Business model of Synopsys

Customer Segments

Synopsys provides a broad range of solutions and services to customers across the world. The Company’s electronic design automation and intellectual property services customers primarily comprise manufacturers of semiconductors and electronics systems.

The Company claims to provide services to almost all of the world’s semiconductor producers, including all of the world’s top 20 semiconductor manufacturing companies. Its other services and solutions are utilised by commercial clients operating across the financial services, energy and industrial sectors. Synopsys names among its customers high-profile companies such as Samsung, Fujitsu, Renesas, Global Foundries, AMD and Xilinx.

Geographically, Synopsys’s business is focused primarily on the US market, which accounted in 2015 for 51% of the Company’s total revenue. The Company also records sales across Europe, Japan, and Asia Pacific and Other categories.

Value Propositions

Synopsys provides value to its clients in the following ways:

• The quality and reliability of its products, comprising a full suite of effective technology and software solutions, many of which are designed specifically for semiconductor and electronics producers;
• Its intellectual property products, which assist in streamlining the manufacturing process;
• Its brand recognition and reputation, with the Company serving a number of high profile customers across the world;
• Its innovation and partnerships, with the company devoting substantial funds to research and development and collaborating with market leading entities in the development of its solutions; and
• The flexibility of its product offerings, with customers able to mix and match certain software products in order to fully cover their design flow.

Channels

Synopsys operates a website at www.synopsys.com, through which customers are able to browse the Company’s services and solutions. The Company, however, does not appear to operate an online sales channel.

Synopsys primarily markets and sells its products and services through its own in-house direct sales teams across the US and other principal foreign markets. The Company operates sales and support centres throughout the US, as well as in Canada, multiple countries in Europe, Israel, Japan, China, Korea, Taiwan and other countries in Asia, with international headquarters in Dublin, Ireland. Typically, Synopsys distributes its software products and documentation to customers electronically, but also provides physical media when requested by the customer.

A small proportion of Synopsys’s sales are made via third-party channel partners, including resellers and independent sales agents.

Customer Relationships

While Synopsys does have an online presence, the Company does not appear to make its products and services available to customers on a self-service basis.

The majority of the Company’s sales are made via its direct sales staff, who consult with clients to provide a bespoke service tailored to their individual needs. The Company typically licenses its software to customers under non-exclusive license agreements that allow a number of individual users to access the software on a defined network, including, in some cases, regional or global networks.

Synopsys provides ongoing personal care to its customers in the form of online support, telephone assistance and online resources, as well as training and learning services. The Company also operates a Community portal, through which customers and partners can find information on events, media and user groups.

Customers are also able to interact directly with Synopsys through the Company’s social media accounts, including with Twitter, LinkedIn, Facebook and YouTube.

Key Activities

Synopsys provides technology and software products, intellectual property solutions and professional services, primarily to manufacturers of semiconductors and electronics systems. The main focus of the Company’s business, is its provision of electronic design automation software that is used by engineers use to design and test integrated circuits.

It additionally provides intellectual property products, comprising pre-designed circuits that can be used as components of larger chip designs, replacing the need for clients to design these circuits in-house. Synopsys also offers a suite of software and hardware products that are used to develop the electronic systems that incorporate chips and the software that runs on them, providing ancillary technical support services to ensure that customers utilise its products to full effect.

Synopsys is also a provider of software tools used by developers produce software code in a range of industries, including the electronics, financial services, energy, and industrial sectors.

Key Partners

Synopsys collaborates with a network of partner companies throughout the development and sale of its products and solutions. These partners can be categorised as follows:

• Foundries, including IBM Foundry, MagnaChip, Dongbu HiTek, SilTerra, and TSMC;
• Design Service Partners, including eSilicon, GUC, Brite Semiconductor, Open Silicon, and Veri Silicon;
• Library and Intellectual Property Partners, including ARM, CEVA, MIPS, Imagination, Faraday Technology, and Artisan;
• Application Specific Integrated Circuit Partners, including Epson, IBM ASIC, Renesas, Toshiba, Gigoptix, Texas Instruments, and Honeywell; and
• Field-Programmable Gate Array Partners, including Xilinx, Achronix, Microsemi, QuickLogic and Altera.

Synopsys also has strategic partnerships with Companies such as Samsung, Intel Custom Foundry, Global Foundries and UMC. It also partners with a small number of resellers and independent sales agents to enhance its sales reach.

Key Resources

Synopsys’s key resources are its technology and intellectual properties, its IT infrastructure, its various partnerships across the development and sales chain, and its personnel – notably its sales, support and research and development staff.

Synopsys relies upon a combination of copyright, patent, trademark and trade secret laws to establish and protect its proprietary rights. According to its annual report, it has more than 2,500 US and foreign patents in place.

Searches of records published by the US Patent and Trademark Office identified a number of patent applications filed in the name of Synopsys, including applications entitled ‘Diagnosis and debug with truncated simulation’, ‘Determining a set of timing paths for creating a circuit abstraction’ and ‘Detecting and displaying multi-patterning fix guidance’.

Cost Structure

Synopsys incurs costs in relation to the research and development of its products and solutions, the maintenance of its IT infrastructure, the management of its partnerships, the operation of its sales and marketing activities, and the retention of its personnel.

In 2015 Synopsys’s research and development costs amounted to $776.2 million, up from $718.8 million in 2014. The Company’s general and administrative costs, comprising personnel salaries and benefits and rent and utility payments across its network of offices, are its most significant, amounting in 2015 to $165.1 million.

Revenue Streams

Synopsys generates revenue through the sale and licensing of various software and intellectual property solutions, and professional services. Revenue from the Company’s products and services is categorised as follows:

• Core Electronic Design Automation Products, comprising revenue generated by the Company’s digital and custom integrated circuit design software, verification products, and field-programmable gate array design software;
• Intellectual Properties, Systems and Software Integrity Services, including revenue generated through the sale of the Company’s solutions for wired and wireless interfaces, logic libraries and embedded memories, non-volatile memory, and configurable processor cores and application-specific instruction-set processors;
• Manufacturing Solutions, comprising revenue generated through the provision of software and technology solutions that enable semiconductor manufacturers to develop new fabrication processes; and
• Professional and Other Services, comprising revenue generated through the provisions of consulting, training and design services.

In 2015 Synopsys generated $2.24 billion in total revenue, up 9% on the $2.06 billion recorded by the Company in 2014. The Company’s Core Electronic Design Automation business accounts for the majority of the Company’s revenue, amounting to 61% of total revenue in 2015. Synopsys’s Intellectual Property, Systems and Software business accounted or 28%, while Manufacturing Solutions and Professional Services accounted for 8% and 3% respectively.