Cadence Design Systems Inc. SWOT and PESTLE Analysis

Strength

1. Leading player in the industry through strategic acquisitions: Cadence is among the leading companies in the EDA industry, who is also the first company in the industry which started growing by acquiring other companies. The company has around 50 acquisitions to its name, and the company especially came into limelight when it acquired Gateway and Tangent. The acquisition of Gateway expanded Cadence’s scope in the Verilog business, which was a high growth and highly expanding venture. Similarly, with the acquisition of Tangent Cadence became the best gate-array router company along with other capabilities. The EDA industry is intensely competitive even today, with the number of new entrants gradually reclining. However, it was even more competitive earlier because there were no dominating players like Google or Amazon in the software industry. Cadence has secured a strong position for itself in the industry with acquisitions.

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Weakness

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Opportunity

1. Demand for electronic design tools across industries is expected to grow: Total revenue of EDA industry has consistently been 2% of the semiconductor industry. However, revenue growth in the EDA industry has been observed to be the strongest across the electronics value chain, and its revenue as a percentage of the semiconductor industry is also rising. With increasing uses of ICs and semiconductors across industries, big-tech companies like Google, Facebook, Amazon, Alibaba etc. are entering the IC design industry. Developing technologies like autonomous vehicles, virtual and augmented reality and IoT are increasing possibilities of applications of electronic designs. As a market leader in the US, this trend is a great opportunity for Cadence to further its position in the industry.

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Threat

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Political

1. Uncertain political conditions and trade relationships impacting customers’ business: Cadence Design’s customers could lose business as a result of uncertainty in political and economic conditions and adverse relationships between countries where it conducts its international business. This loss comes in the form of reduced new chip designs, reduced spending on research and development, leading to reduced demand for Cadence’s products and services. For instance, in FY19 and FY20 some customers of Cadence were named in the “Entity List”, a list of companies or countries where US companies are not allowed to do business, which forced Cadence to have very limited interactions with them. Such restrictions imposed on the basis of geopolitical and protectionist motives result in less business for Cadence along with higher costs in the form of new customer acquisitions.

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Economic

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Social

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Technological

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Legal

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Environmental

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