First of all, we'd like to welcome all of you in the room and also welcome those of you on the webcast. And thank you for taking the time out of your day to join us. Before I suppose I should do that. Okay. Before we begin the Safe Harbor statement, we will be making forward looking statements today, and we encourage you to review our annual and quarterly SEC filings for a list of risks and uncertainties that could cause actual results to differ materially.
But now to the good stuff. Today, we have 3 executives with us. We're going to start out with Chairman and Co CEO, Art DeGeus. And Art will set the stage by discussing our growth strategy in the context of the many evolving technical challenges facing our customers today and tomorrow and also discuss the synopsis strategy for attacking those technical challenges on behalf of our customers. We will then have Dave De Maria, who's Vice President of Corporate Marketing, provide some highlights from some of our highest impact, highest profile products.
And then lastly, you'll hear from Andreas Kuhlman, who is Senior Vice President and GM of our Software Integrity Group. About 1.5 years ago, we acquired a company called Coverity and entered a brand new higher growth TAM. And Andreas was Head of R and D for Coverity, and we're very happy to have him as part of our executive team. Since then, we've expanded our presence and our opportunity space more in the security arena. So Andreas will go into some depth today describing the challenges driving the emerging market space of software quality and security.
He'll also do a bit of a deep dive in the security space, and he'll update you on the synopsis strategy and also operations. So after that, we'll bring all three up here, have a Q and A, Q and A session, and we will conclude by 1 So with that, I will hand it over to Art DeGeia. Welcome to Art DeGeia.
Welcome to you and good morning. Thank you for attending this session. The objective of the session is to give you a sense and feel for the company in its entirety and direction, especially in light of unbelievably rapidly changing markets, unbelievably rapidly changing markets, technology, almost a phase shift of what has happened in the silicon world. And in order to do that, I'd like to give you a little bit of sense what are some of the dynamics that drive us and how we have structured the strategy and the execution of the company against that. For starters, obviously, our pedigree is deep in silicon.
Now we're almost 30 years in that. And so you may know that this year was 50 years of Moore's Law. Moore's Law was this governing driver towards smaller transistors, faster transistors, lower power transistors. And by the way, that drive is continuing. The part of Moore's Law that's a little bit in question is, will they also continually get cheaper?
But so far, our people are moving very rapidly in that direction. What is interesting to me and really already brings you immediately to the heart of what I think our strategy and our communication to you is about is that with this continued drive towards still more capabilities in silicon at lower power, lower footprint. We're entering a 4 footprint. We're entering a phase where the software world will see yet another massive expansion of opportunity expansion of opportunities. And in many ways, the center of gravity of this picture is where we are gradually multi of this picture is where we are gradually moving the company.
And we're doing that in a fashion that hopefully is coherent where you can see that there are both business opportunities that line up, but also the technical acumen of the company coming up from the silicon applies completely to the software world. And by the way, we ourselves are one of the largest software companies in the world and such as software companies in the world and certainly one of the most sophisticated ones with about 400,000,000 lines of code ourselves. And this is not your grandmother's code. This is super sophisticated stuff. So, there's plenty of opportunities to have issues ourselves and therefore we're very much attuned to how do you do that well.
If you look at synopsis and this is not meant to be a financial presentation, but it's still useful to look at it in context. And earlier, I had a question of so when I look at it in context and earlier, I had a question Well, you can actually see, at least, that that would happen again. What you can actually see on the picture 2,009 and you can see, yes, it was a little flatter for us, but we actually navigated through this extremely well. And the reason for that is that fundamentally the technology needs that we serve continue with or without downturns. That drive is there.
Secondly, our business model of a ratable multiyear engagement and commitment from customers has served us extremely well in these challenging times. And third, when there are consolidations, more often than not, customers tend to look at the leader, be it in technology or in market share as the most reliable, trustworthy partner. And we benefit from that. To give a little sense of scale, today we're roughly at a $2,200,000,000 size of the company. And in our industry, we are certainly the EDA side.
We are number 2 in the IP space. And we are now, as you know, have entered the software space. The business model has been very solid and coherent for a long time with good cash generation, fairly high degree of predictability. And our objective, of course, is to manage all of these technology transitions, market transitions while over the long term consistently deliver shareholder value, and we anchor that mostly in the drive towards EPS growth. In order to do that, we have seen the opportunity to diversify from where we were because once you become a leader in a segment, it's time to look at sideways segments.
And of course, we did that already for a couple of decades. If you look at the EDA segment, we are the market leader there. And most importantly, our pedigree and it remains absolutely that is lead and drive with our the technology with our key partners, mostly in the foundry space and the most advanced design companies. And those are high demand partners and that's a good thing because it drives us forward. And so, we have a number of new products and Dave will be talking a bit about what we're doing there.
Secondly, as you know, since the early 2000s, we have really built a substantial position in IP where we're number 2 behind Arm, which is a great company providing new apps processors. We provide essentially everything else. We have far and away the broadest portfolio and we have a lot of experience in working with many customers, many customers in providing IP for them. And so most recently, meaning the last year and a half, you heard Lisa say that we entered the software world, which is a little bit of an open ended statement. We like to call it software integrity because it captures everything from quality to testing to security and now increasingly also safety and other question.
And here, we see a growing TAM, a TAM that's getting a lot of attention. It's quite a TAM that's getting a lot of attention. It's quite fractured. But there's an opportunity for us to bring coherence, build a platform and align technologies that are very fundamental and will be needed by everybody over time. So, if we look at this picture, it sits very much in the middle of these massive trends.
And of course, if you look at the silicon industry, its historical phases of the PC that became servers, became compute centers, then the phone that became mobility, that became smartphone and pads and so on. And the question is, so what's the next big thing? And of course everybody says the next big thing is sitting in the middle. It's IoT, Internet of Things and then they all think something different. And nothing wrong with that.
That is the characteristic of an early phase market, which is a lot of creativity and let's see where the big money is. And so whenever one cannot predict where the big winners are going to be, we all the big winners are going to be, we always think what are the fundamentals that govern this. And if there's any fundamental that I'd like to highlight, Isaid, is that I think this is as much as anything the new intersection between hardware and software. And of course, we come initially from the hardware side, but we know software very, very, very well. And many of our initial customers, the semiconductor guys, actually today have more software engineers than hardware engineers.
So they already provide this. But of course, the software world moves all the way to high end apps, be they in the financial domain or the health domain or cars, you name it. And so if we look at this IoT world, this IoT world, what one will see is that very soon, we will see little IoT things appearing everywhere. And of course, this can be very simple things such as smart thermometers that you have in the wall and so on. It can be very sophisticated things, facial recognition, feeling recognition, things that solely gives a very new insight.
And you can highlight automotive as a domain that's bringing smarts everywhere. The other characteristic, of course, is that all of this is connected in many ways. And I sort of like this picture because it's a little bit a takeoff of the human brain with a lot of little neurons talking out to each other. And this is the essence of what people refer to as big data, which is you get all this what people refer to as big data, which is you get all this data, now do something interesting with it. And now, of course, we have the application domain, where the smarts of the algorithms, the business models around that determine the value.
Be it as it may, this is often referred to as the Internet of Things, IoT for short, which at times I like to call incredibly optimistic thinking. And on one hand, that's paraphrasing a certain degree of skepticism about the opportunity space. On the other hand, I do believe in the optimism here. This is very fundamentally changing the world. And we hear mostly about the stories that start sort of on the edge of things, the devices that pick up through sensors, some physical data in some form or another.
And of course, those device some form or another. And of course, those devices immediately then have to connect to the cloud. And no matter what, therefore, the cloud will continue to grow, be it in computational capabilities, in the transport, in the bandwidth available and in the memory. And so these things will be insatiable as certainly millions of devices start to create little data. Now the reality is the edge rarely connects directly to the cloud.
There's often what we affectionately call the fog, the in between, which is you have a piece of fog in your pocket right now. It's your phone. It's a local aggregator that can maybe talk to your Fitbit that will talk over time to some health devices on your body and so on. But the same is true in the house. It's true in companies.
We'll see essentially networks of networks, some being Internet, some being localized. But the picture definitely will develop in a very hierarchical fashion. And then on top of that, we should not forget the apps, because that is in many cases where the money enters the system. And so this is the fundamental stack that we're talking about and it is very hardware oriented towards the bottom, completely software at the top. But even the bottom is completely software at the top.
But even at the bottom, we will see a rapid increase of the amount of software. And so another perspective on exactly the same story is to say, well, look at it from the end markets. And of course, we're all familiar with many of those and of course, we're all familiar with many of those. The wearables is the most visible one because it's sort of consumer stuff, it's the fun stuff and so on, but it is very clear that these other domains have tremendous, tremendous increases in sophistication and capabilities. And one of the ones that is now becoming super visible and now suddenly also super competitive take automotive.
The amount of sensors and the amount of software that is in a car, in advanced car today is quite amazing. Somewhat you were saying that the amount of silicon is the equivalent of a complete 300 millimeter wafer of silicon in chips, which is a lot of chips, and by the way, 100,000,000 lines of code. And now we're entering the assisted drive automatic drive age and you can just see the number of sensors, the number of ways of looking what's happening around. But most extraordinarily, the demand on computation inside of the car to essentially try to mimic what a human is doing is unbelievable. Now with that, of course, come all kinds of challenges and opportunities.
And my favorite story is Tesla introducing or downloading via software the capabilities to automatically park your car in a parking garage. I think they're doing that this summer or so. Question I have for you, which is what happens when 2 Teslas simultaneously see the same open parking spot? Software, yes, conflict mitigation software in the car. And so there's a zillion of these fun stories, but fundamentally this landscape is changing everywhere and each one of those industries will find its spots where the impact has the highest return on the economics.
And it is very difficult to predict which ones will be fast, the winners and so on, but it is absolutely clear. They're all facing the same challenges. This interaction between hardware and software and the applications that finally run on this. Now with that comes, of course, also some other challenges, which is that if you make everything smart and everything's connected, there's some other guys that figured this one out too. And you're very well aware that literally every week you see another breach in some form or another situation being hacked and the very fact that just in the last couple of months the automotive industry was hammered in unexpected ways here just shows the gravitas of this issue.
And for a while, I've made the joke that if in your home you use many of these, sooner or later the police water will eat well and eat well and the perp came in through the toaster. Well, not as simplistic a joke as you may think because Target, when they were hacked, the perps came in through the air conditioning system, which, of course, is connected to some computer, which is connected to some computer, which is connected to, so it looks like the credit cards. And so this is the issue we're dealing with. And one of the reasons we're investing in the security angle of software is not because there is a single solution that touches everything, Wushan that touches everything. It's very fractured, there are many things.
But again, our objective is to go to the basics of those things that everybody should be doing. And that is our core competence and I think we're on a very good track there. So, in summary, if you look at how we look at ourselves, it's now very much in the center of the silicon to software opportunity space, which in opportunity space for the next 10 to 20 years. And in that, we are very cognizant that the drive down the design into silicon is one of our core competencies that we will keep investing in and that is a big economic engine for us. In parallel to that is I look at that as the drive up, which is verify that what you're building actually works.
And that is an area of our space that is actually seeing dramatic increases in problems, especially because the verification is not hardware. It's hardware and software now together. And we have made fabulous advances there. Then, of course, connecting well to the silicon is a big technical challenge. And again, difficult things are good for Synopsys.
That's our core competence. And our IP business today provides IP that is connected directly to the most advanced silicon technologies in the world. With other words, that's a risk reducer for the design community that they know with Synopsys they can get to a good silicon. And last but not least, now the software integrity business is this new opportunity space that looks not only at connecting well to the silicon, but most importantly at this importantly at the quality, the testing, the security and other aspects of the software. So that's the essence of where we see things going.
I prefer to not use Internet of Things. I prefer Internet of Things. I prefer much more to say smart everything because by the time you say smart everything, it's very clear that Photon over time, there will be distributed computation needed in every device of any substantial value. And that means value and that means there will be chips with some software embedded in some form or another. And that is the overall market driver that we are aligning behind.
With that, let me pass it on to Dave, who will zoom in a little bit more into some of the products.
Thanks, Todd. Let me start with talking about IP. And IP, clearly one of the big growth drivers is what Art just described around IoT. And I won't call IoT anymore, I'll call it smart everything. So if you take the world of smart everything, there's going to be millions and millions of these devices and there's going to be 100 and 100 and 100 of different 100 of different types of devices.
But if you net it all out, many of them will share some very common building blocks, right? Many of them will have sensors that will connect to the real world that we live in. They'll have a processor and in most cases they'll have multiple processors that will need memory and be driven by software apps. They'll need RF devices for connecting to Wi Fi and Bluetooth, some kind of power source. And of course, absolutely critical, security will be built in.
So in June of this past year, we introduced a new IoT platform built around our IP. And basically it features the broadest portfolio of IP in the industry and many of the key building blocks that customers need to create these types of devices our sensor subsystem, ARC processors, memories libraries and a whole host of different interface modules that customers will need on their SoCs. And since that announcement in June, we've had several new extensions to the platform. Just last week, we announced some new ARC cores that are targeted at DSP intense applications that are very common in IoT, things like sensor fusion, voice recognition, things like video processing and all of those types of applications. Earlier this year, we announced some key acquisitions.
We acquired Bluetooth IP from a company called Silicon Vision and we acquired Elliptic Technologies with broader security IP. Both of these are very, very critical building blocks for any IoT device out there. In June, we also announced a collaboration with TSMC to pre validate this IP platform on their 40 nanometer ultra low process process. And they're targeting this for IoT devices. This pre validation really accelerates our customers' time to market.
And we're doing the same thing in automotive. We're creating an automotive IP platform that again we launched in June and it has many of the key same key building blocks I just showed you in IP, but many of the interfaces that are quite different. Ethernet in the car is a big thing. So, that's a big component of our automotive IP solution. But probably the biggest difference is, in automotive, the big concern is safety.
And what we've done is we've prequalified our IP to a really important standard in automotive called ISO 26,262. And we have the safety enhancement package that goes around our IP. And what that does is it basically allows our customers to streamline getting their own SoCs qualified for automotive. And there's an automotive safety integrity level standard out there called ASO and we provide ASO level qualification for our IoT sorry, our automotive platform. So, this is a really big deal for customers.
And I think this whole move towards creating these IP platforms will take our IP business to the next level. It will take our customers' productivity to the next level. Moving to some great progress we've made with IC Compiler 2. One of the key drivers is the rapid move to FinFET. And many of you have seen over the years versions of this slide, we're very intimately involved with all of the leading edge customers and we track the first 500 designs for each new process node.
And what we're seeing is a pretty fast ramp now to FinFET. At last quarter's count, we're at 240 and much of it at 16, 14 nanometer, but you can see 10 nanometer down the bottom starting to ramp as well. And Synopsys is involved as the primary tool in over 95% of those designs. And we're seeing some great momentum. This is one of the key drivers on our growth with IC Compiler 2.
So as a reminder, March 2014, we launched IC Compiler 2 and it truly is one of the most impactful innovations in our history and really in the history of EDA for that matter. And it was the result of a 5 year R and D effort, which had 3 main focus areas. 1st, we developed a brand new infrastructure from the ground up. And second, we developed some new engines in key areas like floor planning and optimization, floorplanning and optimization. And third, we leveraged the best of IC Compiler 1.
And at the time and still when we launched this, IC Compiler 1 was the leading place in route technology. So we started from a position and a strength. We had this development process going on in parallel. And the goal was bring a 10x improvement to productivity, not 10%, not 50%, but 10x. And we've been seeing some great customer results where they're achieving and in some cases exceeding that.
But before I get into those, which I will in a moment, I thought I'd talk a little bit about the competitive landscape, because there's been a lot of noise recently around that. And as I mentioned, when we before we launched IC Compiler 2, IC Compiler 1 was the leading solution in the market by far. We brought an IC Compiler 2, which gave a very impressive 10x performance boost over that. About a year later, our competitor launched their new tool, which brought, of course, advantages over their previous system. But we still feel very, very confident we've got a compelling technical advantage, market advantage and time to market advantage.
And that's really evidenced by the kinds of results that we're seeing at customers. We're seeing a growing number of customers yet really game changing results. And some of those share their experiences at the design automation conference in June. Every year, we host a luncheon where customers share their experiences and I'll share a few of those with you today. We had Media Techs who were able to meet their very aggressive low power and schedule goals And they saw a 5x improvement in speed up.
And what really that meant for them was they could do their whole design in a day. And that was a game changer for them and allowed them to meet their goals, get their product out sooner. On AMD's largest production design ever, they were able to get a 10x improvement. And again, they were able to get the design spun in a single day. Very dramatic.
Socionext. Socionext is the formation of Fujitsu in Panasonic in Japan and they've had experience on multiple production designs over the last year and a half across many process nodes and again anywhere from 3 to 14x speedups. And Samsung also using IC Compiler 2 in production. They got similar kinds of speed ups. But in addition to that, very importantly, they got better quality of results.
They were able to reduce the error on their chip by about 11%, which translates to direct cost savings for them. So these kinds of results have helped make IC Compiler 2 the fastest ramp in the company's history. And we started last year with 4 designs from some pretty compelling customers when we launched. We're now up to over 100 designs that we're tracking, 100 production designs. Many of them are FinFET, 16, 14 and even 10 nanometer, but many of those are also at 28 nanometer and 40 as well.
So, at this point, we feel very confident about where we stand. More precisely, it's 117 production designs.
29 of
those have taped out and that's across 42 unique active customers and 18 process nodes.
42, okay.
And this is a very impressive start over 18 months, but we also feel that we're at the early stage of what will be a multiyear upgrade cycle as we have a number of our customers move over time to IC Compiler 2 and take advantage of it. So, IC Compiler 2 is clearly delivering some game changing results for our customers and it's really advancing our leadership position in digital design. Verification, Art mentioned, is also one of the biggest challenges our customers face. And a year ago actually a year ago next week, we launched our verification continuum and it's targeted to help solve some of those problems. So, the problems are really driven by the exploding complexity of what's going on to a chip these days.
And it's very common to see chips of 200,000,000 gates plus, but what's more complex is making sure that all of this functionality, different IP blocks, all works together. And then really, as Art said, we're at the intersection of hardware and software where there's a 1,000,000 lines of code on a chip and people want to be able to validate that software works on the hardware before they tape out. So, hardware software verification is becoming increasingly critical as well as just managing the sheer complexity. So, to address that, we launched our verification continuum. And at the heart of it is our industry leading simulation tool called VCS.
And VCS is used by about 80% of the world's leading design teams and on the leading designs. And that's important because simulation is still the centerpiece of a verification platform. So we've been working on multi year deep collaborations with key customers to integrate all the hardware and software they need into a unified platform. And other people talking about verification platforms too, there are 3 key things that differentiates Synopsys. One of them is the fastest engines.
Performance is absolutely critical in verification of any type and we have the fastest engines. And in many key segments, we also have the leading market position, the number one position. The second piece of it is unified compile across the platform based on the industry leading compile technology from VCS. And the third is unified debug across the platform based on our leading debug technology from Verdi. So again, we've made a lot of progress over the last year.
I'll focus on just 3 updates today. The first is we closed the acquisition of Atrenta in August and that brings us the number one solution for static and formal analysis. And we're just talking at my table about how important is that going to become. That's becoming a must have now for verification as people are able to get their find bugs earlier before they get the simulation. So we feel very excited about Atrencia joining and about integrating that technology into the platform.
The second really exciting area is emulation. And as we've talked about on our earnings calls, we're seeing good growth in our emulation, emulation business. In fact, we see the whole emulation market as being very strong, benefiting all of us. We've made some key technology advancements over the past year, most notably is bringing Unified Compile to our Xevo emulator And that's been critical for us. Again, we've had a number of customers that shared their success at the Design Automation Conference.
I'll focus on 2 here today. 1 was AMD who saw a 200x improvement in their verification flow by using Zebu together with their virtual prototyping solution. And that really transformed the way that they look at hardware software verification. At freescale, they were able to get 5 MHz performance off of Zeboob and that allowed them to boot Linux in a matter of minutes, which was something they just couldn't do before, 4x to 5x over what they had with their previous flow. And the 3rd area that we've made some great progress in is physical prototyping or FPGA based prototyping.
There we've had the number one product for many years with our HAP solution. And just yesterday, we announced our next generation system called HAP-eighty. And the hardware in HAP-eighty is based off of Xilinx new Vertex UltraScale FPGAs and that together with our proto compiler software is able to let customers achieve 100 megahertz performance, which really allows them to start not only verifying hardware and software earlier, but actually doing early software development. And the other key enhancement is 1,600,000,000 gates. Sometimes prototyping has been focused on just being able to deal with IP blocks.
With 1,600,000,000 gate capacity, people can prototype their entire chip. So a lot of progress with our verification continuum, a lot of progress with IP Compiler 2, a lot of progress with bringing our IP into optimized solutions for IoT and automotive. I'd now like to turn it over to Andreas to give you an update on our software business.
Thank you, Dave, and thanks for having me here. So I will talk about the Software Integrity business, and I'm going to start to talk a little bit about the concerns of the software industry, then dive in some of the megatrends that we are seeing in the software industry, dive then a little bit into security where we see us as Synopsys being a solution provider, talk a bit of our technology roadmap over the last year and then go into customer execution. So first of all, what I would like to do is go into industry. If you just look over the last 30 years, in the '80s with upcoming of the PCs, in the '80s, with upcoming of the PCs, software was really mostly concerned about single applications. We may have a word processor or Excel spreadsheet on our computer.
It was used on a standalone computer at that time. In the '90s, the Internet came and we started actually connecting all the computers and we started transacting over the Internet. We were doing bookings of hotel rooms, of flights over the Internet. We were doing transactions of money over the Internet and banking over the Internet. And then in 2010, Otter's calling it a smart of everything or IoT.
I want to really focus on software controlled devices, and software controlled devices means, for example, in medical domain, my wife had surgery a couple of months ago, minor surgery, and I was in the prep room and every device in that little prep room had the Ethernet connector, was essentially connected to the Internet. So whether it's infusion pumps or any measurement, everything is now connected. Or we talked about automotive. I mean, cars today have a lot of software in it and control a lot of the car really via software. If you look at this now from the concerns over time, in the beginning, it was really mostly about quality.
But at that time, for the application, it was actually sufficient that we got it almost right. If the application crashed once in a while, well, we weren't pleased about this, but we didn't go back to the vendor and would get a refund for our software. So the actual implication in terms of the liability was fairly limited. So the liability was fairly limited. This really changed when the computers got connected and quality of it connected and quality at the time was really supplemented by security.
And the impact was significantly larger and Art was talking about one of the large companies where the CEO actually lost its job because there were some security concern. And the issue here is getting it almost right or getting it mostly right is not sufficient enough because an intruder just needs one backdoor to hack into the system. And that one backdoor, which sometimes could be a quality issue, but that one backdoor is sufficient to essentially hack your system. And now when we go to the software controlled devices, and Art mentioned you also on the news, the recall of the Jeep, which was the recall of the Jeep, which was demonstrated to be hacked over the Internet. That suddenly you have human health suddenly you have human health, you have human life at stake.
And now the automotive industry, which really is primarily concerned about safety, because safety is really something where liability can be unbounded pretty much. But safety, you cannot have safety in the car without security in the software, without quality in the software. So the way we see this is really quality as well as security as well as safety and increasingly privacy are all connected, are just different sides of the same coin. So I want to talk a little bit about some of the megatrends that we see in the industry. The first one is software seems to be always growing.
And in fact, it's one of the reasons it's actually more slower that Art was mentioning before. And it doesn't cost anything to increase the size of the software because memory gets cheaper and cheaper over time. So here just a few examples. The Apollo 11 had at the time 140,000 lines of code. Today, we wouldn't be able to write any code to to a 145,000 lines of code that has any critical functionality.
If you look at Windows from Windows 3.1 to Windows 3.1 to Windows 7, the code increased from 2,300,000 lines of code to 40,000,000 lines of code. I wouldn't really say what I observed in terms of the functionality in Windows that the functionality increased by a factor of 20, but certainly the code size increased by that factor. And then automotive, GM started in 'eighty one putting some software in almost 50,000 lines of code. Today, you have 100,000 lines of code in a modern car. And just as a reference, and Aart mentioned that before, all of Synopsys' products is 400,000,000 lines of code.
So that gives and that's a lot of code.
That's really it's a lot of code in there. So 100,000,000 lines of code in a car is pretty fundamental. The second megatrend that we are seeing is really the number of software developers in the role. And depending on what source you're quoting here, some sources are saying there are 11,000,000 to 12,000,000 professional software developers. This particular source is saying 20,000,000 today, growing to 25,000,000 in 2020.
The number of software developers is actually rapidly growing. But in fact, as you can't even hire. If you try to hire a software developer in the San Francisco area today, it's extremely hard to get, for example, someone for it's extremely hard to get, for example, someone for a Java web application. It's extremely hard, very competitive market. So software developers are increasing and software developers are increasing and software developers need tools.
Software developers need essentially methodologies, tools and training to get the software designs right. So that's it right. So there's a tremendous need out there. The 3rd trend that we are seeing just on the tools market. If you look here at the tools market for quality and security, this is actually fairly rapidly growing.
So today, we have about $1,500,000,000 in the quality space and about $900,000,000 in the security space. Interestingly, security is growing at a 30% rate, so much faster than the quality space. And that has really to do with every time you see something on The Wall Street Journal on the front page, people wake up and saying, well, I need to do something about it. Chrysler is certainly highly alerted right now to security concerns in their domain. And the last trend I would like to mention, and this is really an eye chart and it's really not meant to be readable, but we see an increasing number of regulations, standards and EBIT standards and even laws coming up that are regulating that space in terms of compliance.
And what you see here is really a maturing of what we call the software supply chain, where not only the software development process itself will have standards for compliance, but even the interfaces. When you want to ship software from a supplier, from a Tier 1, for example, Tier 1, for example, to an OEM or from a Tier 2 to a Tier 1, they will increasingly standards that are driving decreasing these standards that are driving the quality and the security of the software that's being shipped. Dave was mentioning ISO 26, 20 6, 26, 2 in the automotive domain for safety criticality. There's actually part of that that's applicable for software. So this is part of that that's applicable for software.
So this is an increasing domain where we feel there's an opportunity in terms of playing in the compliance space, providing solutions in terms of tools, methodologies and training is really where we go on the business side. Let me talk a little bit about security and how security really evolved over time. So in order to do this, I would like to separate between development, deployment the development, deployment and production. Development means you have a development team that gets the requirements in from the marketing requirements in from the marketing department or whatever the product requirements are coming from during the coding, during the testing all the way till it gets to the release. To get to the release.
Deployment means you're now shipping the software, you're getting out on the target machine, you're installing it, you're configuring it, you're ready to go, you can flip the switch. Production meaning, you actually flip the switch, your website may be online, your database is online and you're actually using it on a daily basis. If you look at this from security solutions, it's actually very interesting that security grew really from the right to the left. Security solutions really started originally with firewalls in the early '90s. So firewall is essentially a filter on the periphery of your enterprise that is looking at the traffic and filtering elements of the traffic out that are not needed.
In the beginning, it was set on the network level. Then in the beginning, it was set on the network level. Then now the more intelligent firewalls are really growing up into the application layer. This is growing up into the application layer. This is a market that's about $12,000,000,000 It's growing at 7% year over year.
What's interesting about the firewall, they work actually quite nice. However, they're always an afterthought. In a firewall, you filter out attack vectors that you know, but the hackers are very good at finding always new attack vectors. So in that, it's always an afterthought. So in that sense, it's actually leaking technology.
Over time, security really moved further to the left and what's called penetration testing. So I'm sure all of you are working in your institution. You have consulting firms coming in that do a penetration testing of your IT infrastructure. Penetrating testing is nothing different than you try to hire some hackers and saying try to hack different than you try to hire some hackers and saying try to me, right? And the hackers coming in maybe for 2 weeks, maybe for 3 weeks is trying to find backdoor 2 weeks maybe for 3 weeks is trying to find backdoors in the same way that a malicious attacker could try to find a backdoor.
And you hire him and you do this for a few weeks and you find the most vulnerable elements of your IT infrastructure. The problem here is not scalable. It's not scalable in terms of you're never done really with penetration testing. You could just do it as an ongoing process. But also security experts are even more difficult or higher than job difficult or higher than Java developers, for example.
It's very, very rare talent having an experience on security. So this is just not a scalable solution. So what you really see increasingly that security is really complemented now by moving to the root course of software development, meaning doing software development in a way that you avoid a whole number of vulnerabilities building into the software in the 1st place, meaning security and quality and now increasingly safety as well as privacy built into the process itself. And this is where you see names like HP and IBM Veracode, for example, and this is where Versus SmartAssets are really increasingly playing. So in summary, where we see us really is on the development side of the software life cycle,
addressing quality,
security, safety and privacy, which what I mentioned before are different sides of the same coin and building those into the development process itself. So let me talk a little bit about how we came about in the last one and a half years. So as you all know, Synopsys started the software business by acquiring Coverity in February 2014. We have expanded since then in 2 dimensions. The first two dimensions.
The first dimension is organic. So we added organic investments, and I want to just mention 2 areas here. 1 is adding additional programming language support. And this is really addressing the fact in the modern enterprise today they use probably a dozen of different programming languages. And in order to be a comprehensive solution provider,
you really need as a
solution provider, you really need to have solutions for all of them. So we started that investment earlier this year and already we're having more and more languages coming out of our pipeline. The second area is compliance. I mentioned that earlier, essentially addressing the different compliance standards. And in fact, that's also driving some of the compliance standards in the future is a key investment area of forward going.
The second dimension I would like to mention is really non organic investment. I would like to talk about 2 acquisitions. I would like to talk about 2 acquisitions that we have done in the last half year. The first one is CoronamiCon. CoronamiCon is a well known company in Finland.
They were the co inventor or the co finder of the hot bleed vulnerability that many of you know that was the SSL library vulnerability, which suddenly the entire Internet was pretty much vulnerable to that vulnerability that was found. With Conanicon, we acquired a world leading fuzzing technology. And fuzzing technology is really finding vulnerabilities on protocols. Dave talked about earlier the Ethernet in the car, for example, the CAN bus in the car is a protocol or, for example, on your device, Bluetooth is a particular protocol. So one of the Pfizer technologies, for example, saying, let's take a Bluetooth device, let's fuzz it and try to find essentially vulnerability by exploiting some of the protocol side affording some of the protocol side effects and hacking your Bluetooth device on that.
We are the work lead on that with 2 50 protocols rapidly growing, addressing multiple verticals in this domain. The second technology is software component analysis. Software component analysis, this helps actually for existing software, scanning that software and finding non vulnerabilities that for example, come in open source libraries. Very often when open source is released later on, security researchers find vulnerabilities and this software is now distributed and present in many, many components. So this product allows us to find those market and then alert the customers you should actually upgrade the corresponding release.
The second acquisition I would like to talk about is the acquisition of the Sika product from the company, Quotia. This actually expands our solution into dynamic web application security testing. This is a new technology area, which is called an interactive application security testing. We are a world leader in terms of that technology. This is really helping us now expanding into web application and web application security testing.
Let me talk a little bit about our field execution. So our sales channel is really composed of 2 major pillars. The first pillar is our existing sales channel in Synopsys, selling to the existing Synopsys customers. And Arp has mentioned before, our customers have actually for multiple years already more and more invested into software and adds us all the software and adds us all the years what can you help us to help in the software domain. And the emulation technology, the prototyping technology is all helpful.
With our software integrity solutions now, we're expanding that for the existing customers. The second one is a dedicated enterprise and sales team that is really focused on selling to enterprise customers that are outside of the existing customer base. For example, New York Stock Exchange or NASDAQ, these are customers that are new to Synopsys and the dedicated sales team will really handle those. Both of them are really built on 2 foundations. The first one is a deep culture of close customer collaboration.
And this is something that Coverity has in the culture. Synopsys is a very, very long culture on that In order to drive success for customers, it's not just about giving them tools. It's essentially transforming them in terms of essentially transforming them in terms of the maturity how they do software development. And that's a deep culture that Synopsys brings to the table collaborating with the customers to drive them forward in the maturity.
The second one is a strong international presence.
We have 100 strong international presence. We have 113 sales offices in 27 countries. So this is certainly a very broad infrastructure that we have from which we can operate and essentially serve our worldwide customers in a fairly rapid way. Let me share some in a fairly rapid way. Let me share some of the customers that we have here in the different verticals.
You see on the top left mobile consumer devices. On the right then enterprise networking and independent software vendors bottom left independent software vendors bottom left high reliability devices, for example, in the medical domain or automotive domain. And then on the bottom right, you see financial services. What's really interesting, the technology stack that we have, the technology solution and the products are actually equally applicable to all of them. The concerns are sometimes different.
Just to give an example in the financial sector, it's different. Just to give an example in the financial sector,
a bank cares actually about 2 things.
Number 1 is it cares about security that the banks are it cares about security that the bank account doesn't get hacked. But if the bank or if financial institution has a trading platform, the trading platform cares about security quality because if the trading platform going down, Every millisecond are trading every millisecond are trading platform is down. You guys know this very well, right? I mean, it costs you 1,000,000 of dollars. So qualities into our liability is extremely important.
It's intra liability is extremely important there. Let me talk a little bit about when we going back to supply chain. So what going back to supply chain. So one of the big opportunities we see is providing solutions for compliance to in the software supply chain, meaning software is not just shipped based on the fact that the code compiles, it actually complies with certain criteria for quality, for security, for safety. This is an area where the automotive industry, for example, supply chain and we had the discussion at the table just earlier, is very advanced in supply chain.
In software, this is really an emerging area where we see a tremendous opportunity. And I would like to quote you our collaboration with Underwriters Laboratories. And so all of you know UL. I mean, an average household in the United States has more than 100 devices that are UL certified. And UL is that are UL certified.
And UL is about to launch a cybersecurity assurance program. So we are collaborating with UL providing our solutions. But of course, UL is also utilizing solutions from other vendors. But this is really an emergence of compliance in a market that is not used to that, and this is a tremendous opportunity for us. Let me talk a little bit about some of the coverage that we received recently.
One of them is Gartner. Some of you may know the Magic Quadrant for application security testing in Gartner. So we just entered their magic quadrant on the visionary side. And that is a tremendous accomplishment for us. A lot of enterprise customers looking at Gartner for guidance in terms of which vendors they should utilize for the different technologies.
Having Synopsys there now as an emerging player, I think is really great opportunity for us. This is really great opportunity for us. The second thing I would like to mention is Forrester. Forrester in their tech radar for application security, we are actually present on 4 of the key technologies. And if you look at the I just want to mention this very little print and you see it on your handout.
Web application firewall, this is what I mentioned earlier on my chart. This is really the firewall, meaning at the production side of the software. We have really the technologies to address security in the development process much earlier. So this concludes my part. And I would like to thank you very much.
So with that, maybe we can open it to Q and A for any of the 3 of us.
And if you could hang on
Oh, I guess there's a microphone that's going to be that 1.
How did I know
Good afternoon, Chief. Please, Howard. Question for Bart. The implications of smart products, of which IoT seems to be a special case, in terms of how EDA tools and IT are employed. It's basically a 2 part question.
1, are there significant differences in the requirements of smart connected products versus prior generations of new devices over the last 30 years. Secondly, we've seen from many customers, particularly in automotive, a move towards working on common platforms or products around which there are significant variances or variations. What are the implications of that for how EDA and IP are employed? It's pretty easy to see how it affects your CAD and TLM and other kind of technical software counterparts. But what does that mean for counterparts?
But what does that mean in terms of design methodology for PEA? Excellent question.
I think the first aspect to answer that question is that these products because they have not only very sophisticated silicon but onto silicon, but unbelievably sophisticated software sitting on top of that, The first question that a developer company has to answer is does it actually work? Does it actually do the thing I want it to do? And long before actually building it or building it into a car, let's say, or another very expensive device. And so the way to answer that question is what's called prototyping. Do a mock up.
In the past, we would have said a simulation. Now simulation is not fast enough to do that. And so it's simulation amended with other techniques such as emulation or FPGAs. And one of the areas that we see tremendous success in the verification continuum is that it's actually a continuum from hardware to software. And that has accelerated substantially because when we quote things such as, oh, you can get Linux booted in an hour or Android in an hour, what does that really mean?
That means that this mock up within an hour can tell you does it sort of run and then within an hour you can start running applications on it, which you can try it out. And I think that is a massive, massive direction that we will see more growth in and more opportunities in. But that also implies having the sophistication to do what is very, very large systems. On the platform side, why do people use platforms? Well, because they hope to use the same thing for different applications by modifying them a little bit, a b, a platform invariably means multiple things, whatever they are and a car is a platform, a computer system is a platform.
Our software is 2 or 3 platforms, where the value of the individual pieces when they work well together in a platform is much higher than the individual pieces in separation. And so when you ask the question about IP, one of the reasons we sell not only individual IP pieces, but for example, we have a sensor subsystem is because of a sensor subsystem is because of a sensor subsystem, there's processing, there's memories, there's interfaces and so on. And if we put it together and let's say you want to connect your sensors to it, well, at least that part is already working. And so yes, platform is just another way of saying to put more things together and the next level platform is higher. And so now back to the first part of your question, we always talk about the verification platform as in silicon thing.
Now we don't think about that at all like that. We think silicon and software thing. Well, we did exactly the same. We expanded the scope of what needs to be solved. And the sophistication of that solution is very similar to what we've seen in 20 years of more software sophistication, now applied straight to the software domain.
Yes, please?
Hi, it's Art. I guess as a follow-up on that question around smart devices, As you build up your blocks and you have this IP solution that you could start offering, When I think about customers for smart device, it's expansive, right? It's not the typical customers that are buying typical semiconductor. So, in the early discussions that you were having, where are you seeing the most interest? Is it a typical semiconductor company?
There are many semiconductor companies that are working on these fundamental blocks, whether they're processor sensors or what have you. Or are you starting to see system OEMs come and say, wow, we could take your IP and then add our value add and come up with our devices? Where is sort of the interest? And if it is the system OEMs, are we going to see an expansion of TAM because of
that? The answer is yes, meaning we absolutely see both. And of course there's been already a long standing push on the semiconductor side of things, because you may recall in the late '90s, there was this new word system on chip and it sounded big. And today it's like, okay, but everybody has systems on a chip because most sophisticated chips are 1 or more processors in the 1st place, have all the characteristics of being little super small computers. And so the semiconductor industry is well versed in knowing that only a little computer you need some operating system, you need the drivers and then you need the drivers and then you need the way to connect above.
The challenge for the semiconductor industry by the way is not so much a technical one, but economic one, which is, so how do we get paid for that? And so they are racing forward in trying to provide platforms. On the other hand, there's very clearly now a perspective coming down from the people that say data is intelligence, data is insight, data can impact devices. And again, I think an extreme case, extremely interesting is actually the automotive industry, because it's solely very swift that we see this driving automatically is not only possible now the question will be legal and what are the not only possible now the question will be legal and what are the side effects are all about. But those are people that come down from the system side.
And they have now the opportunity, the dilemma, the question, should they do the chip design themselves, the chip design themselves? And if they see opportunities there or if they have special requirements such as automotive has certain manufacturing, automotive has certain manufacturing requirements, Bosch for example, will say, hey, we can do a lot of that ourselves. We can do a lot of that ourselves. Others may say, well, who do I team up with? Do I team up with an NXP or a Freescale or an ST that are the big automotive chip providers?
And these value chains continually realign themselves. Food chains continually realign themselves essentially based on how can you be more competitive, I. E, how can you move faster and move faster. And it's an interesting difficult question in the automotive industry because the automotive industry is fundamentally a slow moving industry. The cars have to work for 25 years, there's all kinds of requirements.
And suddenly, it's turned into a superfast industry. This is artificial intelligence in real time here, right? So it's hard to predict all of these things, but you can feel the next wave in my opinion is absolutely that computation, mobility and so on gets aggregated into smart distributed smarts. Until it's there, the hunting for money will be challenging, because it's hard to make money on some temperature checker, right? But the car is a lot of money.
So super interesting direction. I think we're well placed for that. And we ourselves are and we ourselves are emphasizing a more vertical market segment than we ever did before, because we're seeking exactly the characteristics you're asking about.
Art and Dave, maybe a
follow on to that taking
it into your IP business, you talked about the IoT and the auto platform. The sense that we've always had is that the margins in the IT business are lower than the corporate average. And again, I think the sense that many of us have is that it's the extra work that you have to do with each of the customers. Now that you're coming out with these platforms that are designated to a vertical, are you finding that there's more standardization, meaning that the customer can take the IP, for lack of a better term, as is, so you get more repeatability and maybe more leverage out of the IP business?
So I think the answer is yes. I think we'll see that. And on the counter side of it, the challenging part too is when these standards evolve, when new versions come out, they become much more complex. So the initial R and D investment that needs to go in, for example, to go from USB 3.0 to 3.1 is huge. It's like a It's like a 10x in complexity.
But I think that will also drive our customers to want to take things off the shelf versus mess around with them. One of the key terms we use a lot in the IP business is silicon proven. And the fact that our IP has and the fact that our IP has actually been on a real test chip and we've been able to test it has huge value to the customer. And so by having it out of the box, they get the advantage of that. So I think the move towards these platforms will help encourage customers to take more off the shelf IP.
Yes. We're already taking it. So, I
want to dig in. The sense is that you're still putting a
lot of manual design effort after they take it, which kind of weighs up margins. Is there more opportunity to take it as
well? Well, I think actually the bigger margin pressure is not from that angle. It is from the fact that right now the rate of change on silicon technology is unbelievably fast and complex. And so I'd like to remind you that 7, 8 years ago, the notion of there ever will be commercial FinFETs was no. Here it is and you can see the rate of change.
And so that is an opportunity for us because that complexity is also very difficult to handle by the users. Now tying to the fact that they will need IT that is that fits their restriction is absolutely key. And recently, we introduced the fact that we have a whole IP collection that is like that we have a whole IP collection that is automotive certified. Well, in other words, we did all the homework for that market segment and therefore they're more likely to come to us for that IP because it passes what are actually very strict checks. So this all way of saying is, I think all of these markets right now are in fairly fast development.
And for us, it is absolutely essential to figure out what can we horizontally leverage and what things do we need to invest in vertically and what things do we need to invest in vertically. And invest is, of course, expensive, but there's also specific benefits and both specific benefits and pricing that you can leverage by going vertically. So I think the IP business is in just as much an evolution as the hardware software interface because IP is hardware software these days. Yes? Thank
you. When you guys acquired Coverity, if memory serves, you talked about a TAM of around $500,000,000 at that time for what Coverity did at that time. You had a TAM for this year now between security and quality of, I think, around $2,400,000,000 or something of that magnitude. Can you talk about how that TAM is involved? And do you really serve that whole TAM today with what you do you really serve that whole TAM today with what you with the pieces you've acquired and organically developed?
Thanks.
So at the time, I think the TAM that was quoted there was really the quality space on the HVHP plate at the time. So remember, we were in the HVHP plate at the time. So remember, we were on a static analysis quality space. Although we sold the security, so now when we quote the north of €2,000,000,000 that
is really the combined quality and security
as well as quality and security as well as on static solutions and dynamic Solutions for the full testing spectrum that we're talking about here.
Thanks. Could you tell us where you are seeing the fastest growth by? It's absurd. You are seeing the fastest growth by specific nodes, regions and customer types?
Okay. Then so maybe Let me
give a little bit color.
Sure. Sure. Let me start with regions. The Far East is still the most rapidly growing. And notwithstanding sort of the recent up and down and shake ups in China on their respective Wall Street.
The investments continue at a very high rate, large number of engineers coming out of school and definitely a drive by the country to accentuate its growth rate in the semiconductor areas.
Which countries?
In the semiconductor areas.
Which country?
This is I'm talking about China. But in general terms, I'm talking about Asia Pacific. And Asia I'm talking about Asia Pacific, I would certainly include Taiwan and Korea and China as the big three. And then around that, you would look at the Singapore, Hong Kong and somewhat India space. That's for us Asia Pacific.
We take Japan in a different category. So that's the highest growth from that perspective. In terms of the growth rates at the different technology areas, when we look at EDA, we typically say we're talking about lowtomidsingledigits growth rate. About the IP, we're talking about just double digits and then the software space, 20% -plus with a lot of variability as you see these markets being very fractured and evolving. And then from a technology point of view, I personally think that the verification space is one that has a lot of potential because the problem set is becoming so much larger and more complex per what we talked about and the intersection of hardware software is only a center of gravity for
us. And could you talk about the synthetic activities that you're seeing at foundries versus IDM and foundries versus IDM?
The what?
The FinFET activities. Sure. Buy, buy nodes, that would be helpful. Sure. Buy, knows, that would be helpful.
Sure. Well, first, just to clarify for those not familiar, what is FinFET? Transistors for the last 40 years were flat and smaller and smaller and smaller and smaller. And then it's hard to make smaller. So what you do, they flipped them vertical.
And it had not only the benefit of using less real estate, it had another benefit, which is it was also a breakthrough in getting lower power. And low power, as you clearly know from your cell phone and other mobile devices, is actually the single biggest physical challenge. So that is what FinFET was addressing. And the question was addressing and the question was can you manufacture these at a a reasonable cost? And it's actually really difficult, right?
We have horizontal houses. Horizontal houses is one thing when you build high rises, a whole different set of scales and it's not dissimilar from that perspective. The answer has been yes, it is possible. It has also been clear that it has been very difficult to get there. And one of the reasons it's difficult to get there.
And one of the reasons we see so many generations of FinFET in very short amount of time is because people keep improving them so that the yield, meaning the number of chips that work over the overall node first produced, needs to come up because that has direct impact on the economic. And so the race has been very, very much on. The race has been very, very much on among the top leaders from a technology point of view. And that is still ongoing because the horizon keeps moving out. What was viewed as almost impossible 10 nanometer chips is now in production design.
And now already people say, well, we want to go to 7, we may go to 5, then maybe other types of transistor possible. So I expect that to continue. I expect the economics to become tougher, but the economics to become tougher. But because of the value of smarts at a low power cost will increase, there's no doubt in my mind that push will continue. Now not everybody is adapting at the same time.
And so there is a large set of companies that are sort of in the wait and see mode and they are essentially parked at 28 nanometers, maybe 22 nanometers. And they're just waiting until FinFET is cheap enough waiting until FinFET is cheap enough, easy enough to then cross that bridge. And you may have noticed that in our IC compiler results, we made a point to say, and here are a number of chips that actually were done at 40 and 28 nanometer, we were done at 40 and 28 nanometer because the many people that benefit from these advanced tools even if they're not on the singular most advanced silicon technology. Bottom line from my perspective is the technology of Moore's Law continuing at a rapid speed. The economics of Moore's Law are under some degree of pressure, but the functionality value, in my opinion, will be so high that it will push the whole system to keep racing forward.
We have time for one more question.
We've heard a lot from semiconductor companies at recent conferences kind of updating their views on the macro outlook. Just kind of curious as we're getting ready for most of your customers to go through the budgeting cycle, What's some of the commentary that's coming back to you around their thoughts around investment in EDA? And maybe if you could layer on top of that, given the wave of consolidation, which you talked about in your call cadence as well. But have you actually gone back and looked at specifically your customer set and the consolidation and when we might see, if any, the impacts that we've talked about, when does it layer in from a timing perspective?
Sure. Well, there's no question that we're specifically with some of the recent events in China, China, there's a bit of reluctance to see super high growth in semiconductor for this year and potentially for next year. And so people are revisiting their budgets. Secondly, you have seen a number of consolidations that have been quite substantial, affiliations that have been quite substantial, at least announced. Not all have been closed.
So NXP Freescale, Avago Broadcom and so on. This is not new. These are quite large. And I think they're all part of what I love to call the techonomic crunch of continuously redriving, continuously redriving for efficiency. Now when you say efficiency, you say, well, they're going to come to
you and say, oh, I
want to pay less. They always say that. There's nothing new. And we have always managed over time to still grow the company. And so in consolidation, what happens?
Well, initially, the customers say, hey, I need to save money because I paid a premium for the acquisition. I'm under pressure and then acquisition, I'm under pressure and then we listen and then we say, okay, let's help you save money by being more efficient, by maybe doing more things, by maybe doing more things with us. And in most cases, we've actually been able to navigate well through this. But at least to navigate well through this, but these are the normal churns in the industry. I think the bigger picture is one where many of these companies struggle with the very question that we're addressing, which is that a substantial amount of their value is delivered through the software that's embedded in their chips and that they are seeking to find where are the new opportunities that actually will have substantial volume.
And so, our best move here is to help them be competitive in being able to prototype very quickly what are the products that they can offer up. And so I've always believed that as much as it is important to help our customers save money and be super efficient, it is even more important to help our customers differentiate and help them grow their revenue. And so, trying to be as well aligned as possible with who we believe are the winners and trying to provide solutions that will make them competitive is the core of our answer. And hopefully, you saw it a little bit the core of our strategy. Okay.
I'm getting this sign, which implies universally it's sort of over. It's sort of over. Thank you so much for joining us. Hopefully, it gave you a sort of comprehensive and coherent sense of what we're doing.