Everything but the Fab

Right on N 64 St...left on E Lafayette Blvd ... I paid close attention as the
Garmin Nuvi GPS unit gave us directions to the nearest Sushi bar in Scottsdale,
Arizona. I was in the back seat of a cab with the device in my lap. It was nice
to see how sensitive GPS units have become, especially when two days later I
used the unit in the maze of streets that make Manhattan, where skyscrapers
block sunlight and satellite on the streets. 

The Nuvi is based on a GPS module designed by a Silicon Valley firm founded
by Indians, though this GPS module itself wasn't designed in India. SiRF, the
NASDAQ-listed company, has a quarter of its technical team in Noida, over 100
engineers, working on radio chipsets for mobile TV, GPS, bluetooth, etc.

SiRF is among over 100 companies in India involved in chip design, a young,
emerging industry that's seeing a quiet revolution.

Not all of it is new in India: Texas Instruments India is over two decades
old, and has the highest number of patents filed by any tech company in India.
Cadence (EDA software) and ST Micro are nearly as old in India. But the past
five years have seen dozens of new companies, and the creation of something of
an ecosystem: everything but the foundry, or fab.

The Indian Semiconductor Association, ISA, the trade body that represents
this industry, projects the demand for electronics products in the country at
$155 bn by 2015, which translates to $36 bn in semiconductors. ISA says that
cultivating the semicon industry would address not only its home market but also
let India participate in the global market, creating an electronics
manufacturing industry in India of $100 bn in 10 years.

The missing slice is the fab. Actually, most of the design players in India,
and the world, are fabless: they outsource their manufacturing. But given the
spectacular rise in the local consumption of electronics and thus silicon
products, a local fab makes sense (and employment). The chip fabs are going to
China. Despite the SemIndia consortium's announcement of a $3 bn chip fab city
near Hyderabad, there's little progress in anticipation of the government's
semicon policy (the PMO has asked for incentives to be restricted). Intel, which
evaluated India for an ATM (test manufacturing) plant, finally chose Vietnam,
unhappy with the sops from the government, and it's building a new $3.5 bn
chip plant in Israel.

So while this doesn't dent India's emerging position as a global chip
design hub, in the overall picture, the fab could add tremendous value. The
Ministry of ICT would do well to add up the numbers beyond the immediate
incentives, and hold its own on the semicon policy. That is unlikely to happen,
so India, for now, remains a fabless chip shop.

Prasanto K Roy

pkr@cybermedia.co.in