Authors: Yang Zeyuan, Ding Qi
The localization of the semiconductor industry chain is imperative, and the independent and controllable development of EDA is accelerating. New downstream scenarios are expanding the development space for EDA, bringing new investment opportunities to the industry. The mid-term scale of EDA in China is expected to exceed 30 billion, supporting a trillion-level semiconductor industry. With the enhancement of product capabilities, the richness of IP products, and the improvement of the industrial ecosystem, domestic forces are expected to rise rapidly. We are optimistic about the long-term opportunities for leading companies in the EDA field and recommend paying attention to primary market players such as Chipone, GigaDevice, Guowei Siershin, Guangli Micro, and Xinhao Semiconductor.
▍EDA: An Essential Tool for Chip Design, the Crown Jewel of the Semiconductor Industry Chain.
EDA (Electronic Design Automation) is aimed at the electronic design field, providing functions such as circuit design, routing, verification, and simulation, making it an essential tool for chip design. Software quality and ecosystem construction are core tools for leading companies to build EDA barriers, while semiconductor intellectual property (IP) is a key focus area for EDA companies, helping to reduce the difficulty of chip design and expand product boundaries. EDA originated in the 1970s, evolving from “manual design” to “human-computer interaction,” with continuously enriched functionalities. Modern EDA tools span the entire industrial chain of integrated circuit design, manufacturing, packaging, and testing, accelerating technological innovation in the integrated circuit industry, and are regarded as the crown jewel of the semiconductor industry chain.
▍Global Landscape: A $10 Billion Market Leveraging a $400 Billion Semiconductor Industry Chain, with the Three International Giants Building Barriers through Products/IP/Ecosystem.
According to data from the ESD Alliance and WSTS, the global EDA market size was $11.5 billion in 2020, while the global semiconductor market size was $440.4 billion, with EDA accounting for 2.6% of the semiconductor industry chain, a gradually increasing proportion that highlights the value of EDA. The three global giants, Synopsys, Cadence, and Mentor Graphics (now part of Siemens EDA), hold over 60% market share, with their core competitiveness lying in products/IP/ecosystem, among which the IP business is growing rapidly and is expected to become the main driving force for EDA development. Leading companies have formed a virtuous cycle of “profit accumulation – increased R&D – technology enhancement – cost reduction and efficiency improvement.”
▍Domestic Landscape: A Competitive Arena Dividing a Market of Nearly 7 Billion Yuan.
According to data from CCID Consulting and WSTS, the size of the Chinese EDA market was 6.6 billion yuan in 2020, while the size of the Chinese semiconductor industry market was $151.7 billion, with EDA accounting for only 0.6% of the semiconductor industry chain, far below the world average of 2.6%. Currently, the domestic EDA market is largely occupied by overseas leaders, with nearly 90% market share. Domestic EDA companies mainly provide point tools, and few EDA companies have full-process solutions for certain semiconductor products, resulting in a certain gap with overseas leaders. With the third transfer of the global semiconductor industry chain to China, the domestic EDA market is expected to grow rapidly and cultivate a number of high-quality domestic EDA companies.
▍Future Outlook: Multiple Measures to Drive Growth, Targeting a 30 Billion Market.
National policies, financial support, talent cultivation, and ecosystem construction are safeguarding the development of Chinese EDA software, leading to the rapid rise of domestic EDA companies. Comparing the historical and current development of the semiconductor and EDA industries domestically and internationally, we believe that the entire chain of semiconductor design/manufacturing in China will accelerate its development, and the penetration rate of EDA in the semiconductor industry is expected to increase from 0.6% to 2.6%, corresponding to a market size exceeding 30 billion, with a significant increase in the localization ratio. Domestic leading enterprises are expected to use point tools as a breakthrough, expanding to full-process products and solutions, accelerating the layout of IP, and building an upstream and downstream ecosystem, opening up broad growth space.
▍Risk Factors:
Risks of technological innovation and product upgrades falling short of expectations; high R&D investment leading to funding risks; intensified industry competition and market competition risks.
▍Investment Strategy:
The localization of the semiconductor industry chain is imperative, and the independent and controllable development of EDA is accelerating. New downstream scenarios are expanding the development space for EDA, bringing new investment opportunities to the industry. The mid-term scale of EDA in China is expected to exceed 30 billion, supporting a trillion-level semiconductor industry. With the enhancement of product capabilities, the richness of IP products, and the improvement of the industrial ecosystem, domestic forces are expected to rise rapidly. We are optimistic about the long-term opportunities for leading companies in the EDA field and recommend paying attention to primary market players such as Chipone, GigaDevice, Guowei Siershin, Guangli Micro, and Xinhao Semiconductor.
