Synopsys Inc, a global provider of electronic design automation (EDA) software for semi-conductor manufacturing, has judiciously used the inorganic growth route to scale up in the last 25 years. The $1.5-billion company, which has so far acquired 50 firms globally, including eight that have strong engineering presence in India, is narrowing on a few target companies. In an interview to K Rajani Kanth, Global President and Chief Operating Officer Chi-Foon Chan charts the company’s roadmap for India. Edited excerpts:
Synopsys had acquired systems design company Coware and memory IP (intellectual property) leader Virage Logic in the last one year. Are you lining up more acquisitions?
We are currently a conglomerate of over 100 companies, including subsidiaries that came along with our acquisitions. We have acquired five companies last year, globally, and are always pursuing acquisition opportunities here, especially in specialised technologies and core tools like implementation and verification, IP and systems. We would expect something or the other (buyouts) this calendar. There are still six more months left. We have $850 million cash and cash equivalents and zero-debt on our books, which we can leverage to acquire some companies.
The company has a venture fund. How big is it and how does it work?
The Synopsys Venture Fund invests in venture-funded technology companies that are strategically aligned with Synopsys. It’s a $50-million non-active fund. Unlike other venture capitals (VCs), we don't want to be the lead investor, but want to support the ecosystem. We invest $1 million in a startup and take some equity. So far, we have invested in 10 startups globally.
Are you planning to fund startups in India?
Yes. We are looking at opportunities to financially support startups in India as well. The EDA industry worldwide is pegged at $4 billion and the top three companies have $3.5 billion of that. Now, there are 300 companies going after the remaining $500 million. So, obviously one of their business models is to get acquired by the top three. However, most of the companies come to us for design tools. We have different investment models to help them; either through extending financial support or providing our EDA at a highly-discounted price.
What is the potential you see for IPs and systems in India?
It is the multinational companies that are driving this business. One of the key things to watch is, there are a lot of local companies with talent and capital available. We are seeing a niche market there. We want to focus more on IPs and systems, both through our acquisitions and organically, as demand for system-on-chip methodology is increasing due to the growth in consumer electronics, especially PCs, mobiles and tablets.
How is your relationship with Indian universities panning out?
We have a couple of ways to address. One is the Strategic Manpower Development Programme (SMDP), initiated by the information technology ministry aimed at making India a significant player in VLSI (very-large-scale integration) design and related software, whereby certain set of universities were given our EDA tools to teach at the master’s and bachelor’s level. SMDP-I has 19 universities in the first five-year period and now they are talking to about 50 universities. We, through our independent programme, also work with 170 universities in India. We don't give EDA tools for free as they lose value so we give it just for a token amount and enable access to our entire suite of tools. The whole idea is to create next-generation VLSI engineers in the country. We are seeing good results coming out through these programmes and would develop deeper relationships with the existing ones.
What are the vertical and location-based revenue breakup and where does India stand in the overall picture?
Implementation contributes $900 million to our overall revenues while IP and systems together account for $300 million. Geography wise, the US leads the league with 50 per cent, followed by Asia-Pacific (India, China, Taiwan and Korea) with 18-20 per cent and Europe and Japan with five per cent. While the US and the Apac are very strong markets with significant growth year-on-year, Japan and Europe are declining.