Siemens Acquires Altair Engineering for US$10.6 Billion to Advance Simulation, AI, and Digital Twin Services, and to Stand Above the Competition

By James Iversen | 4Q 2024 | IN-7599

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Siemens announced it will acquire Altair Engineering for US$10.6 billion on October 30, a 19% markup from Altair's closing price on October 21. Altair is recognized as a leader in computational science with a strong background in simulation, Artificial Intelligence (AI)/Machine Learning (ML), and High-Power Computing (HPC) through offerings such as Hyperworks, RapidMiner, and HPCWorks, respectively. Although the acquisition is still fresh, Siemens will work to integrate Altair's simulation capabilities into core applications such as Simcenter, Tecnomatix, Teamcenter, and NX, along with the overall Xcelerator platform. Regarding AI and HPC, Siemens will leverage Altair's work with HPCWorks and RapidMiner to bolster its industrial AI offering with robust Data Operations (DataOps) for faster, more precise Generative Artificial Intelligence (Gen AI) modeling.

Siemens is determined to aid manufacturers by "left shifting" potential manufacturing issues and solving problems early in the product design phase before any production occurs. To do this, Siemens has been heavily investing in digital twin technologies so products can be seen, tested, and modified to perfection before rolling out. Altair's expertise will help further Siemens' goal as simulation, AI, and HPC are integral in forming complex digital twins, an area in which Siemens has been a front-runner.

The simulation market has undergone significant changes over the last 2 years with multiple large-scale acquisitions occurring across the market; notably, Schneider Electric finalized the acquisition of AVEVA in February 2023 (US$11.9 billion), Synopsys announced the acquisition of Ansys in January 2024 (US$35 billion), and Renesas Electronics announced the acquisition of Altium in August 2024 (US$5.9 billion), initiating a potential further cascade of acquisitions in the simulation space by manufacturing software providers.

The underlying similarity between Altair, Altium, Ansys, and AVEVA is the strength of their Electronic Design Automation (EDA) offerings that are used by Printed Circuit Board (PCB) and semiconductor manufacturers. The purchase of Altair, Altium, Ansys, and AVEVA is evidence of the strength of the semiconductor industry and the importance it will play in the new wave of technology and Industry 4.0. The semiconductor market is currently expected to exceed US$1 trillion by 2030, with an exceedingly fast revenue Compound Annual Growth Rate (CAGR) of 66% (see ABI Research's Digital Transformation of Semiconductor Manufacturing report (AN-5017)). To service the semiconductor industry, Siemens already had a strong portfolio for EDA capabilities from the acquisition of Mentor Graphics in 2017 (now Siemens EDA), and Insight EDA in 2023. By acquiring Altair, along with previous acquisitions in the EDA space, Siemens can carve out significant market share as a leading provider of EDA software to one of the fastest growing manufacturing industries.

With Siemens acquiring Altair, along with three other large simulation providers also being acquired over the last 2 years, it is paramount for competing manufacturing software providers to hop on the bandwagon to strengthen current solutions. Global revenue spending on product simulation software will grow at a CAGR of 8% over the next decade, with electronics manufacturing (that includes the semiconductor industry) garnering the largest market share, outperforming the overall larger automotive sector in product simulation revenue spending by 2034 (see ABI Research's Product Simulation Software market data (MD-PSIM-24)).

Examining the growth of the electronics industry in regard to revenue spent on product simulation software shows the prevalence of the semiconductor industry and importance of offering a comprehensive EDA solution to capitalize on this booming market. Key competitors to Siemens Digital Industries Software such as Autodesk, Dassault Systèmes, PTC, and Rockwell have internal EDA capabilities or partnerships in place for users to perform simulations of electronics design; however, the latest set of acquisitions will have customers favoring the more complete software packages. The acquisition of Altair by Siemens will compel Autodesk, Dassault Systèmes, PTC, and Rockwell to explore EDA acquisition targets with companies such as Cadence (which may be out of reach due to a market capitalization of US$82.5 billion), Keysight (US$28.7 billion), and Logic Design (sub-US$10 billion) being prime targets that offer similar EDA capabilities, which would rival that of previous acquisitions in the market.

For customers, a point of contention stemming from the acquisition of Altair by Siemens is the potential compatibility concerns. Depending on how the integration of Altair and Siemens unfolds, importing Computer-Aided Design (CAD) models from competing vendors into Altair simulation software may not be possible. If the integration of Altair into Siemens occurs in this manner, it will drastically impact the bottom line of CAD providers, as manufacturers that operate in simulation-intense verticals (automotive, aerospace, electronics) may be encouraged to join the Siemens ecosystem. While Siemens restricting access to Altair services for customers outside the Siemens portfolio is unlikely, this would have the largest impact and needs to be top of mind for competing manufacturing software providers. Given the increased demand for enhanced simulation from the semiconductor industry, the increasing prominence of digital twins, and the integration of simulation into core manufacturing software such as CAD and Product Lifecycle Management (PLM), competition to own and operate the most advanced simulation software will only increase.