Cute Brilliant Things...

Semiconductors are cute and smart–and have changed the microelectronics

industry world wide. We usually associate semiconductors with computers and

related devices. However, semiconductors are more common in our lives today than

most of us even notice. Semiconductors, in various forms, are commonly used in

devices like video games, televisions, audio/video players, home theatre

systems, microwaves, cellular phones, PDAs, printers and telephones, amongst

other gadgets.

"It doesn’t seem that the war will compound any of the agony... And if SARS can be contained soon, there won’t be much of an impact on SW industry profits"

In India, the early days of the semiconductor industry were quite lackluster.

This was primarily due to factors like low investment in technology, low demand

and no government focus. If we compare the same period in India to similar

periods in the US or Europe, we find that the US and Europe had favorable market

conditions. Healthy demand for electronic products helped sustain a viable

semiconductor industry. Coupled with that, the availability of skilled people

also helped–and the industry churned out new products and patented

technologies. The governments in these countries also undertook steps to promote

the industry–intellectual talent was promoted and protected by issuing patents

to innovators, and creating an environment conducive to competition.

On the other hand, countries like Japan and Korea focussed more on cost and

quality of their products, thus promoting manufacturing. Interestingly, the

governments here limited the entry of a few major players to specific sectors,

thereby promoting efficient competition between them. With a supply of low-cost

capital, these countries successfully competed in global markets, especially on

the price factor.

However, since economic reforms took hold in India, things have looked up.

Post-liberalization, the semiconductor industry has focussed on the design part

of the value chain. This was due to several factors–one, designing does not

require huge investments; and two, the technically skilled workforce needed was

available across the country’s educational and engineering institutions. 

So, what does the future hold?



With respect to manufacturing, though the future holds potential, much needs

to be done in order to make things look brighter. For one, Indian manufacturers

need to invest in R&D to remain competitive. One of the reasons for the lack

of high investment in technology is the low level of expected returns, and

competition from China.

On the other hand, IC designing, IP and EDA services today constitute a big

chunk of the Indian industry. This sector will continue to be a major driver in

coming years. Vendors need to continue to explore outsourcing opportunities in

this area in order to sustain current growth levels. The industry also

needs to address issues like trained manpower in areas of VLSI and embedded

software. To grow at a healthy rate, steps must be taken to increase the number

of engineers who graduate out of engineering colleges and other educational

institutions.

Second, most design firms have developed skills in the digital domain.

Companies with skills in analog and mixed signal domains are comparatively fewer

in number. The future may see the advent of analog effects in digital designs as

semiconductor process technology begins to shrink. Thus, companies would require

skills in these areas too, in order to face the design challenges of the future.

Pradeep Kumar



The author is country director, STMicroelectronics India