Chipping In

Adilemma has arisen in the global semiconductor industry–more so from the

inevitability of Moore’s Law, for it became possible to increase the number of

transistors in a single IC while chip-designing capacity did not improve in

tandem. This resulted in a significant increase in chip design costs. Chipmakers

are now realizing that speed and performance are not the only USPs–for the

most compelling driver is cost. They are now scouting for low-cost design

opportunities, and as the cost of chip design is increasing in the more mature

markets, design firms in low-cost advantage countries are booming.

Potential Application Areas for Embedded Systems in India Consumer Electronics Automotive Industrial Electronics TV   Engine Management systems Factory Automation Audio and Video Power Steering UPS Refrigerators Power Windows Energy Meters Washing machines Central Locking System Motors Microwave Ovens Switchgears (Source: Frost & Sullivan) Access Control Systems

Chip design is a crucial component in the embedded systems production chain.

Embedded systems are computers (microprocessors) ‘embedded’ in customized

hardware or chips. Examples are cellular phones, robotic equipments, security

and surveillance, and devices monitoring assembly lines. This industry in India

comprises of IC or chip manufacturers, embedded software developers and solution

providers. India has a huge opportunity coming in for chip design as well, with

an already proven record for software development.

Embedded systems arose from the need for devices with multiple functions,

enabled by integrating hardware and software components. These systems run on

integrated circuits (ICs) which maybe standard or application-specific

integrated circuits (ASIC). According to Frost and Sullivan, the revenues

generated by the total embedded systems industry from automotive, consumer and

industrial electronics during the year 2001 were $462 million. Of which,

hardware contributed $65 million and software $379 million. The revenues here

include chip design, IP core design in hardware, reference board and application

software development. Most Indian companies were early entrants into the

communications domain. As opportunities are springing up in other areas like

wireless, handheld, gaming and automobiles, capabilities can be extended as the

core design IP used is generally the same in all industry segments.

IC manufacturers supply the hardware component for embedded systems,. Global

players like Texas Instruments and Analog Devices have dominated the Indian IC

development segment. These firms are called fabless firms, which develop the

entire chip product but outsource the fabrication to a third party. Most major

hardware IC manufacturers or consumer electronics manufacturers often outsource

chip and reference board design to companies like Wipro and Sasken. But by and

large, more and more manufacturers that require customized IC and software

embedded in devices like handhelds, washing machines and access control systems

are outsourcing their software, and even hardware requirements to other

companies, and are concentrating on their core business.

Dr Biswadip Mitra managing director, Texas Instruments “India’s strength in embedded SW will soon help in the critical domain of chip design”

India: The powerhouse for global chip design



Chip design will continue to remain India’s strength and infact there is

room for more. Chip design in India began with Texas Instruments, which started

off way back in 1985, and became a forerunner for chip designing. It started off

in the area of digital signal processing and put Bangalore onto the world map of

chip design. After which global companies like Analog Devices and National

Semiconductor followed, and soon Bangalore became home to around 50 of the 60

chip design facilities in India. Some of these 50 companies that set up their

design bases, were mostly MNCs like Motorola, Cisco and Cypress. There are

several differently sized firms in chip design in India from small start-ups to

large ones. Chip designing eventually necessitated supplying EDA tools that went

into designing chips. So suppliers like Cadence and Synopsis made their entrée

into India by setting up centers for developing EDA tools, and leveraging on low

cost development. Infact Cadence is one of the first companies that started a

design development center in India.

Avendus Advisors estimates the market for chip design in India to be about

$100-125 million, which includes design services, silicon IP and EDA firms.

"India’s strength in embedded software will help in the critical domain

of chip design, where it is emerging as a powerhouse," claims Dr Biswadip

(Bobby) Mitra, managing director, Texas Instruments.

The key lies in IP creation



In India, the market is seeing a proliferation of IP suppliers. Most silicon

IP (SIP) companies in India have created intellectual property in the form of

propriety designs. But there are no pure IP firms in India–they are either

into offering design services or developing components for EDA majors. There are

two things that are generally done after developing an IP–sell them directly

or receive royalty payments. IP designs are commonly sold to fabrication

facilities in Taiwan and to fabless firms to be used in chip making. Thus IP

firms earn either by receiving royalty payments, licensing their design or by

selling them off directly.

Ramesh Emani CEO, Wipro Technologies “India needs to leverage by moving into embedded SW design and development”

Mistral Software has created several IPs in audio, one in SDRAM (synchronous

dynamic random access memory) controller and one in a microprocessor. Having

these IPs has helped attain royalty payments and some revenue also comes in from

directly selling them. Last year, IP licensing alone brought them payments of

$150,000, while this year the company expects $500,000. "Chip manufacturing

is not India’s forte, IP creation is still India’s stronghold. Embedded

technology is growing but the environment in India is not conducive for volume

manufacturing," says Anees Ahmed, president, Mistral Software. Mistral was

set-up in 1997, with a focus on embedded solutions and delved into IP creation

only in the year 2001.

Wipro and HCL Technologies are major Indian players in the area of embedded

systems- they have developed core IP designs, and also develop embedded

software. Most of these companies tend to specialize and develop systems in a

particular vertical. Sasken Communications is focussed on the communications

industry and has developed IP for a few VLSI designs. Another company, NeoMagic

is developing system-on-chip solutions (SoC) for multimedia-rich handheld

appliances.

From the Indian development center alone, Texas Instruments (TI) has about

200 US patents. The revenue streams from the products that embed the IPs run

into millions of dollars for TI. The chip designs are mainly for end-user

equipment manufacturers. According to Bobby Mitra, "Firms that are focussed

exclusively on IP are driven by the fact that most semiconductor firms and OEMs

reduce time-to-market by integrating a suite of IPs from multiple sources."

Texas Instruments is both into silicon design and embedded software.

Though Wipro was long into embedded systems, only recently did they make it a

strategic focus, with change in market dynamics. It is not only into IP creation

but also into providing solutions in embedded systems. Wipro designs

systems-on-chip, reference boards used in the embedded device, and designing and

developing software for these embedded devices. "India has already proven

itself in software development but now needs to leverage on it by moving into

embedded software and designs. There is a need for 100-plus designs every year,

a figure over and above the demand from the consumer and automotive

industry," says Ramesh Emani, chief executive (embedded and access

solutions), Wipro Technologies. Wipro has design patents for five core-IPs

needed across verticals. It is in partnership with two Taiwanese based firms

through which it gets chip fabrication done.

EDA major, Cadence, is catering to companies that are into hardware design,

manufacturing and those delivering and developing complete embedded systems.

Cadence develops design tools that also go into the making of reference boards

used in embedded systems. Most global EDA players have a development center in

India, leaving very less opportunity for Indian firms. Business in this area is

extremely risky. Therefore Indian EDA players co-operate with these major

vendors by offering EDA components, which are incorporated into EDA tools. They

sell the component or license their tool design to the EDA majors. The tool

market is already mature, but there is opportunity in EDA services and

components, which, according to Avendus Advisors, is estimated to be at $200-400

million.

Anees Ahmed president, Mistral Software “Manufacturing chips is not India’s forte. It is IP creation that remains our stronghold”

From chip design to embedded solutions



The good news on the embedded systems front is that the enabling

technologies for various applications have become very cost-effective and are

within the reach of small-to-medium business houses. Since they are not

capital-intensive, individual entrepreneurs can get up and running with very

little money. Indian companies initially took to chip designing, and later

graduated to creating IPs and licensing them. Now the advantage in the embedded

systems will lie in being able to provide the entire solution from product

conceptualization (backend and front-end design) IP verification outsourcing

chip manufacturing reference board design software development systems

integration. The lesser a firm is dependent on another, the less risky the

business would become. By encompassing all the activities in the embedded value

chain, Indian firms can add value to their customers by providing total embedded

solutions, Frost & Sullivan reports. Infact, Wipro is an example of a

complete embedded solution provider.

"This scenario is ideally suited for businesses to address the embedded

systems market. The Indian market itself has a huge potential with global

markets within its reach. But, with the availability of raw intellect, strong

software expertise, low start-up costs, all that the Indian businesses need is

that ‘million dollar idea’ which will be the true leverage," says

Sanjay Mittal, MD, Interra Systems.

HW manufacturing: The only missing link



In order to boost the embedded systems market a few challenges must be met,

especially pertaining to hardware manufacturing. While chip designing is gaining

new heights, chip manufacturing is in the doldrums. In addition the anticipated

WTO regulations by 2003 will hamper chip manufacturing further. Infact, there

are only three Indian chip manufacturing companies- Team Asia, Bharat

Electronics and Semiconductor Complex, which together constitute less than one

percent of the overall domestic chip market.

Massive initial investments in chip fabrication units and high taxes thwarted

private investments. India will never be seen in this segment, for countries

like China and Taiwan are already way ahead. The domestic demand for chips is

very low, for India is neither a producer nor a consumer of chips. On the

average, the domestic chip manufacturers produce 6-inch 20,000 wafers annually

while elsewhere fabs produce 500,000 wafers of 8-inches each.

So the safely the best bet apparently is chip designing, which still is a low

cost and high return opportunity. Because of high design costs, the different

segments of the IC/chip industry are getting outsourced. Sub-contractors are

springing up aplenty, and can be seen in all segments of the design value chain,

including, design services, silicon intellectual property (IP), and EDA tools

and services.

Currently the most glaring hindrances lie in low spending by Indian companies

on R&D, delay in adopting latest technology, and non-governmental support in

terms of policies.

"Investment in R&D by Indian firms is low, amounting to below 2% of

IT budgets. Compare this with global majors, whose R&D spend is 7%, on an

average," says MAIT director Vinnie Mehta. In addition to R&D, royalty

payments from technology exports are not exempt from corporate taxation.

Market drivers



The market is driven by:

n Global

companies and OEM manufacturers outsourcing requirements to Indian firms

including start-ups in the area of chip design



n Increase in demand
for low cost embedded systems in mobile devices, multimedia, networking and

broadband appliances

According to the Frost & Sullivan report new application areas would fuel

growth in the embedded systems market. These would include motor control

functions, electronic based features in automobiles and growth of the UPS market

among others.

Indeed convergence in consumer electronics, telecom and entertainment

(portable handhelds, Internet enabled TV) are driving the need for low cost

chips, as more and more chips are being embedded into them. Some of the devices

using embedded technology are the palm top, the set-top box, web pad, IP phones,

and the digital camera among others. India has an advantage–low cost manpower

for chip design, which is 20-25% cheaper than elsewhere.

Venture funding



However, there aren’t many VCs funding design companies today, though a

few are entering this segment. Vinod Dham, who once headed Intel’s Pentium

processor project, launched a venture fund recently, NewPath Ventures, to nurse

start-ups and aimed at making India a key center for the wholesale design of

chips. The fund would take care of conceptualization, complete design,

development and testing, outsource fabrication and sale of the end products. The

fund would initially invest $50 million in three to five companies that would be

incorporated in the US, but will have 90 % of their staff in India.

Future



The future should see a synergy between software developers, semiconductor

suppliers, and manufacturing companies across verticals. And since most global

manufacturing companies are considering concentrating on their core competency

and outsourcing their requirements, there is hence a growing opportunity for the

Indian Industry. India must increase the number of chip engineers, as the demand

for them is increasing. According to the report by Avendus Advisors, India would

need around 8,000 chip designers up from the current 3,000. Companies like

Philips Software, National Semiconductors, and Cadence often look for engineers

with skills in ASIC, mixed-signal design, frequency board design, and

programming in assembly language, ‘C’, and knowledge of real-time operating

systems.

Frost & Sullivan recommends that Indian designers venture into domains

like multimedia, broadband, wireless and networking appliances after which they

can graduate to offering embedded-systems-solutions.

Radhika Bhuyan in New Delhi