from a variety of flexible, scalable processor options to achieve optimal power performance efficiency for their target applications. Synopsys leverages decades of experience with processor IP and software development kits to develop new ARC-V processor IP, which builds on the proven microarchitecture of Synopsys’ existing ARC processors and features expanding RISC – Additional advantages of V software ecosystem.
Relying on large customers
Synopsys has been benefiting from strong design wins thanks to its strong product portfolio. The company’s penetration of emerging and growing artificial intelligence chip companies is a major growth driver. As the need for enhanced security measures continues to increase, demand for Synopsys solutions is surging given the increasing security threats in interconnected systems loaded with software. Strong growth in software-based verification for traditional semiconductors and emerging systems companies focusing on in-house design is an advantage.
Almost all major chip manufacturers are using Synopsys’ design software. Synopsys’ customers include Nvidia, AMD, and Intel.
ARM
Synopsys has joined Arm Total Design, a key ecosystem built by Arm to facilitate the frictionless delivery of custom systems on a chip (SoC) based on Neoverse CSS. The ecosystem brings together industry leaders—IP vendors, EDA tool providers, ASIC design houses, foundries, and firmware developers—to simplify and accelerate the creation of Neoverse CSS-based systems.
Samsung
In June 2023, Synopsys expanded its agreement with Samsung Foundry to develop a broad portfolio of intellectual property (IP) products that will reduce design risk and accelerate die success for automotive, mobile, high-performance computing and multi-die designs.
ReversingLabs
In May, the company signed an agreement with ReversingLabs, a Massachusetts-based software supply chain security (“SSCS”) platform provider. Under the deal, Synopsys is now authorized to resell ReversingLabs’ SSCS platform and its Software Integrity Group’s Black Duck solution.
TSMC
In April, Synopsys strengthened its collaboration with TSMC and Ansys on the design and manufacturing of multi-die systems that integrate heterogeneous die in a single package, providing designers with a way to efficiently deliver innovative products with unprecedented capabilities. By reusing proven molds, designers can reduce risk, accelerate time to market, and quickly create new product variants with optimized system power consumption and performance.
Microsoft
You read that right, Microsoft has also been vigorously developing its own chips in recent years. Of course Synopsys will not let go of this big customer, especially since Microsoft is the second largest company by market value, with mountains of cash and countless product lines. The chips developed by Microsoft, so far known to the outside world, include various types of ASICs for personal computers, artificial intelligence, wearable devices, data centers, communications, etc.
In late 2023, Synopsys also partnered with Microsoft to create its own chip design assistant.
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