I wrote last week that electronic design automation (EDA) tools are an Achilles’ heel in China’s bid for integrated circuit (IC) autonomy. While representing only a relatively modest $10 billion of the global IC market, these tools—dominated by a Big Three of US, or US-linked, firms—are critical to all IC design.
This EDA reliance poses a problem for not just Huawei and IC design subsidiary HiSilicon, not just for the other companies on the US entities list who have hopes to design their own chips, not just to all semiconductor companies in China, but to the Chinese government itself. Not to sound hyperbolic. All of China’s “self-made” chips are designed, verified, validated, etc. using foreign—mainly US—EDA tools. Chinese chips may grab the headlines, but the government knows China isn’t as self-reliant as they’d like it to be.
While-domestically focused companies can get away with pirated tools, this strategy doesn’t work if you want to be globally competitive. China needs to develop its own EDA tools. Local companies, and even Huawei, have been developing EDA tools, but we have not seen any notable achievements in public. Huawei’s developments are not very public, and the maturity and functionality of other domestic Chinese companies is still lacking.
China’s EDA lag
China has been investing in EDA R & D since the mid-80s when it developed the “Panda IC Design System”, however, I haven’t come across any company using this since I have been here and can only assume it wasn’t very successful. These days the more well-known companies, at least in China, include Huada Empyrean, Xpeedic, Semitronix, Platform-da, ProPlus, Microscapes, and Arcas-da.
But most of these companies cannot provide a complete design flow. The only example I know of is Huada Empyrean’s design flow for analog ICs, and in flat panel displays it works with some of the largest manufacturers including, Samsung, CSOT, HKC, and BOE. Other customers include Ricoh, SK Hynix, Marvell, and Sandisk.
Other than Huada’s relative success in its sweet spot the Chinese EDA industry in general has struggled, but why?
There are several reasons for the gap: Chinese tools are not comprehensive enough, there aren’t enough engineers with the skills to develop such software, market entry is difficult, and Chinese companies don’t have enough access to keep up with developments in manufacturing.
What holds Chinese EDA back?
Comprehensiveness: Chinese tools are simply not comprehensive enough, especially in digital design. Most of the digital design process is dominated by Synopsys and Cadence. Even if in one or two parts of the design flow Chinese companies have technically competitive products, it is difficult to break into the market as the Big Three have the ability to support customers’ development from spec to production. Chinese companies need to create a total solution to begin competing locally on any level, but even then, it will be difficult due to other factors.
Talent: Most of China’s EDA tool development engineers actually work for the Big Three: of the 1,500+ such engineers in China, only 300 (in Chinese) work for domestic companies. To put things further in perspective, Synopsys on its own globally has over 5,000 such engineers. Would-be EDA entrants also have to compete for talent with more lucrative industries. Application level software development at Alibaba, Tencent, etc. pays much better than a struggling Chinese EDA company.
Market Entry: With 95% of the domestic market, belonging to the Big Three, it is a highly difficult market to enter. Even if a full set of tools could be developed, in the short-term it will be difficult for any fourth company to gain any significant market share. Companies are used to certain design flows and engineers have used tools from the Big Three since university. These difficulties have made the domestic EDA industry a less attractive target for investors and, in turn, limited development.
Integration with Advanced Process Nodes: The link between design and process is a key part of an EDA flow. The Big Three work with the world’s leading wafer plants and foundries to develop a strong understanding of their processes, whereas domestic companies often only have access after a new process is developed and even then, not necessarily complete access. This makes it difficult for domestic companies to design and improve their software to compete with the Big Three.
Piracy: As mentioned above, EDA tool piracy is rife in China. These tools aren’t cheap. Silicon IP can’t be “cracked,” but tools can be. Any domestically focused company looking to save money will save it here. This also means the government may see EDA tool investment as a lower priority, as it can still have access to the tools for military chip design for example, even if bans are in place.
The government is beginning to support EDA tool development to some extent, and I expect support to increase over the coming years. Such companies can now claim back 30% of their development costs from the government, capped at RMB 30 million (about $4.3 million).
The government has also helped individual companies. For example, the Guowei Group has been granted RMB 400 million from the central and Shenzhen government for EDA development work. Also, Huada Emperyan has received hundreds of millions in funding over the past couple of years, not just from VCs but also from the state-run “Big Fund.”
While such government help is obviously welcome and is of some assistance it is nothing compared to the Big Three’s internal R & D investments, and if China really wants to become independent in this field much more needs to be done. The recently announced new Chinese government $29 billion semiconductor fund, or “Big Fund Mark Two” as I will call it, may go some way to help, but it remains to be seen how much of this will be invested into EDA. I suspect a small amount compared to how much is invested into memory, foundry capital equipment, and traditional fabless design.
China’s current predicament opens up opportunities for domestic companies. Government investment, coupled with a large domestic market, means they potentially have the environment to grow and improve. China needs to do this in a gradual way though, and not let such companies rely too much on government support. Switching everything to a Chinese equivalent (if one ever exists) could mean slower time to market and worse end products. Adopting a national procurement policy across the board is risky and could discourage innovation. Only once a domestic tool or entire design flow is on a more or less level playing field should they switch, and support should be based on certain milestones to avoid creating SOE-like inefficient operations.
I can see a future where domestic companies compete domestically within China for certain chips, e.g. analog designs or simpler IoT designs. Globally this will be more difficult though, and without access to the most advanced technologies from foreign wafer companies and foundries domestic EDA companies will always be at a disadvantage. China can reduce its dependency but at least for now, has no way of being completely independent in this space.