Synopsys-Ansys Merger: A Divided Future for Semiconductor Design Software

Theodore QuinnThursday, May 29, 2025 12:23 am ET
52min read

The $35 billion merger between Synopsys (SNPS) and Ansys (ANSS) has sparked a seismic shift in the semiconductor design software landscape, but not in the way either company hoped. The Federal Trade Commission's (FTC) insistence on divesting critical optical, photonic, and power analysis tools to Keysight (KEYS) has created a stark new reality: the merged entity will lose its grip on key markets, while Keysight emerges as an unlikely disruptor. For investors, this is a once-in-a-decade opportunity to position for the post-merger world—or bet against the losers.

The Divestiture Domino Effect
The FTC's ruling forces Synopsys and Ansys to spin off three crown jewels:
1. Synopsys' Optical Solutions Group (OSG): Tools like LightTools and RSoft dominate photonic and optical design, used in everything from fiber-optic networks to advanced sensors.
2. Ansys' PowerArtist: The gold standard for RTL power optimization, critical for reducing energy consumption in chips.
3. Synopsys' Photonic Tools: Essential for designing lasers, solar cells, and other photon-based systems.

These assets—now under Keysight—will reshape competition. The merged Synopsys-Ansys loses its ability to compete head-to-head in these niches, while Keysight gains instant credibility in markets it previously lacked. The FTC's move isn't just about antitrust compliance; it's about ensuring innovation doesn't stagnate in sectors critical to 5G, AI, and clean energy.

Synopsys & Ansys: Shorting the Losers
The merger's losers are clear. For Synopsys, losing OSG and photonic tools means ceding leadership in a $5 billion optical design market. Its stock has already dropped 12% since the FTC's ruling (), and further declines are likely as customers migrate to Keysight. Ansys faces a steeper cliff: PowerArtist accounted for ~8% of its EDA revenue. Without it, the merged entity's ability to sell advanced chip design tools to energy-conscious industries (e.g., EVs, IoT) is crippled.

Shorting SNPS and ANSS makes sense here. Both stocks are overvalued given the loss of key revenue streams. Their combined post-merger EBITDA margins could shrink by 10-15%, as the FTC's divestiture costs (transition services, compliance) further pressure profitability.

Keysight: The Explosive Growth Play
Keysight, meanwhile, is handed a rocket booster. The acquisitions give it:
- A 30% market share in photonic design tools overnight, rivaling incumbents like Lumerical.
- Exclusive access to PowerArtist's 2,000 enterprise customers, enabling it to cross-sell into the $14 billion RTL design market.
- A 5-year head start in photonics, as it integrates OSG's tools with its own 5G and semiconductor test platforms.

This isn't just a defensive move; it's a growth accelerant. Analysts project Keysight's software revenue to jump 40% by 2027, fueled by these acquisitions. The stock trades at a reasonable 25x forward EV/EBITDA compared to SNPS's bloated 35x.

Why Act Now?
The merger's closing (expected Q2 2025) is a catalyst. Before then, Keysight's shares could rally 20-30% as investors price in its new capabilities. Meanwhile, SNPS and ANSS face near-term risks: customer attrition, regulatory delays, and investor skepticism over their “too big to innovate” merged entity.

Final Call
- Buy Keysight (KEYS): It's the only pure play gaining from this regulatory upheaval. Target $175/share (25% upside).
- Short Synopsys (SNPS) & Ansys (ANSS): Their post-merger struggles are priced in slowly—shorting now could yield 15-20% gains by year-end.

The semiconductor design software market is undergoing a tectonic shift. Keysight, once a niche tester, is now a power player. The losers? Two giants who bet on consolidation and lost.

Investors: Act before the merger closes—this is a game-changer.