Thanks to its Caltech and UC Berkeley students, VLSI was an important pioneer in the electronic design automation (EDA) industry. It offered a sophisticated package of tools, originally based on the 'lambda-based' design style advocated by Carver Mead and Lynn Conway.
VLSI became an early vendor of standard cell (cell-based technology) to the merchant market in the early 1980s where the other ASIC-focused company, LSI Logic, was a leader in gate arrays. Prior to VLSI's cell-based offering, the technology had been primarily available only within large vertically integrated companies with semiconductor units such as AT&T and IBM.
VLSI's design tools included not only design entry and simulation but eventually also cell-based routing (chip compiler), a datapath compiler, SRAM and ROM compilers, and a state machine compiler. The tools were an integrated design solution for IC design and not just point tools, or more general purpose system tools. A designer could edit transistor-level polygons and/or logic schematics, then run DRC and LVS, extract parasitics from the layout and run Spice simulation, then back-annotate the timing or gate size changes into the logic schematic database. Characterization tools were integrated to generate FrameMaker Data Sheets for Libraries. VLSI eventually spun off the CAD and Library operation into Compass Design Automation but it never reached IPO before it was purchased by Avanti Corp.
VLSI's physical design tools were critical not only to its ASIC business, but also in setting the bar for the commercial electronic design automation (EDA) industry. When VLSI and its main ASIC competitor, LSI Logic, were establishing the ASIC industry, commercially-available tools could not deliver the productivity necessary to support the physical design of hundreds of ASIC designs each year without the deployment of a substantial number of layout engineers. The companies' development of automated layout tools was a rational "make because there's nothing to buy" decision. The EDA industry finally caught up in the late 1980s when Tangent Systems released its TanCell and TanGate products. In 1989, Tangent was acquired by Cadence Design Systems (founded in 1988).
Unfortunately, for all VLSI's initial competence in design tools, they were not leaders in semiconductor manufacturing technology. VLSI had not been timely in developing a 1.0 µm manufacturing process as the rest of the industry moved to that geometry in the late 1980s. VLSI entered a long-term technology parthership with Hitachi and finally released a 1.0 µm process and cell library (actually more of a 1.2 µm library with a 1.0 µm gate).
As VLSI struggled to gain parity with the rest of the industry in semiconductor technology, the design flow was moving rapidly to a Verilog HDL and synthesis flow. Cadence acquired Gateway, the leader in Verilog hardware design language (HDL) and Synopsys was dominating the exploding field of design synthesis. As VLSI's tools were being eclipsed, VLSI waited too long to open the tools up to other fabs and Compass Design Automation was never a viable competitor to industry leaders.
Meanwhile, VLSI entered the merchant high speed static RAM (SRAM) market as they needed a product to drive the semiconductor process technology development. All the large semiconductor companies built high speed SRAMs with cost structures VLSI could never match. VLSI withdrew once it was clear that the Hitachi process technology partnership was working.
ARM Ltd was formed in 1990 as a semiconductor intellectual property licensor, backed by Acorn, Apple and VLSI. VLSI became a licensee of the powerful ARM processor and ARM finally funded processor tools. Initial adoption of the ARM processor was slow. Few applications could justify the overhead of an embedded 32-bit processor. In fact, despite the addition of further licensees, the ARM processor enjoyed little market success until they developed the novel 'thumb' extensions. Ericsson adopted the ARM processor in a VLSI chipset for its GSM handset designs in the early 1990s. It was the GSM boost that is the foundation of ARM the company/technology that it is today.
Only in PC chipsets, did VLSI dominate in the early 1990s. This product was developed by five engineers using the 'Megacells" in the VLSI library that led to a business unit at VLSI that almost equaled its ASIC business in revenue. VLSI eventually ceded the market to Intel because Intel was able to package-sell its processors, chipsets, and even board level products together.