And I would say the capability that we’re delivering to our customers through hardware is something they value greatly was why we’ve been able to have record year after record year. In terms of the cycles, maybe, Sassine, do you want to comment on that?
Sassine Ghazi: Yes, sure. Joe, if you go back eight, 10 years ago, selling hardware to customers. The customers view viewed it at the time as an option. They could have gotten the job done without it, but they used it because it accelerated their efforts. You fast forward to now, there is no way a chip can go to tape-out, meaning to manufacturing without having many, many cycles of emulation and prototyping to make sure that you cover as much as possible in terms of verifying the chip before you committed to manufacturing. So it’s no longer a ebbs and flows of demands around hardware. There’s a constant need by our customers to expand their investment and support the latest and greatest systems in order to take advantage of ensuring that the silicon they get back from manufacturing is going to be functioning and working.
Joe Vruwink: Great, thank you very much.
Sassine Ghazi: Thank you, Joe.
Shelagh Glaser: Thanks, Joe.
Operator: Our next question comes from the line of Harlan with JPMorgan. Harlan, the floor is yours.
Harlan Sur: Hi, good afternoon. Great start to the fiscal year. On the AI front, much of the focus has been on demand, data center, right, data center GPU, networking, custom ASICs focus there continue strong, but now we’re seeing sort of this broadening of AI moving into edges and endpoints, right? So allow many of your semiconductor customers focused on smartphones, automotive, PCs, home assistance appliances like they’re all humbling to add AI capabilities to their future trip road maps? I think it’s resulting in more complex ship designs, more demand for high-performance IP, more systems-level analysis. Like is the team already seeing this in terms of any activity momentum, IP licensing engagements, maybe more potential opportunities for Ansys. I mean any color here would be helpful.
Sassine Ghazi: Thank you, Harlan, for the question. Actually, that’s exactly what we refer to as pervasive intelligence. Exactly what we — when we talk about, we’re entering and we are in the era of pervasive intelligence, it’s more and more devices are interconnected and smart devices. So that exactly means the reference you made AI on the edge, et cetera, which requires more sophisticated silicon and a broader silicon proliferation of those advanced chips. And for our industry, for us, when you think about EDA and IP, that’s a fantastic opportunity. And this is where when we make commentary that despite the ebbs and flows of the semiconductor market, the cyclical market, we don’t see it because the design starts is tied to those R&D investments that customers are expanding for all these different applications.
So absolutely, we’re seeing it. We’re engaged with those customers and when we start describing our company as silicon to systems in that era of pervasive intelligence is exactly the opportunity that we’re talking about here.
Harlan Sur: Great insights there. And then on Ansys, looks like your — looks like your customers’ feedback has been, quite positive. We cover 20-something-odd semiconductor companies, and we’ve asked them about this, and they also seem to be positively inclined on the deal as well. And maybe you can tell me, as a further endorsement on the strategy, I mean, you did see, I think it was last week, right, Renesas, which is a major semiconductor company. They announced that they’re going to acquire Altium, a PCB design and analysis company for $6 billion, right? Looks like the systems opportunity is so important that they decided to bring the design and analysis capability directly in-house. But maybe more importantly, I just wanted to know like what you’re hearing from accesses large customers about the potential combination?
Sassine Ghazi: So the customer feedback has been truly overwhelmingly positive around 2 points they make. One, the challenges they’re dealing with, they’re looking for a deeper collaboration in order to solve the problems they’re running into today. And as importantly, they’re going to face into the future. So from a — anticipated solution the way the customers are looking at current product and future products, they are looking forward to this combination. Now the second feedback that is consistent is what where you were touching on, which is the system level perspective which is, if you look at the various market verticals, you can argue each one of them is going to go through an inflection point at various points in time.
If you fast forward seven, eight, 10-years from now and you pick an industry, let’s say, industrial health, et cetera. They will go through that inflection point of transfer and digitizing their applications in order to be connected in order to be smarter devices in their application, et cetera. And this, again, where Ansys has a very strong presence. Because Synopsys for — since its existence, we serve the chip design customer base. And of course, we extended into our system companies where today, about 45% of our business is with system companies, but those are system companies around hyperscalers and mobile primarily, many, many opportunities to expand with other system companies. And that’s where Ansys will bring in more than just the silicon aspect that is needed for 3DIC, but that whole silicon to system modernization for the rest of the market verticals.
Harlan Sur: Great thanks, Sassine.
Sassine Ghazi: Thanks, Harlan.
Operator: Your next question comes from the line of Joshua of Wolfe Research. Joshua, the floor is yours.
Joshua Tilton: Hey guys, can you hear me?
Sassine Ghazi: Yes.
Joshua Tilton: Great. Actually, I really want to follow up on that last question about the customer feedback on the Ansys acquisition. Is the positive feedback that you’re hearing from customers that currently don’t leverage the benefits of the existing Ansys analysis partnership? Or are these existing customers of both Synopsys and Ansys?
Sassine Ghazi: They’re both Synopsys and Ansys customers. Actually, I want to go back to give you the journey of the customer feedback. In 2017, when we announced the partnership, there was a lot of customer excitement, because the way we structured the platform is an open platform, meaning you can use the Ansys sign-off product that can plug Zen into the Fusion Design platform from Synopsys. And that same Ansys product can plug into other industry available platforms. Then as you move from 2017 to where we are today, that deeper, tighter integration is required not only for one or two products that Ansys is offering is for the broader portfolio. If you look at a multi-die package, the electronics aspect of it to design that multi-die package, you have a solution today that you can use from Synopsys plus Ansys and you’re good.
As it’s going through manufacturing, what they’re facing is mechanical stress issues, and those are issues where as you squeeze in those dice inside the package and you’re running the software workload, it’s overheating. Some of these dice are cracking or warping, et cetera. So it’s very mechanical, intense challenge. We have the deeper integration will be required and needed, and that’s what the customer is excited about. And when I say but deeper integration, this is where you need to move in actual algorithms and engines during the design phase, not only when you go into the later stage of the design for sign-off.
Joshua Tilton: Makes total sense. I guess my follow-up to that then is just are you seeing any signs from your existing Synopsys customers of excitement around customers who didn’t leverage this partnership previously and now because of these integrations to come are like reaching out to you asking about the potential, the opportunities? And basically, is there any early signs that you’re going to see incremental synopsis plus Ansys users and payers because of this partnership or this acquisition that will quite first point out.
Sassine Ghazi: Yes. So Josh, what today, any advanced chip. And when I’m talking about advanced chip, I’m talking about 5-nanometer and below, AI, chip, et cetera, is already using Synopsys and Ansys. I cannot think of customers that are designing most advanced chip with the complexity I described that they are not leveraging Synopsys Fusion platform and Ansys. So they’re already there. But given the complexity is going to be further increasing that deeper integration and addressing the challenges beyond the electronics is going to provide the opportunity where one plus one is more than two. That’s from the core current chip semiconductor business perspective. Now the other part of your question, are there Ansys customers that today, they’re not a synopsis customer?
The answer is yes. There are many, many Ansys customers that we don’t see them, by the way, becoming a Synopsys customer in the next one or two years, but there are going to be many other, that they will be a Synopsys customer regardless if they are designing a chip or not. I’ll give you an example. If you are an industrial OEM and today, you are an Ansys customer because you’re using Ansys to design the mechanical aspect, et cetera, of your product. And you want to move to the next level of product delivery where you have more chip content in order to support connected robot, let’s say, and a connected and smarter device. Even if you’re not developing the chip, you’re going to need an ability to model that chip to verify that chip back to the example of automotive and over-the-air software updates.
Those industries are going to move in that direction. And this is where Ansys has a very broad presence that presence, that market knowledge, that brand that they have will absolutely expand the Synopsys market in the future, where it’s an Ansys customer, but not a Synopsys customer.
Joshua Tilton: So just to be clear, the opportunity is more about making Ansys customers that aren’t Synopsys customers, Ansys plus Synopsys customers and less about making Synopsys, Synopsys for a customer.
Sassine Ghazi: It’s both. And there are Synopsys customers that today, they’re using part of the Ansys portfolio and more you integrate the Ansys portfolio into a current Synopsys platform, you’re going to expand it. For example, the fluid dynamics inside the chip or a mechanical stress challenge that you need to deeper integrate into a Synopsys platform that will expand the one plus one will be greater than two.
Shelagh Glaser: Yes. And Josh, what we shared in the announced that by year four, we’ll have a run rate of $400 million in synergies. It was cross-sell both ways is a big part of that. And then as Sassine’s talking about that multi-die that is further monetization inside an existing customer because that’s a more integrated solution than they’re currently able to for either one of us individually.
Trey Campbell: Thanks, Josh. I just want to thank everybody for coming on the call today. And again, I remind you that we’re less than a month from our investor meeting, and we look forward to seeing a bunch of you here in the Bay Area or if you can, at least join our webcast. So we look forward to talking with you then. So thanks for coming to the call, and we’ll talk to you soon.
Sassine Ghazi: Yes. Thank you, everyone.
Shelagh Glaser: Thank you.
Operator: Ladies and gentlemen, that ends today’s conference. You may now disconnect.
