Cadence Design Systems Inc., a designer of microchip software, is reportedly betting on witnessing high demand for custom chips from automobile companies & other chip users who are facing increasing competition from corporate titans Tesla and Apple, who manufacture their chips.

As per sources, Cadence as well as its rivals Synopsys Inc. and Siemens EDA are amidst a critical industrial shift, as users who previously purchased semiconductors from prominent manufacturers are now looking to produce their chips indigenously.

According to Anirudh Devgan, the newly appointed CEO of Cadence, other industry players are learning from behemoths like Apple, Alphabet, and Tesla, who have created custom chips that set their products apart from the competition.

He further said that many car companies produce more than a million units and that at some point in the process, it becomes a wise decision to have their semiconductors due to factors such as cost and production schedules.

According to sources, the cost of creating a chip is nearly USD 1 million, but with the help of AI, these costs can be minimized, especially since traditional semiconductor companies are continuously raising prices, with certain chips now selling for over USD 100 each.

Notably, Cadence develops EDA software for designing the internal workings of a chip into the physical layout of many transistors squished into a few millimeters of silicon. Taiwan Semiconductor Manufacturing Co. is primarily responsible for the manufacturing process.

The firm’s clients have customarily been traditional semiconductor firms, but the company's newest ‘system’ customers who design products in which chips play a major role, now account for 40% of its revenue.

The company has now expanded its offering to include software that goes beyond chip design and aids in the integration of custom chips into their completed products.

Cadence shares fell 5% on Tuesday (18th January) in a down market, but with the implementation of its latest strategies, share prices are expected to pick up.

Source credits:

https://www.investing.com/news/stock-market-news/cadence-design-systems-aims-to-cash-in-on-new-customchip-era-2741074