Semiconductor industry research: EDA tools: the foundation of the chip industry, domestic rapid breakthrough [institutional review]

EDA (Electronic Design Automation, Electronic Design Automation (EDA), which is at the top of the chip industry, is a typical technology-and talent-intensive industry. EDA tools connect all aspects of IC design, manufacturing, closed testing and so on. It is an indispensable tool in the design and production process of all kinds of chips. The global market space for EDA tools is US $11.5 billion in 2020, and the domestic market is 9.3 billion yuan. The domestic compound growth rate is expected to reach 12% in the next five years.

EDA market is highly concentrated and expands rapidly through high R & D investment and mergers and acquisitions. Overseas giants Synopsys (New think Technology), Cadence (Caden Electronics) and SiemensEDA (acquisition of MentorGraphic) have a global market share of nearly 80%, have complete full-process EDA tools, and some process tools have absolute advantages in subdivision areas. EDA's revenue mainly comes from regular (usually 3 years) EDA software license and IP license, which is less volatile than the whole downstream semiconductor industry. The development of EDA requires long-term R & D investment, talent training and patent accumulation, with R & D expenses accounting for 40% of revenue, high barriers and a gross profit margin of about 80%. In addition, the development history of EDA is a history of mergers and acquisitions. EDA enterprises, represented by Cadence/Synopsys/Mentor, have acquired nearly 300 times in the past 30 years, and their product lines have been rapidly improved through mergers and acquisitions.

China has laid the foundation for the rapid development of EDA, with the rapid development of downstream industries, breakthroughs in EDA enterprise technology from point to area, and the continuous return of talents, the trend of localization of EDA is expected to accelerate. With the rapid development of China's integrated circuit industry, the income of the integrated circuit design industry and the number of design enterprises in mainland China are increasing rapidly, and the production capacity of wafer factories has entered a period of rapid expansion. EDA tools will also benefit from the highly active downstream market and continue to expand the market scale. Mainland China's EDA market accounts for 0.9 per cent of the entire semiconductor industry, well below the global 2.6 per cent. According to Sadie consultant data, the sales of domestic EDA tools increased year by year from 2018 to 2020, and the sales of domestic EDA tools reached 910 million yuan in 2020, including 150 million yuan abroad and 760 million yuan in China. In addition, domestic EDA enterprises continue to absorb relevant talents. From 2018 to 20, the number of local talents in China's EDA has increased rapidly from 700 to 2000.

Huada nine days for the domestic EDA industry leader, Jilun Electronics, Guang Liwei and other companies are competitive in some fields. Huada Jiutian inherited the core technology of the first domestic EDA Panda system, and the core team has been in the industry for 30 years. At present, it has achieved full process coverage in the field of analog circuits and flat panel display (FPD). The domestic manufacturer Zhonghua Jiutian accounts for more than 50% of sales. In addition, EDA companies have emerged in China, such as Guanlun Electronics, Guangli Microelectronics, Guowei Group, Core and Semiconductors, Core Huazhang, Core Vision and so on. Jilun Electronics has been listed for trading on December 28th, 2021, and Huada Jiutian, Guangliwei and Silxin have submitted IPO applications. In the field of integrated circuits, Huada Jiutian EDA tool system is the only one in China in the whole process of analog circuit design; Kanlun Electronics is competitive in the international market in device modeling and circuit simulation, with downstream customers including TSMC, Samsung, SK Hynix, etc.; Guangli Micro provides chip yield improvement and electrical testing solutions for the semiconductor industry.

Investment suggestion

We suggest that we should pay attention to the domestic EDA leader Huada Nine days, EDA manufacturers with global competitiveness in some areas, Guanlun Electronics and Guang Liwei.

Risk hint

The risks of technological innovation and product upgrading are less than expected; the industry competition aggravates the risk; the loss of core technical personnel and the risk of rapid rise in personnel costs.