EDA software will become the next battlefront in the US-China chip war

EDA software is a small but mighty part of the semiconductor supply chain, and it is mainly controlled by three Western companies. This gives the United States powerful leverage, similar to how it wanted to restrict access to lithography machines – another crucial tool for chipmaking – last month. So how did the industry become so America-centric, and why can’t China just develop its own alternative software?

What is EDA?

Electronic design automation (also known as electronic computer-aided design or ECAD) is the specialized software used in chip manufacturing. It’s like the CAD software that architects use, except it’s more sophisticated, dealing with billions of tiny transistors on an integrated circuit.

Screenshot of KiCad, a free EDA software.

JON NEAL/COMMONS WIKIMEDIA

There is no one dominating software that represents the best in the industry. Instead, a series of software modules are often used throughout the design flow: logic design, debugging, component placement, cable routing, time and power optimization, verification, etc. Because modern chips are so complex, each step requires a different software tool.

How important is EDA for chip manufacturing?

Although the global EDA market was only valued at around $10 billion in 2021, making it a small fraction of the $595 billion semiconductor market, it is uniquely important to the entire supply chain.

The semiconductor ecosystem today can be thought of as a triangle, says Mike Demler, a consultant who has worked in the chip design and EDA industry for more than 40 years. On one side are foundries or chipmakers like TSMC; at another corner are IP companies like ARM, which make and sell reusable design units or layouts; and in the third corner are the EDA tools. All three together ensure the smooth running of the supply chain.

From the name, it might seem that EDA tools are only important for chip design companies, but they are also used by chip makers to verify that a design is feasible before production. There is no way for a foundry to make a single chip as a prototype; it has to invest months of time and production, and each time hundreds of chips are made on the same semiconductor base. It would be a huge mess if they turned out to have design flaws. Therefore, manufacturers rely on a special type of EDA tool to perform their own validation.

Who are the major companies in the EDA industry?

There are only a few companies selling software for every step of the chip manufacturing process, and they’ve dominated that market for decades. The three main companies – Cadence (American), Synopsys (American) and Mentor Graphics (American but acquired by the German company Siemens in 2017) – control around 70% of the global EDA market. Their dominance is so strong that many EDA startups specialize in one niche use and then sell to one of these three companies, further cementing the oligopoly.

What is the US government doing to restrict EDA exports to China?

The outsized influence of US companies over the EDA industry makes it easy for the US government to curtail China’s access. In its latest announcement, it pledged to add certain EDA tools to its list of prohibited technologies for export. The United States will coordinate with 41 other countries, including Germany, to implement these restrictions.

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