Atectonic shift is underway in the high-technology world. Chip manufacturing activities moved out of US markets around 10
years ago in form of Asian foundries, and now the back end, verification and design services have also begun their eastward march. The center of gravity of the high-tech industry is slowly but surely moving eastwards, opening the doorway to huge opportunities for Asian nations particularly India.
The market is enormous. The ASIC design services market globally is estimated at $50 billion in 2006, while the embedded software market size is put at $25 billion. The ¡°fabless¡± trend continues to soar and the US Fabless Semiconductor Association predicts that the market shares of fables companies will jump from just over 10 percent today to 50 percent by 2010. Additionally, there is the IP design market opportunity.
Emergence of brand IndiaIndia has been quick to tap into this opportunity. The semiconductor industry in India has grown rapidly in the last 3 to 5 years with the establishment of captive design centers of US chip companies and the evolution of IP leveraged design services firms. Well-known IT Services firms have also entered the market with the setting up of separate practices for electronic design services.
Brand India is well-recognized in the international chip design services market for its technical skill, domain knowledge and access to a large talent pool.
Buoyed by these strengths, the sector is growing at almost twice the rate of application software. There are currently around 100 chip design and 150 embedded system players in the ecosystem and more and more companies are eyeing this potential market.
But these are early days and India¡¯s share of global market is still small. It is estimated to touch revenues of $800 million for ASIC services while embedded software expected to reach $1500 million.
Moving up the food chainThe bulk of chip design activity in India is currently focused on ASICs and FPGAs, but processor-based SOC designs are proliferating now.
Our estimate of the types of IC/chip designs are being done in India today is:
• ASIC 40 %
• SoC 20 %
• Structured ASIC 5 %
• Gate Array 10 %
• CPLD/FPGA 15 %
• Full Custom 10 %
As the industry undertakes these true SOC designs, the gate counts will rapidly increase to 10M and greater. These designs will require 90/65 nanometer geometries to meet dies size and cost targets. It will also necessitate the need for more custom back-end development (physical design services) as well as mixed-signal technologies.
Having cumulated early experience with small design projects, India is gradually moving up the silicon food chain. Beginning as Optimizers, and going through the Enabler stage, Indian firms are now entering Co-Innovator stage. Initially, the chip firms specified all the parameters and expected Indian firms to ooptimally deploy local resources and talent for a given project. That evolved into expanded relationship to address specific problems in a given design. Now as Co-Innovators, some Indian firms have begun partnering clients from the conceptualization stage onwards winning multi-year and multi-project agreements with chip companies.
There are many companies in India today that offer reference designs such as video phones, settop boxes and audio/MP3 players which are being licensed by large OEMs in telecom, consumer application space. The work being done in India is important constituent of the products being rolled out globally by technology companies.
From the end-product perspective, most chip designs in India are targeted at communications (30 percent) and consumer applications (40 percent). Computer peripherals would account for 20 percent and the balance 10 percent comprises industrial, test, medical, aerospace, defense and automotive segments. This trend is likely to continue due to the proliferation of consumer electronics and wireless devices.
Growth impetus: Volume electronics manufacturingThe growth of the Indian chip design services sector so far has been driven by the chip market outside India. The opportunities for Indian design services companies to do full product development has thus been few and far between. It has also meant that all the elements of ecosystem are yet to emerge in India.
Lack of product engineering capabilities such as debugging, failure analysis, and characterization arising from the weak linkages between design firms in India and their foundries puts Indian companies at a disadvantage as compared to Taiwanese and Korean companies.
But this may change soon. India is witnessing an explosive growth in the telephony and consumer electronics segments.
According to a market research firm, in 2003 the total electronics market in India was estimated to be $12.3 billion. The market is attracting very serious attention—both from domestic and international players. Electronics manufacturers such as Elcoteq, LG and Solectron have manufacturing facilities here. Nokia has already announced plans for manufacturing cellphones in India. Many other segments—color television, DVD/ VCD players, automotive electronics etc.—are all witnessing a frenetic pace of growth.
The government of India is now focusing on the manufacturing sector. A high-level Manufacturing Competitiveness Council was set up last year by the Union Government to recommend ways in which India could emerge as the preferred manufacturing destination not only for the domestic market but also as an export base for some of the world¡¯s leading companies.
Though the absence of a robust supply chain and issues of infrastructure such as roads and ports are real and can not be wished away, the growing interest and government¡¯s initiatives could well see India becoming a major center for volume electronics manufacture.
Such a development would impart an impetus to the semiconductor industry and lead to a thriving ecosystem for chip design with IC assembling and testing facilities.
Looking aheadWith growth, two salient trends will emerge. The cost of entry in the industry is already increasing on account of the rising remunerations for the right talents, high cost of acquisition of customers located in foreign markets and the cost of EDA tools and long sales cycles.
As more players seek entry into the area, consolidation will begin and we will witness mergers and acquisitions. Parallely, as the Indian design services companies mature, they will offer specialized services and develop core competencies in their offerings.
A landmark development for the industry has been the formation of India Semiconductor Association (ISA) towards the end of last year with the objectives of building brand awareness, developing an ecosystem, talent generation and driving a technology vision. These indeed are the areas that the Indian semiconductor industry needs to address if it is to realize its full potential.
