Synopsys discontinues legacy EDA tools, notifies 10+ chipmakers

Synopsys is winding down legacy EDA tools to redirect resources toward AI-driven design, a bet that could reshape the $15 billion semiconductor software market.

Synopsys Inc. told more than 10 chipmakers between April and May that it is retiring legacy electronic design automation products, redirecting resources toward AI-powered tools that command higher margins and address a growing share of the $15 billion EDA market.

The company said it is "discontinuing some traditional analysis products" to focus resources on "highest-value products," according to people familiar with the matter. Synopsys declined to name specific products being retired or provide a timeline for final discontinuation.

The affected tools include legacy manufacturing control software used in chip fabrication, according to a person with direct knowledge of the matter. The shift affects customers across Asia, North America and Europe, including some of the world's largest semiconductor foundries. Synopsys has offered migration support but has not disclosed a deadline for complete product retirement.

The move positions Synopsys to capture more of the fast-growing AI chip design segment, where its Synopsys.ai platform competes with offerings from Cadence Design Systems Inc. and Siemens EDA. Synopsys shares have gained about 12% this year, giving the company a market capitalization of roughly $85 billion.

The transition creates near-term friction for chipmakers reliant on legacy tools. Customers must migrate to newer software or risk workflow disruptions, potentially slowing design cycles for mature-node chips used in automotive and industrial applications. Foundries operating 28-nanometer and older nodes — which still account for about 40% of global semiconductor manufacturing capacity, according to industry data — are among the most exposed, as their workflows often depend on established EDA toolchains that may not have direct AI-powered replacements.

The EDA industry has been consolidating around AI-driven design as chip complexity outpaces traditional verification methods. Synopsys's AI suite, which uses machine learning to optimize chip floor planning and timing closure, has been adopted by more than 100 customers since its launch, the company said in its most recent earnings call. Rival Cadence has similarly invested in its Cerebrus AI tool, creating a two-horse race for the premium segment of the market. Siemens EDA, the third-largest player, trails with roughly 15% market share, per estimates from research firm Gartner.

Investor Calculus

For investors, the strategic pivot carries both upside and risk. Synopsys trades at about 35 times forward earnings, a premium to Cadence at 32 times, reflecting market expectations for margin expansion from the shift to higher-value software. If the transition proceeds smoothly, Synopsys could see operating margins expand by 200 to 300 basis points over the next two years as low-margin legacy revenue is replaced by AI tool subscriptions. However, any customer defections to Cadence or Siemens during the migration period could pressure the stock. Morgan Stanley's Joseph Moore, who rates Synopsys overweight with a $650 price target, has said the company's AI transition is "on track but execution-dependent."

This article is for informational purposes only and does not constitute investment advice.