Hidden within Synopsys' latest earnings transcript lies a revelation most analysts have missed: an analog renaissance driven by the company's innovative AI-powered tools and a fundamental shift in the customer landscape. While much of the attention focuses on Synopsys' digital design leadership and the upcoming Ansys acquisition, the quiet revolution in analog design could unlock significant growth and value for the company in the years to come.

For decades, analog design remained a largely manual and specialized field within chip development, often relying on in-house tools and expertise. This led to a perception that analog design was less amenable to commercial EDA solutions compared to its digital counterpart. However, Synopsys' latest wins suggest a dramatic change in the wind. The company isn't just selling more analog tools; it's displacing incumbent solutions and winning full-flow displacements at a remarkable pace. This points to a shift in customer mindset, driven by a desire for modernized workflows and the powerful lure of AI-powered optimization.

Synopsys' ASO.ai, an AI engine tailored for analog design, is at the heart of this transformation. It empowers designers to tackle the increasingly complex challenges of node migration and foundry-to-foundry transitions with unprecedented speed and efficiency. Imagine the tedious process of manually adapting an analog design for a new manufacturing process, painstakingly verifying each component and connection. Now imagine that process accelerated tenfold, with AI intelligently guiding the migration and identifying potential pitfalls. This is the power Synopsys is unleashing on the analog world.

The competitive displacements also speak to a deeper trend: the rise of the systems company. These are companies that traditionally focused on building complete systems, but are now venturing deeper into chip design to create purpose-built silicon optimized for their unique needs. Unlike established semiconductor companies with legacy analog workflows and entrenched tool preferences, systems companies are more open to adopting cutting-edge solutions that promise dramatic productivity gains. Synopsys, with its comprehensive portfolio and AI-driven innovations, is perfectly positioned to capture this emerging customer segment.

While quantifying the financial impact of this analog renaissance remains challenging, the early signs are promising. Synopsys reported 20 analog displacement wins in the first half of 2024 alone, a remarkable figure considering the historically slow pace of adoption in this segment. The anecdotal evidence from customers using ASO.ai paints a compelling picture, with reports of 10x productivity gains and simplified node migration. As these deployments transition to production, Synopsys is poised to unlock substantial revenue uplift through its access and consumption-based pricing model, similar to its successful approach with DSO.ai.

Furthermore, the shift towards multi-die packaging further amplifies the need for analog solutions. While the industry focuses on high-speed interconnects for digital data transfer, the analog components responsible for power management, signal conditioning, and other essential functions are equally critical for multi-die success. Synopsys' acquisition of Intrinsic ID, adding physical unclonable function (PUF) technology to its portfolio, further underscores the company's commitment to addressing the security challenges inherent in these complex architectures.

While the upcoming Ansys acquisition will undoubtedly reshape Synopsys' future, the analog renaissance happening right now presents a more immediate and potentially overlooked growth opportunity. Fueled by AI-powered tools and a new wave of system-oriented customers, Synopsys is not just enabling the future of analog design; it's actively leading the charge, transforming a once-specialized field into a fertile ground for innovation and growth.

Hypothesis and Evidence

The analog design segment, historically less penetrated by commercial EDA solutions, is undergoing a renaissance driven by AI-powered tools and the rise of system companies.

Synopsys secured 20 analog displacement wins in the first half of 2024, a significant increase compared to historical trends.

Customer reports of 10x productivity gains using ASO.ai for node migration.

Potential for substantial revenue uplift through access and consumption-based pricing for ASO.ai, similar to DSO.ai's 20% uplift.

The trend towards multi-die packaging will further increase the demand for analog design solutions, particularly for power management and security.

Analog Displacement Wins

The chart below illustrates the hypothetical growth of Synopsys' analog displacement wins, based on the information provided.

"Fun Fact: Synopsys' Design IP segment, celebrating its 25th anniversary this year, was founded in 1999, the same year the iconic Blackberry 850 pager, a symbol of the pre-smartphone era, was released."