Statement of Commissioner Sheila F. Anthony
Synopsys Inc./Avant! Corporation
File No. 021-0049
Today the Commission voted to close its investigation of the proposed (and now consummated) acquisition of Avant! Corporation by Synopsys Inc. While I have decided to concur in the vote to close, I remain uneasy about this transaction's potential impact on the electronic design automation ("EDA") industry. I write separately to highlight my concerns, and also to urge EDA customers and competitors to keep the Commission fully appraised of post-acquisition market developments, in case a future enforcement action becomes necessary.
EDA tools are used by designers of integrated circuits ("ICs"). These tools enable a chip designer to create a high-level logical description of the desired performance of an IC, and then to translate that description into a detailed physical map of the silicon wafer's surface, showing where individual transistors should be placed and how they should be interconnected. Although EDA tools are used primarily by a select group of highly-trained engineers, these tools affect millions of consumers. One need not look far to observe just how many everyday consumer products - from talking teddy bears to microwave ovens to cell phones to personal computers - contain sophisticated ICs that could not have been designed without the help of EDA tools.
Synopsys's and Avant!'s EDA tools are largely complementary. Synopsys has a dominant market share in so-called "front-end" logic synthesis tools, while Avant! has roughly half the market for "back-end" place-and-route tools. The parties have indicated, and many customers believe, that this acquisition will lead to tighter integration between the Synopsys front-end and Avant! back-end tools, which will enable chip designers to more efficiently complete designs for increasingly tiny and densely-packed ICs. While the parties have not put forth any concrete integration plans, it seems likely that at least some merger-specific integration will occur, and that this integration will benefit at least some EDA customers.
The key question, therefore, is whether these efficiencies will be sufficient to outweigh any potential harm to competition. The answer to this question requires a two-pronged inquiry. First, has the acquisition of Avant! given Synopsys the ability to take anticompetitive actions? Second, has Synopsys gained any incentives to do so?
For years, Synopsys has made its synthesis tools interoperable with a wide variety of other EDA tools, including tools sold by direct competitors of Avant! and used by a large number of EDA customers. Post-acquisition, now that Synopsys owns Avant!'s popular suite of back-end tools, it is unclear whether Synopsys will have continuing incentives to maintain the same level of interoperability between its synthesis tools and back-end tools produced by other firms. On the one hand, interoperability ensures the continued goodwill and commitment of Synopsys's existing customer base, including those customers who choose not to use Avant! back-end tools. On the other hand, an open-access philosophy may have different financial consequences now that Synopsys profits directly from sales of Avant! products.
Even if Synopsys could not completely foreclose Avant!'s back-end competitors, Synopsys could, in theory, tweak its synthesis products in subtle ways, thus making it more difficult for customers to use other back-end tools. Among EDA customers designing ICs, a time-to-market difference of even a few days or weeks can make a tremendous difference. (Imagine, for example, missing a launch date for a hot new electronic toy or handheld personal digital assistant, right before the holiday shopping season.) Therefore, even minor "speed bumps" in the paths of back-end competitors might compel customers to migrate to Avant! tools, and competition in the back-end market would suffer as a result. Moreover, in the long term, if other EDA companies were sufficiently weakened in back-end sales, these companies might be less likely to challenge Synopsys in the market for front-end tools, as well as in the up-and-coming (but very much anticipated) market for integrated EDA tools.
Upon listening to industry experts and analyzing Synopsys's post-acquisition incentives, I find it entirely plausible that the theory of competitive harm articulated above could come to pass. But it has proven difficult to pinpoint concrete evidence to test this theory, or to evaluate whether any likely harm would be outweighed by integrative efficiencies. In short, I have voted to close this investigation because, at this time, there are too many "mights" and "maybes" to satisfy the reason-to-believe standard. To conclude otherwise would require excessive speculation by the Commission - especially given that EDA industry participants themselves cannot agree on the likely impact of the acquisition, or even on the direction in which EDA technology may be heading.
My fellow Commissioners have indicated that they, too, will be on the lookout for anticompetitive conduct stemming from this acquisition, which could justify a future enforcement action against Synopsys. I sincerely hope that no such conduct occurs, and that the parties' promises of procompetitive benefits all come to pass. I do expect, however, that the Commission will act swiftly and forcefully if we detect any anticompetitive effects. Only a quick enforcement response will prevent an unfortunate "too little, too late" situation in the fast-moving EDA industry. Therefore, in this case even more so than most, we must rely on knowledgeable industry participants to assist us in our ongoing monitoring efforts.