Synopsys is a leading provider of electronic design automation (EDA) software and services used in the making of integrated circuits. Chip designers use the company's products to develop, simulate, and test the physical design of ICs before production, and then to test finished products for bugs and security vulnerabilities. The company also provides intellectual property (IP) products, or pre-designed circuits used as part of larger chips. Moving beyond silicon, Synopsys had added software testing to its portfolio. Customers come from a variety of industries, but particularly the semiconductor and electronics manufacturing, with Intel as its top customer. The company generates about half its sales outside the US.
Synopsys makes money from four groups: Core EDA, 60% of revenue, which includes digital, custom, and field-programmable gate array (FPGA) IC design tools, as well as verification products (its Verification Continuum platform); IP, Systems and Software Integrity, about 30% of revenue, which includes the DesignWare IP portfolio, system-level products, and security and quality testing tools (SecureAssist and Coverity); Manufacturing Solutions, about 10% of revenue, products that aid in developing IC designs; and Professional Services and Other, which covers customer service and technical support.
Besides software, Synopsys makes hardware that handle prototyping and emulation for FPGA systems.
Revenues are also broken down among Technology Subscription Licenses (TSL, paid over the life of the contract), upfront, and maintenance and services. Almost 75% of revenues come from time-based products while more than 10% are from upfront products, with maintenance and services accounting for about 15%.
The company, based in Mountain View, California, has more than 30 offices in the US. Its international headquarters is in Dublin, Ireland, and it has offices in about 30 countries, with major operations in Armenia, India, China, and Taiwan.
The US represents Synopsys' largest market, accounting for 50% of revenue; the Asia/Pacific region generates about 30% of revenue, followed by Europe and Japan, each at about 10%.
Sales and Marketing
Synopsys markets its products primarily to semiconductor and electronics systems companies through direct sales efforts in the US and in select international markets. Intel accounts for 15% of revenue while other customers have included Taiwan Semiconductor Manufacturing Corp., STMicroelectronics, FABU Technology, and Infinera.
Synopsys’ sales have steadily increased over the past five years, growing 10% from 2014-2018.
In 2018 (ended October), sales jumped 15% to $3.1 billion from 2017, driven by higher Technology Subscription License revenue, acquisitions, and professional services revenue. The company also had an extra week in its 2018 fiscal year, which added $46 million.
Total cost of revenue and operating expenses were $2.8 billion, a 16% increase from 2017, due to an increase in the number of employees, including those from acquisitions. But the company posted a profit of $423 million in 2018, 216% higher than 2017, thanks to a tax credit for the year. Synopsys’ effective tax rate was 19% in 2018 compared to 64% the year before.
Synopsys held $723 million of cash and equivalents in its coffers in 2018, about $317 million less than in 2017 because of money used for acquisitions and stock repurchases. Operations generated $424 million in 2018, investing activities used $4743 million, and financing activities provided $5.1 billion.
Like most suppliers to the semiconductor industry, Synopsys has had to deal with the industry's consolidation. Synopsys has managed its way through the merger and acquisition trends and, in some cases, expanded its business. The trend toward integration of multiple chips and software into chip products plays to Synopsys' strengths in providing design and test products and services.
The company looks for opportunities to grow in areas such as digital intelligence, machine learning, the Internet of Things, 5G mobile networks, virtual and assisted reality, and massive cloud-based computing. The automotive market is a particular area of interest for Synopsys, where it sees opportunities in technologies for self-driving cars.
Several years ago, Synopsys began to develop its software integrity product, which identifies and addresses security and quality problems early in the software development cycle. The software-focused product, which expands the company’s portfolio beyond chips, accounts for about 10% of Synopsys’ revenue.
Acquisition is a key part of Synopsys’ strategy to fill gaps in its product offerings and expand its portfolio into other areas. The company made seven acquisitions in 2017 and 2018 to strengthen its communications and intellectual property capabilities.
Inventory of Synopsys’ hardware products doubled in 2018 from 2017, tying up about $60 million. The company carries the inventory to meet demand for the products hardware and to be able to deliver it when customers want it.
Mergers and Acquisitions
In 2018, Synopsys, acquired Silicon and Beyond Private Ltd., a provider of high-speed serializer/deserializer (SerDes) technology used in data intensive applications such as machine learning, cloud computing, and networking. The deal enables Synopsys add next-generation SerDes tools to its offerings.
In another 2018 transaction, Synopsys acquired PhoeniX BV, a supplier of photonic chip design technologies for application requirements ranging from data communications to sensors and biomedical devices. The acquisition broadens Synopsys’ photonics design automation offering by adding photonic aware physical layout capabilities.
Kilopass Technology and Sidense Corporate are both providers of IP products used in automotive, mobile, industrial, and Internet of Things (IoT) applications; Synopsis acquired these companies in January 2018 and October 2017, respectively, to enhance and broaden its offerings in the IP solution market.
In 2017 Synopsys acquired Black Duck Software, which helps companies work with open source software. Black Duck becomes part of Synopsys's Software Integrity Group. Also in 2017, Synopsys completed its acquisition of certain assets of Forcheck, a privately held software company based in the Netherlands that provides a static analysis tool for detecting coding defects and anomalies in FORTRAN applications. QuantumWise, another 2017 acquisition, provides simulation tools for materials modeling and will allow the company to create higher-quality early Process Design Kits (PDKs) for Design-Technology Co-Optimization (DTCO).
Aart de Geus founded Optimal Solutions in 1986 with funding from General Electric, where he had been a manager in the company's Advanced Computer-Aided Engineering Group. The group built the prototype of a product that saved chip designers time by automating much of the design work.
In 1987 the company changed its name to Synopsys (an abbreviation of "synthesis and optimization systems") and moved to California. It went public in 1992, and two years later it introduced software that engineers used to design chips by function rather than structure.
As chips grew more complicated, Synopsys bolstered its product development efforts through acquisitions. The company has added other functions such as designing chip components that customers can use instead of designing their own and software testing.
690 E MIDDLEFIELD RD
Mountain View, CA 94043-4033
Phone: 1 (650) 584-5000
Employer Type: Publicly Owned
Stock Symbol: SNPS
Stock Exchange: , NASDAQ
President and Co-CEO: Chi-Foon Chan
Chairman and Co-CEO: Aart J. de Geus
CFO: Trac Pham
Employees (This Location): 500
Employees (All Locations): 13,245
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