Executive Summary

Synopsys (SNPS) and Cadence hold a duopoly on EDA (Electronic Design Automation). You literally cannot design a modern chip without their software. As Apple, Google, and Amazon all start designing their own custom AI chips, the customer base for EDA expands from just "Chip Companies" to "Everyone."

1. The Duopoly

There is no third player. Switching costs are infinite.

• Pricing Power: EDA software is a tiny cost relative to the value of the chip, but failure is catastrophic. Nobody connects a multi-billion dollar chip design project on "cheap" software.

2. IP Blocks

Synopsys sells "pre-made" blocks of silicon logic (like USB controllers or PCIe interfaces).

• Design Re-use: Instead of designing a USB port from scratch, engineers just license it from Synopsys. This is high-margin royalty revenue.

Risks to the Thesis

1. China: Developing their own EDA tools to escape US sanctions.
2. Ansys Acquisition: Synopsys is buying Ansys for $35B. It's a huge, complex merger that could distract management.

Conclusion

Synopsys is the safest way to play the "Custom Silicon" boom. It is a tax on innovation.