To understand the impact of local foundries on the design industry, let us first understand the requirement and the benefits of semiconductor manufacturing in India.
In the value chain of manufacturing, semiconductor manufacturing occupies a very high position. It is a global, highly competitive growth industry. To compete, one requires capital expenditures in increasing amounts—for new integrated circuit (IC) designs, new fabs and new process technologies. It requires leading edge equipment, highly qualified human resources and a constant investment in the newest technology and equipment if one aspires to be, and remain an established player in the field.
The industry is capital intensive (for a mid-sized investment of say $1 billion semiconductor manufacturing would directly employ only around 2000 people), the order of magnitude in terms of finance requirement of which can be compared to the investment in the field of nuclear technology. This necessitated the requirement of an official policy from the Government of India. All the countries with a successful semiconductor manufacturing industry have direct and indirect involvement of the local Government in the form of subsidy, tax breaks and infrastructure support.
Semiconductor requirement in India in 2015 will be of the order of magnitude of $40 billion-plus (ISA – Frost & Sullivan 2006), and if we could manufacture a large percentage of this here in India for the total electronics equipments consumption of $350 billion (ISA – Frost & Sullivan 2006), it would be adding to the local value chain.
Semiconductor manufacturing in India will help bring in its eco-system of Fab backend i.e., testing and packaging houses which will create additional jobs. The availability of locally designed and produced semiconductor products will provide an impetus to the electronics products companies to set up shop for production and logistics, thereby creating jobs for people with lower academic qualifications (who we have in much larger numbers than university graduates) as compared to IT – where only university graduates find employment. As per the ISA – Frost & Sullivan 2006 study, this should help create around 25 million jobs in direct manufacturing and affiliated fields.
Let us now look at some of the implications of ‘semiconductor manufacturing’ per se in India:
Complete semiconductor value chain
With the setting up of Fabs, India can fill in the existing holes in the value chain. The chips designed in the country could be ‘fabbed’ in the country and then built into the electronics system being manufactured here for both, local consumption an export. This will play a significant part in the enhancement of the Indian value addition to the system. A complete semiconductor eco-system will mean greater co-ordination among companies in the semiconductor industry, new relationships and partnerships will be created – all aimed at elevating the semiconductor industry and its prospects in India. It will boost India’s equity in the semiconductor market.
Spur innovation
With increased local demand, design companies catering to the requirements of a local consumer electronics industry will have the opportunity to design for local consumption. This opens up the window to allow for greater flexibility and encourage companies to adoption of technologies, trends and unique products (such as low-cost mobile phones, computers). Rising consumer electronics demand could be a catalyst to spur innovation in product design happening out of India.
Impact of a foundry setup
Gartner predicts that the Asia-Pacific region will remain the hotbed of the global semiconductor industry during the next five years, as manufacturing and consumption of IP will be increasingly concentrated in China and India. In this scenario, India presents a part of the huge growth market, with its proximity to China and Southeast Asia, as well as the opportunity to be a unique test bed for conventional semiconductor process technologies.
A foundry setup in India will encourage local technology adoption, innovation and IP creation. It will drive new rounds of partnerships and consolidation with an objective to share risks and cost of ownership of semiconductor products. Fabless semiconductor companies will be required to forge strong relationships with the foundries as these will be critical to their success.
It will be interesting to observe the approach adopted in India – whether MNCs and Indian companies will invest in Fabs of their own or work with Fabs / Foundries on the anvil. The trend observed in other markets is that with the availability of high level IP and access to production capacity via Foundries, SoC designers take their designs directly to Foundries. With this, they are able to keep the cost of the semiconductor products low by managing the cost of IP and manufacturing on their own. IDMs in general too are looking to work more closely with Foundries as it is becoming increasingly difficult to invest in the large sub-micron Fabs, necessary to keep up with Moore's Law.
In a scenario like this, the real differentiators for the success of a semiconductor product will be in the IP content and system know-how on the SoC along with the ability to exploit the process capability to the hilt, and not in the manufacturing. This means the role played by design companies will continue to grow.
ARM in the Fab eco-system
The ARM design center in Bangalore is an integrated part of ARM’s corporate design strategy for ARM products for the global market. Some products are being designed here completely for the global market; in others, the design center here provides support to team or teams located in other ARM design sites.
As the industry’s leading provider of 16/32-bit RISC microprocessor solutions and Physical IP it is important for us to address customer requirements in the local environment in India.
ARM could provide best-in-class standard cell libraries, memory products, PHYs, mixed signal connectivity products and our renowned RISC microprocessor for the process geometries of choice for the Fabs locally with support in the local time zone, there by helping in shortening their set up time.
Outlook for design companies in India
Chip design has been India’s strength and continues to present a positive outlook. Practically every major semiconductor company has invested in resources - and is growing in India. Global companies are moving high caliber design jobs here, Indian design services’ firms are expanding and the number of design start-ups and key research and development contributions from India is increasing.
India has been late in recognizing the importance of manufacturing as compared to China and other South East Asian countries. It is only now that we are seeing a push in manufacturing in general and electronics manufacturing and semiconductor Fabs in particular. Current trends and observations suggest that India is set to maintain its edge as a major design center for ICs (integrated circuits) and SoCs (system on a chip) in the future. With increased consumer electronics activity, India’s design-work looks to be on a growth trajectory and has the potential to emerge as one of the most significant contributors to service the high-end design needs in the future.
