Synopsys: Silicon Design

Synopsys, Inc. provides electronic design automation software products used to design and test integrated circuits. The company offers Fusion Design Platform that provides digital design implementation solutions; Verification Continuum Platform that provides virtual prototyping, static and formal verification, simulation, emulation, field programmable gate array (FPGA)-based prototyping, and debug solutions; and FPGA design products that are programmed to perform specific functions. It also provides intellectual property (IP) solutions for USB, PCI Express, DDR, Ethernet, SATA, MIPI, HDMI, and Bluetooth low energy applications; analog IP, including data converters and audio codecs; and system-on-chip (SoC) infrastructure IP, datapath and building block IP, and verification IP products, as well as mathematical and floating-point components, and Arm AMBA interconnect fabric and peripherals. In addition, the company offers logic libraries and embedded memories; configurable processor cores and application-specific instruction-set processor tools for embedded applications; IP subsystems for audio, sensor, and data fusion functionality; and security IP solutions. Further, it provides Platform Architect solutions for SoC architecture analysis and optimization; virtual prototyping solutions; and HAPS FPGA-based prototyping systems, as well as a series of tools used in the design of optical systems and photonic devices. Additionally, the company offers security testing, managed services, programs and professional services, and training that enable its customers to detect and remediate security vulnerabilities, and defects in the software development lifecycle, as well as manufacturing solutions. It serves electronics, financial services, automotive, medicine, energy, and industrial areas. The company was incorporated in 1986 and is headquartered in Mountain View, California.

Executive Summary

Synopsys (SNPS) and Cadence hold a duopoly on EDA (Electronic Design Automation). You literally cannot design a modern chip without their software. As Apple, Google, and Amazon all start designing their own custom AI chips, the customer base for EDA expands from just "Chip Companies" to "Everyone."

1. The Duopoly

There is no third player. Switching costs are infinite.

Pricing Power: EDA software is a tiny cost relative to the value of the chip, but failure is catastrophic. Nobody connects a multi-billion dollar chip design project on "cheap" software.

2. IP Blocks

Synopsys sells "pre-made" blocks of silicon logic (like USB controllers or PCIe interfaces).

Design Re-use: Instead of designing a USB port from scratch, engineers just license it from Synopsys. This is high-margin royalty revenue.

Risks to the Thesis

China: Developing their own EDA tools to escape US sanctions.
Ansys Acquisition: Synopsys is buying Ansys for $35B. It's a huge, complex merger that could distract management.

Conclusion

Synopsys is the safest way to play the "Custom Silicon" boom. It is a tax on innovation.

Synopsys: Silicon Design

Executive Summary

1. The Duopoly

2. IP Blocks

Risks to the Thesis

Conclusion

SNPS Valuation Model

Synopsys, Inc. (SNPS)

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