The annual CEO forecast included the gang of the big three -- Aart de Geus of Synopsys, Lip-Bu Tan of Cadence, and Wally Rhines of Mentor Graphics -- plus John Kibarian of PDF Solutions as the CEOs and Jay Vleeschhouwer from Ticonderoga Securities as the dominating moderator.

Vleeschhouwer showed his prowess as a financial and industry analyst by declaring that EDA companies revenues were down by about 10 percent to $4.15 B. This is the second year that revenues have dropped, driven by a 7 percent drop in semiconductor R&D spending in '09. 2010 should be better as semiconductor R&D spending should grow in the mid-single digits, leading to growth in the EDA businesses. He expects a full recovery to take 6-8 quarters and organic growth to be a few percent. Current book-to-bill ratio is about 1 and pro forma operating profits for the industry was about $390 million or about 13 percent of revenues. Margins should go up in 2010.

After this lead-in, there was little for the CEOs to say. Cadence's Tan has been meeting with customers and has found that they are looking for ways to improve profitability and more importantly, survival, as the costs of new developments requires a product volume between 60 and 80 million units. Users are looking for business and collaboration partners to help close the profit and productivity gaps by improving time to market and managing unit and design costs. Cadence is trying to help by focusing on teamwork and addressing mixed signal flow integration.

Rhines stated that Mentor is in a quiet period, as they haven't announced their quarterly numbers yet. He proceeded to review his presentation from last year and reiterated that semiconductor R&D spending lags behind revenues, which will have a continued drag on the eventual recovery.

PDF's Kibarian noted the efforts to move to the newest technologies and the challenges of bringing up manufacturing at the newest nodes. Capital expenditures for logic manufacturing has been flat and the fabs were running at about 30 percent of capacity in the year just ended. For 2010, there are two possible outcomes: we will continue to have excess capacity or return to sustainable growth. In addition, the industry is trying to determine the composition of the 28nm node and the need to manage variability at that node.

Kibarian said that TSMC is planning capital expenditures of about $4.8B this year resulting in global 300mm capacity of 1.6M wafers. He wondered if we can design to this and existing production capacity. We have had two good years of growth in logic and new products are continuing to be introduced. These trends, plus the requirements for low power design, will make the first half of '10 look good. The issue is overall capacity. If utilization remains below 80 percent, the industry will have overshot the capacity needs but if utilization goes above 85 percent, the industry will continue to grow.

Synopsys' de Geus suggested the industry is at a turning point. We don't have answers to all of the question and need to work more closely with users. The technologies have changed from scaled complexity—just more (or Moore)—to systemic complexity. The industry has gone from transistors, to gates, to RTL, to IP and reuse, and now to hardware-software systems. Drivers for the industry include computing, television as it moves towards 3D, and networking. All these products have lots of smarts integrated into them and innovation will be the biggest push to enable more functionality. EDA will continue to be the center of gravity in high technology for the next decade.

De Geus added the economy is shifting. World leaders are worried about the danger of stopping stimulus too fast but also must consider that stimuli means increases in debt. The whole world is going to be pushing for increased productivity and reduced prices.

After the individual statements, Vleeschhauer mostly ignored Kibarian and grilled the other three CEOs about semiconductor industry consolidation and its effects on EDA, demand drivers for the overall electronics industry, alignment of company resources towards end markets, how the companies were balancing long-term versus short-term growth, defining the next big EDA sector, and what are their next acquisitions. The CEOs mostly gave non-committal and ambiguous answers to these questions, as they are not the type of questions that companies normally discuss publicly.