The present US government is experiencing a phenomenon unexpected by their economic gurus. The economic fix they engineered does not seem to be working. Although Congress provided $700 billion for the task, the executive branch is having difficulty deciding how to use all of the money and is finding that the money it already used is having no discernable impact. The financial crisis is getting worse, not better.

Supply-side economics is failing because the problem was not seen soon enough and it spread to the demand side of the economy.

What I think is important to our industry is that we seem to be falling into the same trap. Just yesterday, commenting on Mentor's third quarter financial results, Wally Rhines, its Chairman and CEO, stated that: "For the EDA industry, as always, one would expect a less severe downturn than for our customers, because design is normally the last area to be cut," Rhines said. "This is not just because of the value of designer staffing stability, but it's also driven by the need for new products whenever the recovery comes." For a full report see Mentor's Loss.

Wally's remarks are based on supply side economics that postulates that demand will always be available when the supply side decides to increase production or introduce new products. It also counts on the fact that the economic recession cycle will be short, certainly less than 18 months, and hopefully even less than 12. It has worked in the past, but it is not going to work this time.

Just like the US economy, the world's economy is suffering from a lack of demand. Consumers are not finicky, or just waiting for the introduction of improved products, they do not have money to spend, or, if they have money, they are reluctant to spend it. As a result, companies do not see any reasons to introduce new products, and every reason to cut costs instead.

The EDA industry cannot count, either for its recovery or its expansion, solely on the usual customers. First of all they are diminishing in number, and secondly they are heavily dependent on consumers' activity, the sector of the economy that will have a shallow ramp to recovery. The EDA industry must find a way to find additional demand for its services. Since it cannot dole out a few thousands dollars to each consumer in order to prime its traditional customers demand for products, it must find new customers.

i believe that we can do so only by turning our sights to application specific markets, instead of just concentrating on our traditional market: providers of generic hardware vendors (foundries and fabless companies) can we shorten the recession cycle and increase the positive slope of the recovery. This means providing systems solutions that use the products of our present customers (the ICs) for the hardware portion of the solutions, and our project management and software development expertise to develop subsystems that will be integrated in the final products of our new customers. We need to become partners with hardware developers and provide the software that adds value to their hardware and simplifies the task of their customers. I recently met with Jim Hogan during ICCAD and he expounded the same conviction: the era of pure hardware solution is gone, and software will play the major role in the next few years. We all agree that production costs for ASIC is so high that only a few products can be justified. In most cases, hardware is used as a platform for application specific software, aided by the fact that FPGAs allow the use of the most up-to-date manufacturing node.

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