It may be appropriate today to ask if chip designs are still being “outsourced” to India. The industry will agree that India’s semiconductor journey began as a destination offering design services to MNCs abroad. This has changed significantly, with Indian development teams of MNCs and IMNCs (Indian MNCs) adding high value to design projects from here.
What is also starting to happen is that the design teams in India are beginning to participate in the “specing” phase with their global teams. So, if we consider this, we could say that companies are “globally distributing” their design work across markets, including India, and not merely “outsourcing” design work to India.
Evolution of India as a semiconductor design destination
Over the last 10 years, India’s semiconductor design market has evolved significantly. Skilled human resources and India’s financial advantage on a relative scale have been the prime factors in attracting leading chip design companies here. Over time, the high quality R&D work became evident and the interplay between the semiconductor and the electronics industry grew, leading to the rise of the industry. Indian services companies who initially did software services also developed expertise in IC design. These firms also matured into creating selective IP, leading to the co-development of smart chips and embedded software. India matured over the years, from being a country where testing, verification was sourced to, to becoming a country where cutting-edge design work can emerge from.
As a result, India’s strengths have grown to areas such as IC design, software engineering and project management. Owing to the Indian design industry’s collective performance, global companies are implementing high caliber design projects here. Indian design services firms too are expanding and the number of design start-ups, and key research and development contributions from India has been increasing in the last few years. This has influenced many leading semiconductor companies to invest and grow their operations in the country.
We could say that it all started with verification work moving here; this was very similar to the way software testing and maintenance that started here as a first step. This is where the natural progression of India’s semiconductor design story began. Verification was a success story and this encouraged companies to explore other areas of design as well.
How time-to-market helped India
As MNCs gradually warmed up to harness India’s chip design talent, they realized India could not only produce high quality verification and testing work, but at the same time, do it in a more cost effective manner, and deliver faster. This is one other main reason why design projects were implemented by MNCs’ India teams – to leverage the time-to-market advantage.
In the simple business version, time-to-market (TTM) is the time taken for a product to be conceived and being made available for sale. In the semiconductor world, due to the intricacies of chip design, process and project management involving several teams around the globe, TTM becomes a much bigger issue. TTM is one of the most critical factors the success of a project is judged on. For a chip design company, faster TTM means quicker quality turnaround in design for the benefit of the chip manufacturer. For a chip manufacturer, faster TTM means it can bring to market a new technology for the benefit of OEMs and end-customers, and thereby increase its own standing of being an “innovator” in the market.
Thus, the pressure of faster TTM mounted upon MNC design companies, leading them to leverage potential (in one country or in other countries) in the form of engineering talent. From the mid-late 1990s to early 2000, India leveraged this very cause through its skilled talent base, by offering companies the faster TTM advantage, at the desired project quality, and at a lesser cost. This was, and continues to be, a major advantage India offers to the global semiconductor industry.
What favours India?
The bulk of the design work conducted in India has been related to verification, testing, and front/back-end design implementation. Across the industry, digital design has found many takers in India, largely due to industry demand and skill sets availability. Strong knowledge of mathematics and physics have also aided Indian engineers take up analog design work. Historically, India has leveraged digital and analog design projects well (especially the former), aided by the proliferation of companies that are into third party design. In parallel, another factor that led to the increase of digital/ analog design projects coming to India is the emerging market syndrome, as we saw areas such as communications, medical, consumer and industrial taking off locally. These segments are pretty much the primary growth vectors for analog design content. Despite this, we have seen much less work on analog design as compared to digital, since analog is a very complex area requiring excellent understanding of mathematics fundamentals, and only a small number of engineering professionals in India qualify for that. Across the industry, analog and RF are two areas which haven’t been India’s strengths, as yet. This is perhaps India’s immediate challenge, in terms of competing on skills with other markets.
Traditionally, Russia and East European countries have been excellent in mathematics, as with certain Asia Pacific countries such as Japan and China. And in the long-term, China may well pose a big threat to India’s design prowess, as they have the ability to build the talent base in sizeable numbers, have the infrastructure to support them, have the government’s backing on science and technology, and have a culture that is geared towards innovation. Even the English language barrier may be overcome by China with the next-generation Chinese being more “globally aware”. However, for India, opportunities lie in building on current strengths and developing strong knowledge in systems areas in analog and mixed signal design.
India and its future in the design market
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.
Having done the initial back-end services phase well, passed the design implementation phase successfully, India is, I believe, on the threshold of the product conceptualization phase. Even though almost every key semiconductor design MNC is based in India, end-to-end product design remains elusive to be executed out of India. This however has nothing to do with the capabilities of the Indian engineering professionals, but more to do with market dynamics and when the industry in India collectively breeds the ideation culture.
For India to continue its current status of a favoured design destination, it needs to have a collaborative approach to build the required talent base for the long-term, and develop a “conceptualization culture” in its workforce. Let’s be realistic and agree that the cost arbitrage will not exist for too long a period of time (what with increasing competition from other markets), and when that time comes, India needs to have better reasons than just cost efficiency and faster TTM to remain competitive. The semiconductor industry is extremely dynamic and cyclic, and India should plan on addressing the long-term scenarios well in advance.
Only if India graduates to this next (expected) phase of design conceptualization will it realize the potential of its engineering talent base, and at the same time uplift itself in the semiconductor hall of fame, on a permanent basis. Currently, we may see foreign MNCs not willing to make the first move in the industry, and consequently, may not encourage product ideation here. Instead, it may well be IMNCs who will look at the local market, gauge the opportunity, and go after product creation in India.
Once we see ideas coming from India, and product conceptualization/ creation taking place here, we can start to think about product innovation. Though we may see several ideas, it is innovation that is finally counted, as that alone has the power to add value to a consumer need, and make it productive in the market. In the next three to five years, MNCs and IMNCs in India must begin encouraging its workforce to take risks and think out of the box. Why? It is, but the next step in the natural evolution of India’s semiconductor design market. And it is for this reason that design work should continue to make its way into India.
Anil Gupta can be reached at Anil.Gupta@arm.com.
