The Biggest Little Industry You've Never Heard of Turns Fifty

10/15/2013 09:50 pm ET | Updated Jan 23, 2014

Chips touch every aspect of our lives. You use chips in your car, in your phone, in your TV, in your fridge, when you play a video game, when you text, Skype or blog, in the bar code reader at the grocery checkout, when you take a photo, as your luggage is routed through an airport -- any time you use electronics today you are using chips.

Now I am not talking about potato chips, I'm talking about semiconductors -- integrated circuits. Those small, intricate pieces of silicon, doped with chemicals in factories in the U.S. and Taiwan, that use logic and memory to take action for you. To shoot the zombie, or control the brakes on your car. To route your phone call to your mother, or tell the government what you just said on Facebook.

The semiconductor industry is a $300B industry, dominated by global giants like Intel, Samsung, Texas Instruments and Qualcomm, and it's an industry where the complexity of its products doubles every two years. It costs billions of dollars to build the factories where the chips are built and millions of dollars to make the first one of a new design, all so that the chip in your phone or your car can be cleverer than a mainframe computer was a few years ago, but only cost a few cents.

None of this would be possible without the computer scientists and physicists who work in the industry that makes these complex designs possible. That industry is Electronic Design Automation -- EDA -- and it is celebrating its fiftieth birthday this week at the Computer History Museum in Mountain View, Calif.

When the first integrated circuit was designed at TI by Kilby in 1959 design was done by hand. But once the idea was out, a new industry emerged creating sophisticated software programs running on computers to help humans create more and more complex designs.

Today integrated circuits are less than 1 square inch in size but are three-dimensional and have many, many miles of metal interconnect on them, where every line of metal carries a signal like a wire in your house, but is thinner than a fraction of a human hair. They can perform millions of operations per second and store the Encyclopedia Britannica in your fingertip. And a human mind could not fathom the complexity of these chips without software programs to control the design and simulation of the chip before it's built.

The EDA industry is the group of companies, and brilliant people, who make the amazing computer brains in the devices we take for granted every day possible. They build software to model how to turn analog signals -- like your voice -- into digital bits. They build simulators that use physics and maths to model Maxwell's equations and predict how electricity is going to move through different materials, at different speeds. They simulate the memory cells that store data, they predict how complex logic will work with the different inputs you give it. The chips being built now have features so small that you can't use light to expose them any more (the process is a lot like the old photographic process) so they use math to adjust how the light will behave and compensate. It's rocket science built into software.

But despite being such a profound building block of our modern electronics, EDA is a relatively small industry. With revenue of $7B, the industry is dominated by two California Bay Area companies: Synopsys and Cadence, who work alongside many small, highly innovative specialist companies to solve the hard design problems (and yes, the small companies get bought up by the big companies over time). The industry is small because the number of companies than can actually afford to design chips is low even though we all use more electronics every year. But it's a healthy industry where the leading companies are growing and generate strong operating margins and where new startups emerge every year.

And it employs the brightest engineers. Graduates with EECS degrees (electrical engineering and computer science) from colleges like Berkeley and Stanford and MIT walk the halls. The executives are all engineers too because the pace of change of the chip technology is so fast you need to be able to talk with your customers about what they need in the language of technology.

Men or women, they're mostly a nerdy bunch. But tonight, at a banquet to raise money for the Computer History Museum, they'll be dressed up and celebrating their love of one of the most fascinating technical areas you can choose to work in. And next time your phone, or your camera, or your TV makes you gasp in wonder think about the software nerds in California who design the tools, that design the chips, that make your device magical.