EDA in 2009

As Wally Rhines, CEO of Mentor Graphics, recently pointed out, EDA has a lower correlation with GDP than other sectors of the economy such as consumer discretionary spending or automobiles. EDA does however have a high correlation with Semiconductor R & D investment and capex with approximately 30% of EDA revenue coming from semiconductor R & D spending. Chip companies and foundries have been hit hard in the current recession, as evidenced by the shortfall in earnings being announced by all and sundry. Nokia and others (Apple is an exception) are announcing lower sales of cell phones and other electronic devices. Japanese semiconductor and automotive companies are announcing restructurings and layoffs, some for the first time ever. Given all these leading indicators, EDA CEOS are generally being cautious about the outlook for 2009. There is agreement around the fact that EDA revenue will decline in 2009 with some speculation that it could fall 6% over 2008 revenues. The big question on everyone's mind is if the downturn will affect EDA revenues beyond this. In short, are we looking at a decline that is closer to 10% than 6%?