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India's global designs on chip
market
By Indrajit Basu
KOLKATA - The global spending slowdown post
September 11 may have dampened the exuberance of the
Indian information technology industry to some extent,
but one area within it where the mood is definitely
upbeat is electronic hardware design. Chip design, to be
specific. Industry sources say that the business in chip
design is healthy not just in terms of volume, but value
too.
According to a recent study conducted by
the National Association of Software and Service
Companies (NASSCOM), semiconductor design industry in
India is at the same stage that IT services was a decade
ago.
"Unlike IT-enabled services, electronic
hardware design, with its emphasis on high-end chip
design, is high-end work that is going higher in terms
of complexity every day," said NASSCOM vice president
Sunil Mehta. "The Indian IT industry earned a revenue to
the tune of US$149 million last year [2001] from this
segment, but it has the potential to grow by more than
six-fold by 2004-05 if it encashes the opportunities in
this sector.
"Faced by one of the worst
recessions in recent memory and subsequent profound
changes in industry structure and value chain, global
semiconductor companies are increasingly turning to
outsourcing design and fabrication capabilities in order
to survive," said Mehta, adding that the proliferation
of handhelds, cellphones and gaming devices has also
thrown up new opportunities for chip designers and
producers.
Many multinational chip and design
companies, such as Intel, Texas Instruments, Motorola,
ST Microelectronics, Cadence and Synopsis are already
conducting design related work in their respective
facilities in India. Moreover, quite a few Indian
companies, such as Wipro, Moschip, Sasken and DCM
Technologies have also jumped on to the band wagon. More
than 50 Indian firms are currently engaged in one or
other kind of design services, but there is still enough
room for new entrants, says NASSCOM
"Although
India has little chance of catching up in semiconductor
manufacturing, it has the fundamental building blocks
like talented work force, low cost, anchor skill bases
to capture a significant proportion of this emerging
opportunity of chip design," Mehta said. Design services
and SiP (system in package) are the two areas (in the
chip design value chain) that can be tapped by Indian
companies.
Other businesses, such as setting up
fabs (fabrication workshops) and even fabless operations
are not viable because of the huge investment
requirement and lack of market access. Fabs for a
12-inch wafer production line could cost up to $4
billion to set up, while the fabless players are
typically large chip companies that outsource design and
chip fabrication while taking over the branding and
marketing.
Indian companies are already present
in a small way in one key segment of SIP: bus interface
blocks, but they will have to start addressing segments
such as microprocessor and memory markets to grow their
revenues. Similarly, a number of start up firms are
operating in design services and a few of them have
already transited from piece meal jobs to turnkey
services, according to the report.
Meanwhile,
one leading chip designer who is taking advantage of
Indian resources to the hilt is Indian subsidiary of the
US-based design automation tools major Cadence Design
Systems. According to Himanshu Singh, country manager of
Cadence in India, the value created in India in this
space in 2001-2002 ranges between $ 700 million and $1
billion, accounting for over 1.5 percent of global
value. This space is growing at 30 percent per year and
is mostly research and development driven.
Cadence says that it added 15-20 percent last
year to its customer base and both new and old customers
undertook more sophisticated end-to-end work, which was
outsourced to its research and development center at
Noida on the outskirts of New Delhi. Cadence adds that
this center, which has a current employee of 320 heads,
will double early next year. Cadence's research and
development activity in India is the largest outside the
US and makes a "very significant" contribution to the
company's work in areas like logic verification,
simulation and printed circuit boards.
Industry
sources add that Indian companies are moving up the
value chain too. "There is a great potential in
electronic design in India and activity here is moving
up the value chain," says Singh of Cadence. Looking into
the future, Singh said, "India should be able to retain
the technology and expertise it creates." The way to do
it is to first create intellectual property and then
aspire to develop entire products wrapped around this
intellectual property. "Right now," he added, "there is
a good chance of India becoming the IP country of the
world in electronic design."
Yet another fan of
India's chip designing capabilities is India-based
managing director of the US's leading hardware
manufacturer Texas Instruments, Bishwadip Mitra. "Indian
companies have done admirably in getting system-level
expertise so that they can do system-level design and
software. The bigger companies have different
departments with IP and system-level design focus. This
could be the next big thing for India and the good news
here is that it is sustainable. It is not a cost play
anymore. It is a very strong IP play."
However,
the availability of micro-electronic engineers to meet
the growing demand could be a key concern in future,
feels NASSCOM. According to a report prepared by India's
top software services firm Tata Consultancy Services,
(which makes chip design tools), to achieve the Indian
government target of $1 billion in revenues in
chip-design exports by 2004, India would need 20,0000
chip-design engineers. "That means India academia will
have to produce almost 5,000 chip designers every year,"
said the report, adding, "the problem is, current output
is 400 such engineers at the most optimistic level."
(©2002 Asia Times Online Co, Ltd. All rights
reserved. Please contact content@atimes.com
for information on our sales and syndication
policies.)
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