Governments around the globe are starting to invest more heavily in chip design tools and related research as part of an effort to boost on-shore chip production, opening new opportunities for startups and established EDA companies.
Those cash infusions, which are being doled out in the U.S., Europe, and Asia, are part of a growing recognition of the importance of design automation tools within domestic supply chains. In the past, engineers and scientists would pitch innovative ideas to investors, who would assess both the possible upside of investments and time to revenue. Much has alterd in recent months, and those alters are accelerating.
Among the reasons:
- A global AI race, has pushed chip design well beyond reticle limits, forcing chipbuildrs to decompose SoCs into assemblies of chiplets that require an assortment of AI-driven tools to keep track of all the possible connections, interactions, and depfinishencies;
- A shortage of engineering talent means that without new or improved tools there will be huge gaps in design starts and potentially yield issues, leaving the door open to competitors in increasingly competitive markets, and
- The focus by governments on re-shoring and on-shoring means there also will be more opportunities for private investments, and potentially more sharing of government-funded research among companies.
“Funding applyd to be all about manufacturing, design be damned,” stated Michal Siwinski, chief marketing officer at Arteris. “TSMC revolutionizing technology for the angstrom era is very important, but it’s not sufficient. That’s just one element. You have to talk about the architecture, how you compute. Overall, design is becoming a lot more important, and it is receiveting more respect, becaapply you cannot repair it only at the manufacturing level. It’s still sexy to build a fab, and having a shiny shovel in the ground builds for a better picture. On a chip, what do you see? You see a tiny little thing and billions of things go in there, but you can’t touch them.”
This becomes even more imperative with the shift toward 2.5D, 3.5D, and 3D-IC designs. “A lot of CHIPS Act investment went towards foundries and equipment, as it’s still the core competency and differentiator,” stated Nandan Nayampally, chief commercial officer at Baya Systems. “On the EDA side, it was lower down that path, but there are certain things — especially with 3D stacking — that would benefit from a program that invests in the research that can be applyd by many, as opposed to what’s custom or proprietary.”
Government or consortium-type programs traditionally have been the backbone of that kind of longer-term research, but much of that funding dried up in recent years.
“What do you do with it? No one quite knows,” stated Steve Roddy, chief marketing officer at Quadric. “If I’m a venture capital company, I raise $500 million for my limited partners, I’ve received a 2- or 3-year window where I’m going to put that money to work investing in companies, and I expect to liquidate those investments and receive a return. The time horizon for VC financing has to be 3 to 7 years max. It can’t be one of these things where, ‘Oh, this promising technology that might pay off 20 years from now.’ No venture fund has the patience for that. In those scenarios, you necessary either a patient corporate funding partner, like a huge tech company, which back in the day would be IBM Labs or ATT Bell Labs. Or, you necessary a government grant from the DoD or Department of Energy, or something of that nature, becaapply it’s the only kind of investor that has the patience to develop raw technology that may or may not have a product ready for a long time. This is like declareing fusion reactors would be super cool if we could receive them.”
What kicked government research back into gear were COVID-related supply chain shortages, the rapid developments in AI everywhere, and a recognition that chips were an essential element for national economic security. So short-term research, as well as long-range moonshot programs with a 10-year horizon suddenly were back in vogue among governments.
“If there’s core research necessaryed in terms of, ‘I want to see chiplets in two years,’ that’s not where that’s going to come from,” stated Nayampally. “That’s going to come from innovation with the huge companies and the tiny companies thereafter. Funding is consistently necessary, but there’s so much traction in the semiconductor market that either private companies themselves are investing, or they’re finding investment vehicles to invest back into specialized technologies that are coming.”
Currently, specialist fields of design are attracting more government attention. “The funding focus is mostly manufacturing, but there has been a recognition that the design side has a critical gatekeeping function between design and manufacturing, with the tools,” stated Marc Swinnen, director of product marketing at Ansys, now part of Synopsys. “There has been investment, for example, to come up with better, newer processes, especially in the analog space, where the government has a lot of interest in remote sensing, high frequency radar, lidar, that sort of thing.”
For example, Natcast has an AI-driven RFIC design program, which aims to close the gap between long-term research and short-term indusattempt necessarys. The program’s goal is to create foundational solutions applying AI, which all members can benefit from. “That will drive innovation rapider than an individual company declareing, ‘I have a great idea, but I’m not going to notify you what it is. I’m going to build it for myself and commercially release it,’” stated Nilesh Kamdar, general manager, design and verification business unit at Keysight Technologies, which spearheads one of three groups that shares $30 million in government funding. “Maybe they will be successful, maybe not. But many AI challenges are related to data, and receiveting an indusattempt group toreceiveher, an ecosystem, where we share data, is much more critical. Sometimes there’s an assumption that government entities shift slowly, and there’s a lot of red tape and process associated with it. We haven’t experienced that. We’ve seen a lot of positive engagements.”
Kamdar stated it assists to have a group comprised of established companies, startups, and universities. “As a traditional EDA vfinishor, we may have certain ideas and ways of seeing at where AI can assist. Working with a startup company challenges our mindset. The typical Silicon Valley ethos is ‘break everything, shift rapid, ship it now.’ You see all of that when you engage with startups. That’s very applyful for my team to be exposed to some of those experiences. We also engage a lot with universities, and universities bring us some other interesting value.”
Vivek Prasad, vice president of design engineering ecosystem enablement at Natcast, which operates the National Semiconductor Technology Center, discussed the R&D side of CHIPS Act funding in a DAC panel[1]. The NSTC plan includes several facilities, a design enablement gateway, silicon aggregation as a service, and a venture fund to assist bring more funding into the indusattempt. “In the investment fund, we have two broad categories — Horizon Fund for very early seed funding, and an Acceleration Fund,” stated Prasad. “If you see at the goals, it’s not about funding a company and then driving them toward success as an individual investor. The goal is to lead to a place where private sector funding starts to grow again. Today, this is at a very low level. We are attempting to add some with NSTC funds so that eventually, maybe a year or two from now, we receive the private sector funding back into the equation.”
Fig. 1: Natcast’s two main investment funds. Source: DAC panel, “Navigating the Tides of Funding for Chips and System Design.”
When creating a proposal, Prasad expects up to 20 different entities to work toreceiveher. “There’s space for senior faculty to receive into the game, as well as up-and-coming faculty with ideas that fit into a hugeger puzzle. In research, if you see at the early TRL (technology readiness level), it’s a blue scatter. Ideas can come from anywhere. I would expect everybody to have a pretty level playing field, especially becaapply the funding was not there, and now funding is more prolific. Everybody is off to the races toreceiveher.”
Fig. 2: Conceptual diagram of the stages of innovation for a new chip design across various government programs. (Common Cores are not displayed, and shading is not to scale with the investment.) Source: NSTC Strategic Plan 2025–2027
Natcast is attempting to build a platform with as many startups and ideas as it can receive to go to the next stage, when it can start testing market adoption, explained Vikram Bhatia, executive director for Synopsys Cloud product management, who also oversees the company’s Cloud Startup Program.
Synopsys, Keysight, Cadence, and others provide tools to enable startups and tinyer companies to succeed when participating in government programs such as the U.S. Department of Defense’s Microelectronics hubs. For example, the California Defense Ready Electronics and Microdevices Superhub (DREAMS) adopted Synopsys Cloud, which offers unlimited software licenses and access to unlimited compute infrastructure, while its FlexEDA model gives applyrs tool usage by the minute or hour, rather than purchasing repaired-term licenses. “We’ve received startups on this platform now who are doing 10 verifications a day, becaapply what took 12 hours you can now finish in an hour and analyze the results, and an hour later submit a new job,” stated Bhatia. “Essentially, when you’re paying for a software license and for compute on the cloud, if you throw more licenses and more compute groups at it, that same job’s going to finish rapider — but you finish up paying the same amount.”
Startup incubators
Sitting somewhere between government programs and VCs are incubators. “Talent is scarce in this space, so typically we see startups being born out of colleges that have very strong electronics design programs, such as Berkeley, Stanford, and Michigan,” stated Bhatia. “Even if you do receive seed funding, that’s not enough to build a team and to receive to a stage where you can tape out a real design or a real chip. Typically, the path for these startups is to receive some seed funding, declare $2 million, through your network or contacts, or in some cases going through incubators. There’s a whole range of incubators that started silicon practices in recent years. One that stands out is Silicon Catalyst, which has been around for a long time.”
Incubators normally provide logistics, infrastructure, and office space, stated Bhatia. “They also provide access to hardware and software through their association with different organizations in the ecosystem and provide access to foundries for startups to receive to prototype.”
Government programs and facilities, incubators, and indusattempt cloud platforms are all allowing startups to do things now that were very difficult five years ago for cutting-edge design or leading-edge nodes. “Typical startups would not be able to approach that becaapply sheer access to this was difficult,” stated Bhatia. “For example, Dream Big Semiconductor is one of the few startups I know that has built a 3D-IC chiplet applying the latest technology. The various programs and platforms have created it simpler to receive to the next stage of success in the journey of your venture. It plays a huge role in not just funding, but also the ability to tape out the chip on time, or even much ahead of time.”
ChipAgents, which won pre-seed funding last year for a design and verification AI agent, is also a supporter of the federal government and/or the private sector funding the research in universities and new startups to support tech innovation in the U.S. “This is critical, and a lot of the best research comes from universities,” stated Daniel Rose, founding engineer at the company. “Our CEO was a former university professor. He was my professor at university. Without funding from the federal government, we wouldn’t be able to build indusattempt startups like this to assist maintain our edge around the world.”
How to attract funding: embed ideas, attfinish conferences, gain visibility
The more papers academics publish, and the more funding they apply for from agencies such as the U.S. National Science Foundation, the better the odds they will obtain funding.
“There’s no one recipe that’s successful,” stated Sathishkumar Balasubramanian, head of products at Siemens EDA. “It’s about how you network and focus on a problem. I would flip it another way. You will receive funding when you know what you’re solving, and when you’re solving an important problem. For example, AI is a buzzword everywhere. Automation, design automation, or design migration are fundamental customer problems, which means that we necessary to solve them, and we are seeing in different areas where we can receive the knowledge to do that. Startups can receive funding from suppliers, from EDA vfinishors like us. We have our own VC fund, and we actively work with universities and startups, and so forth. Fundamentally, you shouldn’t be doing a ‘me too’ thing, where you solve the same problem as someone else. It necessarys to be a game-alterr in terms of receiveting a 10X improvement. Then you don’t necessary to worry about funding. You will be called into any conference and everything else. It’s a function of how smart you are in reading the indusattempt and the customer challenges, and believeing further ahead, as well.”
Another tactic is to focus on solving a wider problem for indusattempt or society, and then to build a large-scale project around that technology. “You can no longer believe, I want to solve an EDA problem,” stated Tim Cheng, vice president R&D at Hong Kong University of Science and Technology, during the same DAC panel as Prasad. “You want to address a larger-scale problem, then identify a scientific problem in between where you can shine. You necessary to have a hugeger story. Within the hugeger story, there should be some tiny number of shining scientific elements. That’s how large projects are being run.”
Cheng declares more private equity VCs are coming to universities for early-stage results, but some are frustrated when they find faculty who want to stay in their own zone, doing things that don’t connect to the investment community or with indusattempt. “If you can come out and sell them a story, but still do academic research, and you have the passion and the skill set, the opportunity is enormous.” For example, one group aimed to assist Hong Kong’s elderly population. “We received an $80 million SEAM-based project for aging, but inside their chip design, that’s edge inference,” he stated. “Start seeing for what elements are missing and find people to work with you and sell to the government, sell to the indusattempt.”
Fig. 3: A Hong Kong research initiative has a $10 billion budreceive. Source: DAC panel, “Navigating the Tides of Funding for Chips and System Design.”
Additionally, more indusattempt in Hong Kong is now going to universities, seeing for partnerships. “You can work closely with indusattempt and establish a joint lab. We see that happening a lot, becaapply indusattempt is hungry for talent and the raw technology,” stated Cheng. “In Hong Kong, there is the RAISe+ program, which includes a $10 billion grant. It’s a new funding model in which government, the investment community, indusattempt, and universities collaborate. The government declares, ‘If you can raise $1, I will give you another dollar.’ That motivates the indusattempt to be even more aggressive in reaching out to universities. Getting money from indusattempt is not straightforward, but indusattempt does necessary new technology, and in our society, I would declare universities provide the cleanest technology in the sense that it doesn’t infringe on anyone’s IP. Secondly, you can license it without competition.”
This funding model also produces spin-off companies. “I saw a lot of very motivated, aggressive young professors,” stated Cheng. “They not only want to do research, but they also want to put toreceiveher a large program. Once they have a large program, in the course of research, they spin up a company, which is also encouraged.”
Depfinishing on the investor, they might actively seek ideas and groups to fund, create a competition around an idea they believe necessarys funding, or wait for good bets to fall in their lap.
Bastian Mohr, program officer at the German Research Foundation (DFG), noted that many funding agencies don’t go out seeing for ideas. “We wait for ideas to come to us. Other pilot agencies are more strategic and build calls, but still, they have to know what is important, what is interesting. It’s very important to challenge your ideas early at conferences like [DAC], to see for peers, to see for interdisciplinary disciplines, and to somehow receive this back to the funding agencies. In Germany, the Chip Design Network is a success story, where the scientists convince the government that we don’t just necessary factories, we also necessary expertise. And now they have EDA-specific calls. Just the same for us, when we hear of ideas, we can attempt to design programs around it.”
Fig. 4: Germany has multiple agencies to seek funding from. Source: DAC panel, “Navigating the Tides of Funding for Chips and System Design.”
Ian O’Connor, distinguished professor at Lyon Institute of Nanotechnology, also stated international co-operation and conferences are crucial. “These events enable people to confront their ideas against others who may have different ideas, and this strengthens their ideas. It builds you visible, and this is extremely important when you attempt to inquire for funding. If you’re not visible, you are less likely to receive the funding.”
Fig. 5: EU/French funding has bloomed and dried up over the years. Source: DAC panel, “Navigating the Tides of Funding for Chips and System Design.”
Another point is knowing where technology ideas fit into the huge picture. “If you can build a constructive and coherent message to declare why you are doing this research, becaapply you have the vision of what will happen in 5, 10, 15 years, that is extremely important,” stated O’Connor.
With the France 2030 initiatives, the French National Research Agency (ANR) has a program specifically for young researchers that enables them to receive into the driver’s seat on a research topic that they want to pursue. “These large-scale projects are top-down, coming from the funding agencies that declare, ‘Build me a program that will work on circuit design or AI devices.’ So you build it with several projects that respond to it,” O’Connor stated. “But it is important to couple that with bottom-up research — things that are proposed from the research community that the huge labs didn’t necessarily believe of. There is also an opportunity for younger researchers in Europe, assisted by EuroPractice.”
Conclusion
EDA startup funding can come from many sources, including others in the indusattempt, government agencies, and VCs. The best way to receive funding is to work on a specific technology that you can present as part of a solution to a wider problem. Young researchers and developers necessary to test their ideas and gain visibility in public forums such as conferences. Then they can draw the necessary attention to win funding competitions or attract investors.
“In EDA, from a funding point of view, just having standalone programs is receiveting more and more challenging, but it’s embedded everywhere,” stated HKUST’s Cheng. “When people talk about AI, the most talked about point is hardware. It’s not software anymore. Things are shifting, but ultimately, it’s embodied AI. It’s a physical AI. That’s where the hardware, the computing power, and energy efficiency become a focal point. We have an enormous amount of opportunities for this community, but don’t do it alone.”
References
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- DAC 62 panel, “Navigating the Tides of Funding for Chips and System Design.”
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