India’s niche: semiconductor design services
By Chitra Giridhar, Contributing Writer -- 10/24/2006
If China is the factory to the world, then India aspires to be the design capital.
With its semiconductor design services industry growing at 30 percent annually, according to an ISA-Frost & Sullivan report, India is emerging as a key destination for integrated circuits (ICs), field-programmable gate arrays (FPGAs) and system-on-a-chip (SoC) designs.
Some companies, such as Conexant India, already count on India for a competitive advantage.
“India is a key piece of our overall strategy and is critical to the company’s long-term success,” says Shiva Gowni, president of India Operations, Conexant India. “We chose to build a significant R&D capability in India because we can tap into a large pool of highly skilled, talented engineers for a fraction of what it would cost us in the U.S. We’re already seeing positive results,” Gowni adds.
Although realizing cost savings is an important objective for companies thinking of using Indian designers, another draw to the region is the breadth of skill sets the engineers offer. Daniel Yang, managing director, Pacific Rim, for Mentor Graphics, says his company established a center in India because of the availability of skills, and he rates the work done at the company’s India centers among the best in terms of quality and timeliness. The company currently employs about 320 people at two R&D centers, one in Noida and the other in Hyderabad.
Xilinx was so impressed with the work done by its Indian partner, CMC, that it decided to open its own development center in Hyderabad. The CMC team produced more than 35 core IPs for Xilinx in less than three years, says Akshya Prakash, managing director of Xilinx India. “We are now opening our own facility to build on this momentum and enhance our R&D capabilities,” he says.
Indian engineers are also pushing the envelope in chip design and are working on higher-value-added projects. NXP Semiconductors (formerly Philips Semiconductors), for example, was among the first companies to set up a design center in India. The company files 60 to 80 patents each year from the India center and has about 700 engineers working on leading-edge technologies in 90-nanometer and 65-nm processes, embedded software and systems. Says Rajeev Mehtani, vice president of NXP, “Cost is a factor but not the main driver.”
Up the value chain
Local companies and design subsidiaries are also evolving from the “build-to-spec” model. Sanjay Nayak, managing director and CEO, Tejas Networks India, observes that there is a discernable transition among many captive design centers from being engineering subsidiaries to being product companies.
“Increasingly, companies are realizing that cost arbitrage will take them only to a certain level,” says Ashutosh Pande, managing director, SiRF Technology India. “Thus they are seeking avenues for ‘value’ creation.”
“Global firms today view India strategically—not just as a capacity augmentation locale,” confirms Ganesh Guruswamy, country manager and director, Freescale Semiconductor India. The company recently expanded its India operations with a new 100,000-square-foot facility in Bangalore to support R&D in wireless technologies. Freescale currently employs about 700 engineers in India and has announced plans to hire 1,500 more over the next four years. Its India design center filed more than 30 patents in the last two years.
Srini Rajam, chairman and CEO, Ittiam Systems, says more companies are designing complete products, systems and end user applications. “Traditionally, we have not focused on those aspects, but that is changing,” he says. Ittiam has designed an IP Video Phone (IPVP) that works off broadband connections to deliver high-quality, affordable, multiway personal video communication for home and enterprise users.
Partnering for success
There is also evidence of increased outsourcing in the design service industry. Among the more enduring examples is the partnership between Nortel and Wipro, which goes back 15 years. In 1991 Nortel set up an ODC (offshore development center) at Wipro to develop and support telecom products for service providers and enterprise customers worldwide. Today more than a thousand engineers at Wipro work on Nortel projects.
“Nortel established its first ODC in India due to a shortage of skills in Canada,” says John Haydon, chief procurement officer, Global Procurement, Nortel.
Nortel has since partnered with many more Indian design companies (including Infosys, Sasken and TCS), fueled by its initial success. “Because there is a lot of work going on, we have our own center, in addition to outsourcing,” Haydon says. Wipro has also benefited from the success of the Nortel ODC and now has similar centers for clients such as Ericsson and Nokia. More recently Japan’s Renesas Technology set up its first ODC at KPIT Cummins Infosystems to strengthen its design and development capabilities. KPIT Cummins previously executed design projects for Renesas in several areas, including SoC products for use in digital consumer electronics, analog circuit designs and embedded software. The Renesas ODC at KPIT Cummins will employ about 100 engineers.
Despite robust growth in outsourcing, many companies prefer to bank on captive units. Daniel Yang of Mentor says his company has chosen not to outsource, due to intellectual property and secrecy issues. Some other companies, such as NXP Semiconductors, use a hybrid model—using a self-owned R&D center as well as outsourcing to third parties.
What’s ahead
Although there is a discernable shift in the kind of work that is being outsourced to India, captive units are still the first choice for conceptual design activities.
With Indian firms continuing to demonstrate skills in part lifecycle services such as design, verification and front-end/back-end services, KPIT’s Praveen Acharya, vice president, ATS-Semiconductor Solutions Group, says he is hopeful that they will be able to bag increasing numbers of turnkey projects.
“Currently the captive units execute about two thirds of all the work done, with the rest being done by third-party design houses. Over the next five years, the split between captive and third-party will become 50-50,” predicts Srinivasan Janakiraman, president, R&D services, MindTree Consulting.
However, Christian Heidarson, a Gartner senior research analyst, says that if Indian design companies want to win turnkey designs, they will need to augment their analog and mixed-signal capabilities. “They will have difficulties doing this quickly if they tap only the Indian pool of engineers, and they will need to look for international partnerships or acquisitions,” he says.
Editor’s Note: For an in-depth look at how the boom is resulting in a growing shortage of experienced designers in India, watch for our major feature, “India struggles to fill talent void,” in the November issue of ELECTRONIC BUSINESS.
Reasons To Look at India
1. Low cost labor
2. Skilled talent pool
3. Software process maturity
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