The Business of EDA:EDA Vendor Return on Investment

EDA Vendor Return on Investment

Frank:

Let's look at that. Let me draw on the whiteboard here. (See Figure 2.3.)

Now this is admittedly a rough estimate, but the tool prices come out about right. We can typically sell a tool for anywhere from $10K to $200K per copy, depending on how critical it is. So you can see there are potentially large profit margins in this industry.

Nora:

I see a large difference between the development cost and the value to the user. You can sell a single tool for ten times what is needed to support the company?

Frank:

Sometimes, but it depends on the perceived value of the tool and the amount of competition. Only a few tools sell in the multi-$100K class. Also, larger user companies often have a larger budget for EDA tools than small design houses have.

However, an early timetomarket product can demand a higher price. In addition, an aggressive marketing and sales staff can increase the number of copies sold.

02fig03

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