WHILE the US still holds the lead in IC design capabilities, it is losing its competitiveness especially to Taiwan, Korea, India, China, Japan, and Singapore. Experts believe that this competitiveness will erode in five to ten years.
Asia, which accounted for merely 7-9 percent worldwide EDA market till 2000, is now the fastest growing market for EDA tools, with a forecast of over 30 percent growth in 2006. India is one of the countries with a lot of potential for growth. The largest market for EDA tools continues to be Taiwan, but both India ($47 million) and China ($87 million) in 2004 showed excellent double-digit growth. Leading EDA vendors have significantly increased their sales in Asia. (
Fig 1.)
Asia has rapidly progressed in the complexity of chip designs, in terms of process technology linewidth; design of analog and mixedsignal products, which are far more complex than digital products; the number of logic gates used in the design; and the type of system-level design. Many factors are helping this growth. Outsourcing of design implementation services continues unabated. Asian companies have gone beyond implementation; they specify electronics systems and applications, especially for Asian markets. Wafer fabrication and chip assembly have migrated to Asia, with the concomitant need to relocate design close to production. Asian markets are booming, especially for communications, computing, and digital consumer equipment. Keeping design infrastructure close to markets is a catalyst to gaining market share. Human resource advantage is with Asia in the foreseeable future, in terms of both the number of design engineers and their cost. The shortfall of experienced professionals in the US is projected to be much more than in Asia.
Globalization has helped desegregation of the supply chain, which is an important factor in ensuring the continued growth of Asia, impacting the design industry. Desegregation has given an impetus to vertical specialization. Any operation is typically centered on cost-cutting, and is divided into discrete activities conducted globally. This has given rise to the concept of global design networks (GDNs), which means bringing together design teams from companies across geographies. A typical SoC design network could be as follows: A Japanese system company defines the system architecture; an American IDM provides the design platform; an Indian company provides SIP; Korean, Malaysian, Taiwan, or Indian fabless design companies provide design support; Taiwan, Chinese, or Singaporean foundries provide manufacturing; Chinese or Malaysian companies provide chip packaging; American or Indian companies provide design automation and testing; and so on.
IP is becoming increasingly important in semiconductor design and development. iSuppli forecasts that in 2006, worldwide semiconductor IP revenue will be slightly less than $1.5 billion, and is set to grow to over $2 billion in 2009. India, Taiwan, Korea, and China hope to become important IP players. However, currently no Asian company is a top global IP player.
TAIWAN: Valued at NT$285 billion ($8.71 billion at US$1=NT$32.7) in 2005, the IC design sector showed 9.3 percent growth over 2004. Industrial Economies & Knowledge Center, Industry & Technology Intelligence Services (IEK/ITIS) projects a growth of 12.3 percent in 2006 to NT$320 billion ($9.78 billion). There are an estimated 500 design houses in Taiwan specializing in various verticals, especially optical storage IC, networking IC, consumer IC, and LCD driver/controller IC. LCDrelated chipsets have traditionally done well, even during the bust in 2002. Wireless communications chipsets saw great growth in 2005. Both these verticals are forecasted to show strong growth in 2006. With strong foundry, packaging and testing, and EMS/ODM infrastructure, the design industry in Taiwan is set to expand further, especially with EMS/ODM segments going into designs more than before. In 2005, Taiwan’s rank was third in the list of top electronic equipment design-driven semiconductor spending countries, with a contribution of about 10 percent, behind the US and Japan. However, the competition with China is shrinking margins of Taiwan companies. Some operations are moving from Taiwan to China. For instance, 3C (computer, communications, consumer electronics) backend designs have almost fully moved to China.
INDIA: iSuppli estimated Indian semiconductor design industry revenue at $620 million in 2005, projected to grow at CAGR of 23 percent to $1.72 billion in 2010. Nearly 125 companies do design in three segments: design services (including fabless), accounting for 75 percent of revenue; EDA, 15 percent; and SIP, 10 percent. Design services segment is projected to grow at CAGR of 25 percent during 2005-2010, mainly due to influx of global companies into India and growth of Indian design houses. EDA segment will show CAGR of 13 percent during 2005-2010. All global EDA companies have operations in India, and are increasing investment. SIP segment, hindered primarily by poor semiconductor R&D in the country, will grow at CAGR of 12 percent for the same period. With the coming up of two advanced foundries in India next year, R&D activities should rise. This should also increase home-grown EDA activities in India. Intel, TI, IBM, Motorola, Cisco, STMicro, AMD, and QualCore are some of the MNCs who have invested heavily into design in India.
KOREA: Jim-Hyuk Kim, Manager, IT-SoC Association, estimates the total number of IC design houses in Korea at 200, with revenue of $1.2 billion in 2005. “Korea IC design houses are working in various sectors, especially mobile handset, multimedia, display, and RF,” says Kim, “with memory design technology being the best in the world.” Sung-Gyu Seo, Strategic Planning Division Manager, MCS Logic, compares Korean design houses to those elsewhere, “Unlike American, European, and Taiwan design houses, Korean companies are faster in rolling out new solutions using new technologies developed by American and European companies.” Seo says that Korean houses dominate over others in the multimedia sector. Kwang-Jae Choo, Chief of R&D, WIZnet, says that “Korea’s semiconductor industry has placed too much emphasis on multimedia, including mobile phones and PMP. The industry urgently needs to diversify products.” The need for cooperation is becoming an important issue. Says Seo, “As I/Os, including MCUs, DSPs, and other controllers become one chip, IP technology becomes important. Cooperation among R&Ds has become a hot issue. But the cooperation among local fabless semicon companies is inadequate.” Choo points out that “local IC companies need to cooperate with semiconductor companies and research organizations.”
Kim estimates that the average revenue of 58 local SoC design houses has gone up from $8 million in 2003 to $17 million in 2005.
SINGAPORE: The Government has identified design as a major factor in the next phase of Singapore’s economic development. Design operations started in the early 1980s. Currently there are 40 IC design houses, comprising IC design operations of IDMs, fabless companies, and emerging startups from the US, Europe, and Asia. Forty percent of design houses are local. The main areas of IC design activities are in consumer, industrial, communications, and computer segments. The country has over 800 IC design engineers, of which two-thirds are in analog and mixed-signal. As Singapore is home to three of the world’s top 10 wafer foundries, three of the world’s top 10 fabless IC design companies, three of the world’s top 4 sub-contract assembly-andtest companies, and some of the world’s largest EMS/ODM companies, it has a wide range of infrastructure for design activities.
Over 20 IC design and system companies have formed a forum called Microelectronics IC Design and System Association (MIDAS) that will further help the local semiconductor industry from evolving from a predominantly manufacturing-based role in the past 30 years to further up the value chain into design and R&D processes.
HONG KONG: There are 20 IC design houses in Hong Kong. With manufacturing operations shifting to mainland, design is emerging as a viable option. A number of IC design houses, especially foreign, are planned in the Science Park set up by Hong Kong Electronic Industries Association (HKEIA). The IT master plan involves establishing a special IC Design Fund to complement existing governmentsupported financing projects. With such incentives, HKEIA estimates that Hong Kong’s IC design and application exports would increase from $300 million at present to $1.2 billion in four years. The HKSTP has teamed up with seven regional IC design centers in the Mainland to form a strategic alliance, known as “7+1” arrangement.
Hong Kong is also focusing more on ODM. Hong Kong believes that the most important attribute of its success in the ODM business model would be product design and development.
