The Indian semiconductor industry is in a very exciting phase today, poised to witness enormous growth. The ISA commissioned
Frost & Sullivan report released in February 2006 predicts that the Indian electronics equipment consumption market will grow to over $300 billion by 2015. As semiconductors form the heart of electronics equipment this is a tremendous opportunity for the Indian semiconductor industry.
Market landscapeThe semiconductor market can be divided into two segments: electronics, and telecom and IT applications.
The electronics segment includes consumer, industrial, automotive and medical electronics, consumer durables, defense and aerospace, testing and measuring equipment, prototyping, and industrial process controls.
The telecom and IT segment include wireless (particularly cellular) technology and hardware and office automation. The
communication segment has the largest share of the total market for semiconductors (Source: ISA-F&S Report 2005).
From an electronics design perspective, the market today can be divided into three segments. First, there are the global MNCs
and market makers. Companies in this segment own between 70 and 150 design projects and employ between 1,000 and 3,000 designers. They are concerned about design chain methodology and the challenges associated with shrinking process nodes (65nm and below).
The second segment is shared by two domains: “pure play” design services companies and fabless semiconductor companies. Over the past decade multinationals have leveraged India’s service companies as partners for complex projects in the design chain.
Design services companies have moved up the value chain and bagged prestigious projects that have worldwide impact.
The third segment is government, including defense and space. With an increased focus on the telecom market and the continued push in defence, government-owned R&D centres are producing complex designs requiring EDA partnership.
India has emerged as a desirable base for R&D centres (India Design Centres or IDCs). IDCs have graduated from doing small projects to driving critical ones. It is becoming increasingly common to find leading edge designs for the global market being driven by IDCs. In addition, IDCs provide worldwide support on tools and methodology. Anecdotal information suggests that the number of design starts out of India is also increasing.
Embedded designOne of India’s strengths is in the area of embedded design. It has the expertise to handle the hardware and embedded design required to support lower process nodes.
With more international companies establishing their offshore centres in India, the country design services companies have shown tremendous growth. Global majors have shown confidence in Indian design companies by awarding them critical projects.
India has a tremendous competitive advantage in terms of skilled manpower. Indian colleges produce over 300,000 engineers every year. Semiconductor design is the most challenging and high-tech area today. The country’s skill base ensures that complex design projects are increasingly developed at local R&D facilities. It is not an issue of cheaper labour. India’s competitive edge is its huge talent base and design capabilities. Global companies are keen to tap these resources.
Trends and opportunitiesThere are several emerging trends that are driving the semiconductor industry today.
First, local demand for complex electronic gadgets is booming. The buzz is that India is the fastest growing market in the world. Indeed, the number of mobile phones, personal entertainment devices, digital cameras, and other complex electronic gadgets available in stores is a testament to this.
India’s electronic equipment consumption is expected to grow to 5.5 percent of global electronics production in 2010 and to 11 percent by 2015 (Source ISA-F&S Report). The burgeoning middle class with increasing levels of disposable income, coupled with increasing penetration of wireless technology, is fuelling this demand.
Second, there is an increase in contract manufacturing in India today, particularly in the area of telecom handsets. With local consumption increasing, vendors realize that manufacturing locally can cut costs and help them stay close to the market.
Third, the semiconductor ecosystem is developing to maturity. Around the core semiconductor companies are satellites of IP companies, design services, test companies, university research labs, EDA companies, IDCs, and application development. A testament to the maturity and size of this ecosystem is the recent setting up of the India Semiconductor Association.
Fourth, universities are being more proactive and are recognizing that VLSI is a course in itself. There is also a growing
awareness that practical experience in VLSI design will be invaluable to electronics engineering students upon graduation and is the need of the day. Cadence recently worked with VTU in Karnataka to set up a VLSI lab—earlier VLSI was taught purely in the classroom.
Lastly, we are seeing that the electronic design industry is a focus area for VC funding. The availability of funds will encourage start-ups to develop local design and manufacturing capabilities. As it is, there has been an increase in the number of hardware/board design starts, especially in the consumer electronics area. This can be attributed to the increase in product development work and the rise of domestic product companies catering to various application segments.
Added to this, the government is taking active steps to encourage the semiconductor industry; there are plans to set up a fab unit in the country. This is a great fillip to the industry and demonstrates the government’s commitment to seeing the entire design chain happen here.
While the urban demand for electronic gadgets is a mammoth opportunity in itself, there is also an untapped and vast opportunity for locally made products in the rural market, especially in the area of telecom. The Telecom Regulatory Authority of India (TRAI) plans to raise the teledensity in rural areas from the current 1.9 percent to 15 percent by 2007.
The shift in focus for growth is from Tier 1 to Tier 2 and Tier 3 cities. With this aggressive growth planned, there is a need for products that are made specifically for rural areas where access to power is limited and conditions are harsh.
It is not hard to imagine that a mobile phone which is waterproof, resistant to dust, hardy and low power is likely to find a ready market in small towns and even villages. Consider the market for a device that can deliver instantly the most updated information to farmers about crop yields and weather conditions in a language they understand.
ChallengesThe first challenge is for telecom and consumer electronics companies to take the lead in investing money to build the India brand. The challenge is to put in significant investments in making local products for local conditions.
The Indian government can help in promoting local products by providing incentives to companies developing products locally.
Another challenge is in the development of human capital. The need is to encourage students to be more design oriented. There are several ways in which this can be achieved: Updating the engineering curriculum to adopt a design focus, hiring qualified faculty, and improving infrastructure facilities for students. By taking industry feedback and updating the engineering curriculum to adopt a design focus, universities can give their students a big picture view of the design chain.
Clearly, it is essential that the various players in the ecosystem collaborate to help develop products for the local market as well as human capital. Each component of the ecosystem—IP companies, design services, test companies, EDA partners, etc—
needs to work together to strengthen and grow the industry.
The road ahead—EDAFaced with the escalating complexity of today’s advanced chips and relentless competition, EDA customers are seeking new efficiencies in productivity. The EDA industry should seize this opportunity to increase its value to customers. EDA companies can help their customers adapt, even prosper, in today’s ever-challenging competitive environment by focusing tightly on solutions for specific vertical markets or market segment applications.
First, they must, of course, continue to provide product solutions that drive design productivity and manufacturing yield.
There is also the increasingly important space of functional verification, the technology that tests the integrity of a design before it is created in silicon.
The complexity of today’s advanced integrated circuit and systems designs have dramatically boosted the importance of effective verification, and EDA companies must continue providing top-flight technology to minimize customer risk.
Beyond providing the technology, the EDA industry must work more closely with its customers to develop methodologies and provide design expertise. One big step in the right direction is the development of solutions tailored to aid in market specific designs. Such solutions can shorten customers’ time to productivity by helping them efficiently apply EDA technology to the unique needs of their specific vertical market. Instead of simply bundling a set of point tools, EDA companies should deliver verified design methodologies enabled by a comprehensive suite of technologies, platform flows, intellectual property
(IP) and consulting services. At Cadence, we call these solutions “kits.”
All this implies a new type of relationship between EDA companies and their customers. Beyond the traditional role of tool provider, EDA companies need to become a true partner with their customers. Each design is unique, and customers need more than the right technology to maximize productivity and profits, they need an EDA team that understands their specific design challenges and work side by side to help resolve problems.
Working as partners, EDA companies have an opportunity to help their customers reduce risk, increase productivity and shorten time to market. Ultimately, this will enable customers to dedicate more of their precious resources to design differentiation rather than design infrastructure. Today, companies like Cadence continue to enjoy success because they see the importance of globalisation—both in terms of customer engagement and tapping into skill bases. There is a wealth of talented technologists around the globe that EDA companies rely on to help develop the solutions that enable the global technology industry to
continue its advance.
Summary The semiconductor industry has a lot to look forward to in the next 10 years. Increasing consumer demand, increase in contract manufacturing, the development of the ecosystem, supply of VLSItrained graduates, and an injection of funds into electronic design, all promise that the industry is headed for growth and consolidation.
Semiconductor companies should look to the rural markets for growth opportunities, especially with the government making rural telecom penetration a priority. The challenge is for companies to collaborate to invest in the local brands as well as in the development of human capital.
India has great advantages that needs to be built upon—the right climate for setting up IDCs, strength in embedded design and design services, and a base of skilled, English-speaking manpower.
Consumer requirements pose many of the greatest challenges for both the semiconductor industry as well as electronic designs today. Small form factor, long battery life, wireless connectivity, data bandwidth—these are the obstacles electronics companies face everyday, and these are the obstacles that the semiconductor and EDA industries must overcome to provide great value to the billions of people around the world who rely on technology everyday.
Author informationYou can reach Himanshu Singh at
hsingh@cadence.com
