The electronic design automation (hereinafter referred to as EDA) software tool industry is becoming an important breakthrough area for China to seek to solve the shortcomings of the chip industry chain.
The global market size of this industry is less than 10 billion U.S. dollars, and the net profit margin is less than 15%. However, it can drive a 500 billion U.S. dollar semiconductor industry chain and is regarded as a major opportunity by China's pioneers.
In March 2020, Wang Libin, who served as the deputy general manager of EDA giant Synopsys in China, decided to resign after working in the EDA industry for 20 years and founded the domestic EDA company "Xinhuazhang" as a Company founder, chairman and CEO.
He said that there were two reasons for leaving Synopsys to start a business:
First, seeing the country’s strong support for the “domestic substitution” of the EDA industry, he was very optimistic about the future prospects of EDA technology;
Another reason is that he believes that with the past 20 years of upstream and downstream industry experience and market relations, he has an understanding of customers' ideas and needs. These opportunities can help Xinhuazhang achieve commercialization.
Others who have similar entrepreneurial experience to Wang Libin include Liu Zhihong, chairman of Guanlun Electronics, Dai Wenliang, co-founder of Xinhe Technology, and Li Yanfeng, founder and CEO of Boda Micro. All three of them have worked in EDA III. Cadence, one of the giants, held important positions and then resigned to found a domestic EDA company.
On October 16 last year, after receiving government guidance funding support, "Xinhua Zhang" founded by Wang Libin announced that it had received Pre-A round financing of 100 million yuan; on November 9, Xinhua Zhang completed another nearly 100 million yuan in financing Pre-A+ round of financing; on December 9, it completed a round of financing of over 200 million yuan, less than one month apart. The three rounds of financing introduced many well-known funds such as Yunhui, Zhenge, Gaorong, Hillhouse, Wuyuan Capital (formerly Morningside Capital), SMIC Juyuan, and Songhe.
In addition to Xinhuazhang, many domestic EDA companies have "gathered" to raise funds this year. In April 2020, Banlun Electronics announced that it had completed hundreds of millions of yuan in Series A financing; in September, "Guowei Silxin", a subsidiary of Guowei Group, announced that it had completed hundreds of millions of yuan in financing, with investors including affiliates of large international funds. Xinxin Financial Leasing, Shanghai Semiconductor Equipment Materials Industry Investment Fund and other government investment institutions.
The rise in capital is no accident.
Back in May 2019, the U.S. Department of Commerce stated that it would comprehensively restrict Huawei from purchasing semiconductor components produced by U.S. software and technology. Affected by this, the cooperation between the three EDA giants and Huawei has been terminated.
The three overseas EDA giants refer to three American companies, Synopsys, Cadence, and Mentor (a subsidiary of Siemens). They occupy more than 64% of the global EDA market share.
EDA tools are an indispensable and important component in chip IC design. They are also the most upstream and highest-barrier part of integrated circuit design. Covers all processes including integrated circuit design, wiring, verification and simulation. It can be used to connect extremely complex circuit diagrams to create powerful CPU and GPU chips.
In the context of the continuous evolution of complex technologies such as AI and edge computing, the tens of billions of EDA industry is becoming an important "cornerstone" to leverage the US$500 billion semiconductor industry chain. EDA is also known as "Mother of Chips".
Therefore, the termination of cooperation between Huawei and the three giants means that the chip will not have matching domestic EDA software tools for advanced processes, and HiSilicon will not be able to create the next generation "Kirin core". Dongxing Securities described EDA in the report as "the United States' chokehold sword to restrict Huawei," highlighting the importance of this technology.
Against the background that China’s chip manufacturing ecology is in urgent need of “make-up lessons”, a game full of opportunities and adventures has quietly begun.
The current situation of the domestic EDA industry: slow technological development, shortage of talents, and inability to form a full chain
Public data shows that China’s EDA market size in 2019 was approximately 540 million, accounting for only 10.25% of the global scale. 5.3% of US$100 million.
As the world's largest electronic component production and sales market, the products of the three EDA giants account for more than 85% of the domestic market share (actually close to 90%), while domestic EDA software production and sales account for less than 10%.
At present, domestic EDA software companies mainly include Huada Jiutian, Guowei Group, Xinhua Zhang, Boda Microelectronics, Xinhe Technology, and Guolun Electronics, etc. The number and scale are very rare.
The main reason behind this is that the EDA industry has high technical thresholds, high cost elasticity, and high industry concentration, resulting in slow development of domestic technology, shortage of talents, and inability to form full-chain EDA tools, thus forming the current situation of Chinese IC design. The industry is increasingly inseparable from the embarrassing situation of the three EDA giants.
In fact, from the perspective of the development of the EDA industry, China has also experienced its heyday.