Accelerating Innovation in the Era of Pervasive Intelligence

Daniel Newman:
Hey, everyone. Welcome back to the Six Five Summit. Daniel Newman here, CEO of The Futurum Group. It’s day two. We are in the semiconductor track. I am very excited to introduce our next guest. I got Sassine Ghazi. Sassine is the CEO of Synopsys, someone I’ve gotten to know well over the past several months as he took the helm of the company. And someone I believe has a lot to share about what’s going on in AI, pervasive intelligence, and the future of silicon development, and so much more. Sassine, welcome back to the Six Five. Welcome to the show. So excited to have you here.

Sassine Ghazi:
Great to be here, Daniel. Great to be here.

Daniel Newman:
It’s a really interesting time right now. Things are moving very, very quickly. I attended your Investor Day pretty recently, probably a few months ago now. It’s crazy how fast time is going. But I’ve been tracking the company, watching closely. You’ve been buying and making big deals. You’ve been selling off parts of the business that have been seen as not in the focus area that you want to build around. You’ve seen tons of demand and interest as AI and data centers scale. Look, it feels like there’s never been a better time to be in semis. I mean, I just hit on the demand, the need for IP. The doors have opened up for so many new companies to participate. You’ve got a new national holiday every quarter called Nvidia Earnings Day. Look, you’re the guest of honor. What are you seeing? It seems like it’s just a great time to be in this space.

Sassine Ghazi:
Daniel, it’s such an exciting time to be in our industry. I mean, AI is absolutely a mega driver to big changes that are happening. If you look at the infrastructure build out that is taking place and that insatiable demand and need for more compute, high performance, low power in order to power up all these AI applications. And now you’re seeing in a number of companies that are making investments not only from an infrastructure training point of view, but AI on the edge doing both training and inferencing on the edge. And that does not happen without advanced sophisticated silicon. And as you know, with our design solution, both for design automation and design IP, that sophisticated silicon will not be taking place. As our customers actually describe us, not us describing ourselves, as we are mission-critical for their success in this era of pervasive intelligence that is driving silicon proliferation everywhere.

Daniel Newman:
Yeah, you really do. I mean, without saying it, I mean you tend to have a pulse. You tend to have a very strong indicator of the industry and where it’s at because of the interactions you have. I mean, look, the design of chips, I mean some of the things you’re doing with generative technologies, but even before just the partnering that you do and the speed of innovation and the cycle times. We heard recently about going to one-year cycles on the big GPUs. That means work for your team. That’s going to meaningfully increase what you have to do to keep that moving forward.

Sassine Ghazi:
No, exactly. See, we see things from two angles. The one is a leading indicator from markets. So if you look at an automotive, or an industrial, or a data center hyperscale, et cetera, we see at least two to three years ahead of time what are the big R&D investments our customers are making and what are the things they’re excited about in terms of their next products? So we see it very early because we enable their R&D as they develop these products.

The other angle that we see is from a technology point of view, all that silicon has to be manufactured on a certain technology, and we’re the bridge between manufacturing and design, and as you know right now that design is changing. When you start redefining the way the chip is being designed in order to jam as many of these transistors into a monolithic or a multi-die, the complexities unbelievable. But the only way that our customers are able to achieve it and bridge between the manufacturing readiness and the architecture aspiration they have is through the design automation and the design IP that we provide.

Daniel Newman:
I think when you see a lot of the sort of memes floating around about buy shovels, you know where the gold is. Well, you could truly say that Synopsys is a very important shovel in terms of digging out all this AI opportunity, and it’s been very exciting to watch. And that’s why I’ve been very positive in my commentaries. The numbers have been there, but also the technology that’s been required to speed these cycles up, speed innovation, democratize the access to AI.

I want to pivot a little bit with you though. We’ve had a few conversations. We had the chance to meet in person. One of these days, we’ll do this in person. We’ve had the chance to have you on the record with me before. But for my audience out there, you’ve been, you said 28 years, so you’re not new. You don’t look a day over 27. So to your credit. But you’re five months now into this role as CEO of Synopsys. Talk a little bit about your first five months.

Sassine Ghazi:
It’s been such an exciting five months and exciting given what’s happening around us as an industry. And as you know, and you and I, as you said have talked about it a few times, stepping into the role we made couple strategic decisions. One is to sell off and carve out part of the business and really double down on the core. So we had a business in software security, which is roughly 10% of the company’s revenue. Actually, we have a buyer. We’re in the process of carving it out.

At the same time, we made a very strategic decision as we look at the world moving forward from what we call silicon to systems and we can double click into it. We made the decision to acquire Ansys, which is a company we’ve had a partnership with them since 2017, so about seven years partnership. And we want to take that partnership to the next level in order to drive it truly a pathway for our customers, as they themself, are trying to serve their customer at the system level. So those are in the last five months, big strategic decisions while of course delivering on the current commitment we have for our investors. And as you’ve seen, as we reported Q2, we raised the year again because we see nice momentum for our business.

Daniel Newman:
And look, there’s no better indicator right now. Like I always say, “The current quarter matters to me only if the guide is bad.”

Sassine Ghazi:
Yeah, that’s right.

Daniel Newman:
I always say that. “You have great result, but if the guide is bad, doesn’t matter.”

Sassine Ghazi:
It doesn’t matter. That’s right.

Daniel Newman:
It does not matter. Now, besides those numbers though, I think like you said, you’re just in the front end of so many of the important trends of where we’re heading. And this AI trend is just so important. There is an exuberance about it, Sassine. I mean, there’s an exuberance around AI. I’ve been asked a few times, “Is this the biggest front load in history in terms of the buying?” And I think there is, but the time between a front load and an infrastructure build out and when we will get to value, everybody knows how short it’s going to be. That even if that is true, it will be true for such a short period of time that I don’t think it matters.

Sassine Ghazi:
I agree. That’s why I said in the beginning it feels like it’s a gradual then all of a sudden that you see that steep inflection point and it doesn’t matter. I agree.

Daniel Newman:
What do they say? It’s slow at first then all at once is the-

Sassine Ghazi:
That’s right. Yes.

Daniel Newman:
By the way, slow now isn’t actually all that slow.

Sassine Ghazi:
No, no, no.

Daniel Newman:
Let’s talk about that. Let’s talk about what’s going to drive your next wave of growth, because clearly you’re not a secret anymore. You’re tying up with another player that meaningfully expands your capacity to do what you’re doing and do more for your customers to get them to market faster. How do you capitalize on this? And then how do you continue to expand TAM? Everybody wants more TAM. They want more growth. You’re going to have to have more.

Sassine Ghazi:
The best way to make big bets is to be centered around what are the customer requirements and how are they changing? If you listen to the big semiconductor companies, they’re all describing themself as, “I’m not a chip supplier. I’m a system. I’m providing a solution to my customer.” You talk to their customers, they’re truly trying to define the electronics, and in some cases they’re designing their own chips, in many cases they’re not. But why is it becoming more and more important?

The content of electronics in every system and system be it a data center, or a car, or an industrial application, is only going higher and higher. And when you have electronics going higher in terms of content, they require two things. How do I develop my software early to define my application? And does it match what I have in terms of silicon and chips?

If you’re a chip company, you’re trying to customize and deliver a solution for a specific workload and specific end system. If you’re a system company, you’re trying to define your system architecture and determine which chip you need in terms of delivering the most effective and efficient, be it performance, be it power, in a car mileage per charge, et cetera, et cetera. And this is where we find ourself as a company that at the system level, at the software definition level, we have solution that our customer can virtualize the electronics and build the software early.

And at the silicon level, we do everything in terms of IP and design automation. And the quick nugget here, and I know you and I have discussed it before, but seven, eight years ago, Synopsys, was about 90% of our revenue coming from the chip guys. Now it’s 55/45, 55% of our revenue coming from semiconductor, 45% coming from system companies. Just to tell you how the trend shifted. So when we made the decision to take the partnership from Ansys from a partnership to an acquisition is to drive the solution from silicon to systems.

Daniel Newman:
Well, you’ve heard me say it a few times. I almost feel like you’re leading the witness and making this too easy for me because the next question I was going to ask is about the semiconductor ecosystem. Again, I don’t know who semiconductor companies are anymore. And I mean this as an analyst that’s watched this industry for a long time, comments on it regularly, and has regularly sought for my opinion about it. I mean, is Microsoft a chip company? Is Amazon a chip company? Is Meta a chip company? Because technically in the world of fabless, which if you consider Nvidia a chip company or you consider MD a chip company, why would Microsoft… You know what I mean? They happen to do many other things.

Sassine Ghazi:
That’s right.

Daniel Newman:
But now they design in partnership with companies like you, and companies like Arm, and companies like Broadcom and others. I mean, they don’t do it on their own, but most don’t. There’s only very few. I mean, heck, even Intel uses TSMC for some things. So there is almost nothing out there that is a pure end-to-end play we do nothing but chips anymore. So what is the semiconductor ecosystem? What do you see? What does it look like in the future? How’s it going to evolve?

Sassine Ghazi:
No, no. Actually, believe it or not, when I described the 55% coming from traditional semiconductor and 45% from systems, the best way for me to describe it, those system companies, even though they’re designing their chips, like the Microsoft example you gave, they’re not selling the chips to the outside. Meaning they’re designing the chip for their own consumption and their own workload. And semiconductor chip companies, they’re selling the chip for many system companies. You’re right.

Daniel Newman:
But they do sell it in the cloud as other people consume it.

Sassine Ghazi:
That’s true. No, no, exactly. Exactly. So when a Microsoft, or an AWS, or a Google, and other are developing silicon is they’re developing it for their own workload, but they’re offering it in terms of that workload from an effectiveness, efficiency point of view to their cloud customers. Now we’re talking so far about hyperscale compute and AI training, et cetera, but if you zoom out and you look at other markets, automotive is actually a good example. Even though you see right now the shifting to the right in terms of electrification. But there is no shift to the right in terms of having a more advanced ADAS system, having a more advanced infotainment and connected and advanced electronics in the car.

So that demand in terms of having a car being connected and taking advantage of AI, be it on the edge and/or through a data center, is another opportunity. But another way for, in this case, the automotive OEMs to rethink what is their role, what is a car of the future, where are they making that investment? And this is where it’s creating an opportunity for a company like Synopsys that we did not have before. We did not talk to automotive OEMs in the past.

Daniel Newman:
Well, I think you will be talking to them quite a bit more. I mean, look, we’re about out of time here, Sassine, but I think what you’ve seen Elon Musk do at Tesla, and of course not without help from partners. What we’ve seen companies like Qualcomm do to build that design pipeline has shown that the car is an edge device, and it is going to be a software defined, silicon driven. I mean, look, you should have called this session silicon or semiconductors will eat the world. In 2019, I wrote that as my 10 predictions for 2020. Before the pandemic, I said, “2020 silicon will eat the world.” And so I didn’t realize there would be such a unfortunate circumstance that would accelerate that, Sassine.

Sassine Ghazi:
Right.

Daniel Newman:
There’s been no turning back meaning we rediscovered. And now, by the way, it’s cool to be a chip guy again. So you can put that cool coat on and wear it out and the rock music is going to follow you right down the streets of Palo Alto and throughout Sand Hill Road. So I really appreciate you, you joining me.

Sassine Ghazi:
Exactly. It’s such a great time to be in our industry. And Daniel, great to see you as always.

Daniel Newman:
Sassine, we’ll do it again soon. I’m absolutely sure of it. Keep doing great things and keep inspiring the industry. That’s Sassine Ghazi, CEO of Synopsys joining us here, Six Five Summit, day two. Stay with us for more covers, semiconductors, chips are cool folks. Lots of great sessions here. I’m going to send it back to the studio.