Synopsys Inc Q3 2020 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Mitchell Toshiro Steves - RBC Capital Markets, Research Division - Analyst : I really had 2. So first, kind of addressing the server market. I mean there's been a lot of changes over there and potentially or may become a more viable solution long term. So my question is really just, if we draw parallels between what happened in mobile when that started to take off, and we assume -- just -- I'll make the assumption that the server environment becomes more competitive. Would the EDA space see ASP increases in additional demand? And if so, why would that be? Or why wouldn't that be the case if we have more different server chips coming out in the market over the next few years? Aart J. de Geus - Synopsys, Inc. - Co-Founder, Chairman & Co-CEO Well, it's an interesting question. And the first part is an obvious positive, which is more servers is good for our market because even if there's competition among the providers, they're all going to race forward to high performance and low power and high density. But the second observation -- the second thing, I think, you alluded to is also interesting, which is there will be more diversity in the type of computations. And so a variety of accelerations are going to make their way more and more into the cloud and that includes, of course, all kinds of different AI algorithms. And because these things are so compute-hungry, they're all going to get optimized for some aspects that is of particularly high value. So if nothing else, I think the whole compute space itself will have many providers with many different chips. And both the word many and the word different are really good for Synopsys because they all need to be optimized and designed and verified and tested.

Question: Jackson Edmund Ader - JPMorgan Chase & Co, Research Division - Analyst : First one, without discussing any customer in particular, I think people are curious, what impact does manufacturing have on your customer relationships? I think customer switches their fabrication provider, perhaps. Aart J. de Geus - Synopsys, Inc. - Co-Founder, Chairman & Co-CEO Sure. Well, we touch manufacturing in many places. The most profound place with some customers, we are very involved in the actual literal development of their process to create advanced transistors because we have the capability to simulate those before they get built. From there, we move up in terms of helping customers create what are essentially the descriptions of their process so that it can be linked to the design tools, and we are very proficient in that. And this is the area where you see constant change even a new process gets introduced, a matter of a month or 2 later their modifications because people are constantly driving, not so much the performance of the process anymore, but the yields. Meaning initially, the early chips don't yield very well and then they yield better and better and better over time and so we're involved in that. Where our engagement grows very, very rapidly is right after that, which is making sure that our tools intersect well with the process, with other words, that our tools bring the best out of the manufacturing process. But the same can be said identically for our IP, meaning that we provide building blocks that get highly optimized for the different processes. And as we go to smaller and smaller geometries, this is a more and more differentiated and difficult task. And difficult is actually good for us because Synopsys is uniquely competent at that. As we then move to yet a higher level as people design chips, we, of course, assist the different design companies with how they design their circuits in light of the processes that we know very well. So -- and then probably the last level where that intersect is that these chips have to also be tested and different testing techniques get used for different silicon technologies. So it's another way of saying that we are both a connector and a buffer throughout the entire design flow and complexity flow. And the experience that we bring helps, at any level, make up for some of the shortcomings that invariably happen. And I'm not pointing fingers at any of this level, it's just all substantially challenging stuff to do. And so our support teams help people bridge towards the new nodes on a constant basis. And so the fact that you see at times sort of disruptions or accelerations in silicon development is a very natural phenomenon in silicon design for the last 20 years, the fact that these things are very large investments is, of course, always of concern because one hopes to get high yield as soon as possible. But invariably, it just takes time for that to happen. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 19, 2020 / 9:00PM, SNPS.OQ - Q3 2020 Synopsys Inc Earnings Call In all cases, we are involved to the point that it is beneficial to us to support many different silicon nodes for many different vendors. And at the end of the day, it's the end customer, the semiconductor chip designers that decide which nodes they will be using. And of course, we listen carefully to them.

Question: Jackson Edmund Ader - JPMorgan Chase & Co, Research Division - Analyst : Quick follow-up, Aart, on Design Compiler and IC Compiler II, the kind of 2 main components in fusion -- of the Fusion Platform. Are you seeing much demand at all for the individual products on a stand-alone basis? Or is it -- would you turn the corner toward the platform demand? Aart J. de Geus - Synopsys, Inc. - Co-Founder, Chairman & Co-CEO Weirdly enough, the answer is yes and yes. And so let me start with Fusion Compiler. I think it's doing terrifically well. And we do see that a lot of the future will be heading in that direction as the results are just very, very compelling. At the same time, completely by accident this morning, I was writing a little note to the team that's working on IC Compiler because they had some stellar results at a very important large customer that actually decided to have a significant portion of their chips done with ICC II. And so it just shows that different people have different forms of flows that some people like to have the integrated version, some people have maybe design flows that they have optimized in the past for the individual tools. And both are absolutely at the state of the art, and it's been a good choice for us to be able to maintain both of those directions.