Consolidation In The Embedded Software Market

Many industries consolidate as they mature. The consolidation most often happens from within. Sometimes consolidation might take the path of mergers with or acquisitions by software providers in adjacent  markets. The embedded software industry  has certainly seen its share of consolidations through mergers and acquisition since the 1990s. For example, Diab Data was acquired by Integrated Systems which then became the second largest company in the commercial embedded software market, till it in turn was acquired by Wind River Systems in 1999.
So far so good. The embedded software industry appeared to follow a path to maturity similar to the mechanical CAD software industry and the electronic design automation software industry. Both these industries have consolidated over the last two decades and now we are left with 2 or 3 large vendors that account for 70% to 80% of the commercial software market in that industry.  But here the embedded software market diverges from the other two software markets. While internal consolidation was happening, the embedded software market also saw acquisitions not only by companies in adjacent software markets but also by companies in their supply chain. Texas Instruments, Motorola, Harmon Industries and now Intel have been acquiring embedded software companies for several reasons, including the need to control the software stack. This leaves the embedded software market with very few independent providers and begs another question, should we expect similar activity in the EDA industry? After all, 30 years ago, semiconductor and systems companies owned most of their EDA software.

Or is this an inflexion point in both the EDA and Embedded markets, as Gary Smith suggests, and  they will eventually merge as consolidation continues in both markets? Gary goes on say, ( I quote), " We will lose Cadence and Magma in the next three to five years and Synopsys will be challenged in the same time frame."