ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 28, 2019 Parts Of A Chip
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Directors, Executive Officers and Corporate Governance
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
This Annual Report on Form 10-K and the documents incorporated by reference in this Annual Report on Form 10-K contain statements that are not historical in nature, are predictive, or that depend upon or refer to future events or conditions or contain other forward-looking statements. Statements including, but not limited to, statements regarding the extent and timing of future revenues and expenses and customer demand, statements regarding the deployment of our products and services, statements regarding our reliance on third parties, and statements using words such as "anticipates," "believes," "could," "estimates," "expects," "forecasts," "intends," "may," "plans," "projects," "should," "targets," "will" and "would," and words of similar import and the negatives thereof, constitute forward-looking statements. These statements are predictions based upon our current expectations about future events. Actual results could vary materially as a result of certain factors, including but not limited to those expressed in these statements. Important risks and uncertainties that could cause actual results to differ materially from those contained in the forward- looking statements include, but are not limited to, those identified in "Proprietary Technology," "Competition," "Risk Factors," "Critical Accounting Estimates," "Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk" and "Liquidity and Capital Resources" contained in this Annual Report on Form 10-K and the risks discussed in our other Securities and Exchange Commission ("SEC") filings.
We urge you to consider these factors carefully in evaluating the forward-looking statements contained in this Annual Report on Form 10-K. All subsequent written or oral forward-looking statements attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date of this Annual Report on Form 10-K. We do not intend, and undertake no obligation, to update these forward-looking statements.
We enable our customers to design electronic products. Our products and services are designed to give our customers a competitive edge in their development of electronic systems, integrated circuits ("ICs"), electronic devices and increasingly sophisticated manufactured products. Our products and services do this by optimizing performance, minimizing power consumption, shortening the time to bring our customers' products to market and reducing their design, development and manufacturing costs. Our customers create and sell electronic products at differing levels of completeness. Our electronic systems customers deliver entire devices, such as smartphones, laptop computers, gaming systems, automobiles and autonomous driving systems, servers, cloud datacenter infrastructure, artificial intelligence ("AI") systems, aerospace and defense, medical equipment and networking products. These systems companies internally develop, or externally purchase, the sub-components for their products, including printed circuit boards ("PCBs"), which interconnect all the hardware components, ICs, which are often referred to as computer chips, and software at various levels which runs on the hardware. Our semiconductor customers deliver ICs, which include subcategories such as memory chips, systems-on-chip ("SoCs"), analog chips, processors and other types of chips.
We offer software, hardware, services and reusable IC design blocks, which are commonly referred to as intellectual property ("IP"). Systems customers use our offerings to develop and integrate software that is key to the functionality of their products, as well as to design their ICs and PCBs. Our semiconductor customers use our offerings to design, configure, analyze and verify ICs. Additionally, some customers license our IP, which accelerates their product development processes by providing pre-designed and verified circuit blocks for their ICs.
Our strategy, which we call Intelligent System Design™ , provides the technologies necessary for our customers to develop and optimize a complete and functional electronic product. We address the challenges posed by the needs and trends of electronic systems companies as well as semiconductor companies delivering greater portions of these systems.The development of electronic products, or their sub-components, is complex and requires many engineers using our solutions with specialized knowledge and skill. The rate of technical innovation in electronics is swift, long driven by a concept known as Moore's Law, which more than 50 years ago predicted that the complexity of ICs would double about every 24 months. In order to make our customers successful, our products must handle this exponential growth rate in complexity, without requiring a corresponding increase in our customers' costs. Historically, the industry that provided the tools used by IC engineers was referred to as Electronic DesignAutomation ("EDA"). Today, our offerings include and extend beyond EDA tools to enable Intelligent System Design across three layers as illustrated below-starting with IC and SoC design excellence, followed by system innovation, and then pervasive intelligence.
The core IC and SoC design excellence requires core EDA technologies for custom IC, digital IC and signoff, and functional verification, and leverages pre-build semiconductor IP. These tools, IP and associated services are specifically designed to meet the requirements of engineers who design across analog, digital and mixed-signal domains, and perform the associated verification efforts, including validation of low-level software running on the silicon model, thereby enabling design teams to manage complexity without increasing the team size or extending the project schedule, while reducing technical risks.
The second layer of our strategy centers around system innovation. It includes tools and services used for system design of the packages that encapsulate the ICs and the PCBs, system simulation which includes electromagnetic, electro-thermal and other multi-physics analysis necessary as part of optimizing the full system's performance, Radio Frequency ("RF") and microwave systems, and embedded software.
The third layer of our strategy is enabling pervasive intelligence in new electronics. It starts with providing solutions and services to developAI-enhanced systems and includes machine learning and deep learning capabilities being added to the Cadence technology portfolio to make IP and tools more automated and to produce optimized results faster, supported by cloud access to address the growing computation needs of our customers.
Our products and services allow our customers to design complex and innovative electronic products which are accelerated by growing digital transformation. Demand for our technology and expertise is driven by our customers' investment in new designs and products. The most promising new opportunities for us involve enabling the design of electronic systems for AI, edge computing, hyperscale computing including datacenter infrastructure, communications, including 5G networks, augmented reality, virtual reality, internet-of-things ("IoT"), aerospace and defense, automotive, industrial and healthcare subsystems. Large and existing electronics categories, such as datacenter servers, smartphones and networking products continue to provide business opportunities for us as customers initiate new design projects.
Underlying the requirements within any particular vertical market sector is the availability of rapidly improving IC manufacturing technology. In order for our customers to take advantage of such advancements, some of our products must first be developed to exploit new manufacturing capabilities. This dependency means that we must invest significantly in product research and development ("R&D") to keep pace with the latest manufacturing technology. The demand for new IC manufacturing technology directly impacts the demand for our newest products.
Another driver for our business is the differentiation, capabilities and benefits provided to our customers by our products. With the rapid pace of innovation comes the opportunity for our products to address key challenges associated with electronic product creation, such as power consumption, performance and cost. Our products and services have unique attributes that our customers value. In general, these attributes can be grouped into broader categories such as quality of results ("QoR") (in terms of power consumption, performance and chip area), engineering productivity, tool performance, and faster time-to-market. Our business opportunities are significantly enhanced when our offerings address these key factors. We are applying machine learning techniques within our products to enhance QoR, productivity, performance and methodology.
Our Intelligent System Design strategy is to provide our customers with the ability to address the broad range of issues that arise as they develop electronic products. Our solutions are comprised of products that are categorized according to the role they play in the electronic product design process. We combine our products and technologies into categories related to major design activities, including Custom IC and Simulation, Digital IC Design and Signoff, Functional Verification, IP, and System Interconnect and Analysis.
Custom IC Design and Simulation
Our Custom IC design and simulation offerings are used by our customers to create schematic and physical representations of circuits down to the transistor level for analog, mixed-signal, custom digital, memory and RF designs. These representations are verified using simulation tools optimized for each type of design, including the design capture environment, simulation and IC layout within the Virtuoso® custom design platform. Other tools in the custom IC portfolio are used to prepare the designs for manufacturing.
Virtuoso Advanced Node adds functionality to the base Virtuoso package to enable the use of three-dimensional transistors ("FinFETs"), multi-patterning and other technologies required for advanced designs. The Virtuoso RF solution addresses the challenges of RF design across chip, package and board. Spectre® Simulator provides large-scale verification simulation. The Virtuoso System Design Platform enables engineers to design and verify concurrently across the chip, package and board.
Digital IC Design and Signoff
Digital IC design and signoff offerings are used to create logical representations of a digital circuit or an IC that can be verified for correctness prior to implementation (please refer to the discussion under "Functional Verification" below). Once the logic is verified, the design representation is implemented, or converted to a format ready for silicon manufacturing, using additional software tools within this category. The manufacturing representation is also analyzed and verified. Our digital IC and signoff technology suite provides a full flow to achieve power, performance, and area ("PPA") design targets, and includes three major categories: logic design, physical implementation and signoff.
Our logic design offering is comprised of logic synthesis, test and equivalence checking capabilities and is typically used by customers to create and verify designs in conjunction with our functional verification capabilities. The offering includes the Genus™ Synthesis Solution, a logic synthesis offering that provides fast throughput while also offering high quality results, the Stratus™ High-Level Synthesis solution for system-level synthesis, and the Joules™ RTL Power Solution, which delivers fast power analysis while preserving near-signoff accuracy. We also offer the Modus Design-For-Test ("DFT") software solution, which reduces SoC test time.
Our physical implementation offering comprises tools used near the end of the design process, including place and route, optimization and multi-patterning preparation. The Innovus™ Implementation System is a physical implementation offering that delivers fast design turnaround time while also delivering improved PPAcharacteristics. This offering enables customers to address the technology challenges of the latest semiconductor advanced-process nodes, create a physical representation of logic models and prepare a design for signoff.
Our signoff offering is comprised of tools used to signoff the design as ready for manufacture by a semiconductor foundry, which provides certification for this step. This offering includes the Tempus™ Timing Signoff Solution, Voltus™ Power Integrity Solution, Quantus™ Extraction Solution, and Pegasus™ Physical Verification System. Our design-for-manufacturing ("DFM") products are also included in our signoff offering and are used by customers to address manufacturing and yield issues as early in the product development process as possible.
Functional verification products are used by our customers to efficiently and effectively verify that the circuitry or the software they have designed will perform as intended. Verification takes place during and after custom and analog design, and before manufacturing the circuitry, significantly reducing the risk of discovering a costly error in the completed product.
Our Verification Suite™ includes four primary verification engines, starting with the JasperGold® Formal Verification Platform and Xcelium™ Parallel Logic Simulation Platform, which are used in the early stages of design, often at the IP and subsystem level. Once the design is more mature, with early formal and simulation verification tasks performed, verification engineers deploy our Palladium® Emulation Platform and Protium™ Prototyping Platform for more complete chip verification, often running low-level embedded software on top of a model of the chip, to ensure proper functionality before silicon manufacturing.
These engines are used for early bug detection, verification of block-level functionality, verification acceleration and emulation of system-level functionality, system-level power exploration, analysis and optimization, and system-level prototyping for hardware/ software co-verification. Palladium provides high throughput, capacity, datacenter reliability and workgroup productivity to enable global design teams to develop advanced hardware-software systems. Protium leverages a common front end with the Palladium environment in order to move designs rapidly from emulation to the prototyping stage, allowing for software development to start weeks to months earlier.
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