The amount of software pirated each year is roughly 10 times the yearly revenues of the entire EDA industry, according to the nonprofit Software & Information Industry Association (SIIA). Although those purloined programs come from vendors such as
Microsoft, EDA itself is not immune from pilferage. The EDA industry's lackluster revenue growth during the recent semiconductor recovery may be the result of the increased use of bootlegged EDA in third-world design firms. And short of making a complete change in the way they deliver their software, there's little EDA vendors can do about the problem.
"I'm really concerned about piracy," says
Magma Design Automation chairman Rajeev Madhavan. "I've seen Web sites in China offering CDs containing entire EDA suites for a fraction of what a licensed version of the software costs." Far from being clandestine or secret, such sites are brazen in their claims. "One site even promised to offer upgrades and new versions over time," he marvels.
The growth of EDA software piracy is the result of two trends. First, the globalization of the semiconductor industry has greatly increased the amount of design work being done outside of the United States. Much of that outsourced design work is taking place in the third world, due to the lower cost of paying skilled engineers in those regions. This has created a miniboom in EDA startups, according to
United Microelectronics Corporation CEO Jackson Hu, who estimates that there are currently about 500 small design firms in China alone.
The second trend that's driving EDA piracy is the industry-wide effort to make EDA software easier to install and use. EDA used to be of such Byzantine complexity that only an insane person would have tried to use it without the helping hand of a friendly (and well-paid) vendor. Although EDA software is unlikely to ever be shrink-wrapped, like word processing software, the advent of common data models and transfer protocols has made it easier for shady designers to slip a bootlegged program or two into the tool flow.
How bad is the problem? David Thomas, vice president and general manager of the SIIA's software division, admits that the SIIA lacks specific figures on EDA piracy but notes that "the more expensive the software, the more likely is it to be pirated." And software piracy is extraordinarily prevalent in the third world. The SIIA estimates that the ratio of pirated software to legitimately purchased software runs as high as 9 to 1 in China, with similar ratios elsewhere in the region.
EDA worldwide purchasing patterns illustrate the overwhelming scope of the problem. As shown in the chart ("Year-to-Year EDA Revenue Growth Rates," below), North American EDA software revenues for the final quarter of 2004 (the last available figures) shrank by 14 percent ($85 million), clearly reflecting a large-scale exodus of design work to elsewhere in the world. However, even though most of that design work has ended up in the third world, EDA revenues outside of North America, Western Europe and Japan grew only 23 percent ($24 million). Although some outsourcing may have migrated to Western Europe, one would expect EDA revenue growth in the third world to be much more dramatic. The lackluster growth in "rest of the world" EDA revenues suggests that third-world foreign design firms aren't paying for 100 percent of their EDA software.
The impact on the industry is enormous. If EDA vendors had eliminated piracy in 2004, revenue growth in the third world might have doubled, pouring an additional $466 million into the coffers of EDA vendors. This would have given the EDA industry a 2004 growth rate of 15 percent, more than twice the 6.9 percent rate of the software industry as a whole, according to figures from market research firm IDC.
What should EDA vendors do? ,b>Cadence Design Systems CEO Mike Fister believes that the best strategy is to keep EDA software so clunky that designers will continue to pay money simply to have access to the developers. Magma's Madhavan, however, notes that EDA users are clamoring for software that's easier to install and use, even though that means that EDA vendors must suffer from piracy. "Relying on services as a crutch is a reflection of sloppy tool design, not an antipiracy strategy," he says.
Long-term, Fister believes, the EDA industry will need to convert to an application service provider (ASP) model, in which the software resides on a vendor-controlled server rather than on the designers' own systems. The SIIA's Thomas agrees that using the ASP model is the only way to completely eliminate piracy. "Every other copy-protection method can and will be subverted by hackers," he promises.
Unfortunately, the EDA industry, with its focus on creating discrete tools, is many years away from an ASP model. This means that, for the time being, the EDA industry must either release half-baked tools that require intensive support or suffer from the ongoing plague of software piracy. Says Madhavan, "It's a real problem that's not going to go away anytime soon."
YEAR-TO-YEAR EDA REVENUE GROWTH RATES (4Q03 TO 4Q04)
North America: -14%
Western Europe: 33%
Japan: 2%
Rest of world: 3%
SOURCE: EDA CONSORTIUM
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