Government has recognized tremendous opportunity semiconductor industry opens up for India: Saankhya Labs

Established in 2006, Saankhya Labs is India’s first fabless semiconductor solutions company. It developed the world’s first production software-defined radios (SDR) chipsets. The products and solutions are powered by an award-winning, patented, ultra-low power consumption, fully programable SDR chipsets.

It has designed and developed a full spectrum of next-gen communication solutions for the present and the future. These include products and solutions for broadband, satellite and broadcast applications including 5G NR, 5G broadcast, rural broadband connectivity, satellite communication modems for IoT applications and multi-standard DTV modulators and demodulators.

Hemant Mallapur, Co-Founder and EVP Engineering, Saankhya Labs, tells us more. Excerpts from an interview:

DQ: Tell us about your experience of the recent semiconductor conference held in Bengaluru.

Hemant Mallapur: Semicon India 2022 was indeed a watershed moment in India's semiconductor journey. For the first time, semiconductor manufacturing was in focus with serious government backing accompanied by the attendance of highly successful Indian diaspora and some big business houses from this field. The tone of the event was "India means business in semiconductor manufacturing".

DQ: What are your views on domestic startups?

Hemant Mallapur: Domestic deep tech in semiconductors today is in the area of fabless design and design services - manufacturing is not yet in place. The fabless chip industry is dominated by intellectual property creation where India has a head start in terms of talent with 20% of the world's semiconductor design engineers based in India, albeit employed by MNCs.

There are 5-10 domestically owned small Indian fabless startups with chipsets in production and another 20-25 companies that are in the prototype/pre-proto stage. There's an awareness that fabless semiconductor exits (acquisitions) are possible though few and far between, and this can jack up the interest for more entrepreneurs to follow.

DQ: How do you see the future of semiconductor industry in India?

Hemant Mallapur: I am very optimistic about it. While the fabless startup ecosystem has been rising in a small way till now, for the first time big industry houses and government has recognized the economic importance of what a tremendous opportunity the semiconductor industry opens up for the country.

There will be challenges of course, and decades of work, as it is not an easy business to succeed in, and competition from other incumbent countries is formidable. If we put our best as a country into this field, it can change our fortunes as an economy.

DQ: With the government’s latest incentive schemes, how is the industry prepared for semiconductor development?

Hemant Mallapur: It is heartening to see the government so intent on making this a success. The schemes for PLI and DLI are the first steps for manufacturing and design respectively. State governments are for the first time vying with each other to get the semiconductor wafer fabs to be setup in their regions with incentive packages and infrastructure support. All of these have received global and domestic attention.

Wafer manufacturing being big business has seen keen interest from big industry houses, and we hear of at least three serious proposals. There are reports that OSAT, i.e., chip packaging and test factories are being planned, which is a sub-sector with lower investments that presents excellent opportunities. Fabless design and electronics product OEMs are other parts of the ecosystem that are seeing heightened interest from entrepreneurs.

DQ: When it comes to manufacturing semiconductors, what is Saankhya’s role as an industry player?

Hemant Mallapur: Saankhya Labs is a fabless semiconductor and telecom equipment company. As a fabless company, we design our own chipsets but get them contract manufactured from wafer fabs, and package and test houses (all outside India currently).

We then sell these chips under the Saankhya brand to product OEM companies. If the semiconductor manufacturing technology we need becomes available in India, we could be a customer for such wafer manufacturers and OSAT companies.

Our business model also replicates as a telecom OEM company and in this, we design our electronic system products using Saankhya's and other semiconductor vendor's chips and we get them contract manufactured mostly in India.

DQ: Please elaborate on your fabless model of designing semiconductors.

Hemant Mallapur: For chip products, we first define its specifications based on target market applications such as telecom, satcom, etc., and the functions it needs to perform in the system product.

We then invest significant R&D to design the chip. Starting with coding in a hardware description language called Verilog and performing extensive simulations to verify that the design when manufactured will perform to its specifications in the electronic system. This chip design then goes through a process called design implementation using sophisticated EDA software tools and finally into the "mask set" database that represents the billions of transistors on the chip and their connecting wires in the form of polygons etched onto the silicon.

We then hand over this mask set database to our wafer manufacturing fab who first manufactures a physical "mask set" which they use repeatedly much like a mould to chemically "print" (etch) the transistors into a silicon wafer. The mask set allows for manufacturing chips in large quantities of millions or tens/hundreds of millions.

Each wafer is cut into dice (plural, singular - die), packaged to expose only the pins (that are meant to connect the chip to other components on a printed circuit board) and each packaged chip is tested to ensure that each piece does not have any manufacturing defects. These are then ready to be shipped to customers.

Apart from the above process, there is a significant effort in embedded software development, product marketing, sales, and technical support to help our OEM customers develop their system products using our chip. Once customers’ products go through their testing, they place orders for our chips in large volumes which are fulfilled by our outsourced manufacturing process.

DQ: How much potential does India have to be a manufacturing hub for semiconductors?

Hemant Mallapur: The potential is huge! The global semiconductor market is $500 billion today, and will cross $1 trillion by 2030, growing at 10% CAGR. Indian market as an end consumer today is around $25 billion. If the Indian companies execute well, a share of 5-10% over a decade would mean close to $50-100 billion opportunity.

DQ: As the funding slows down, how can startups building for India keep pace?

Hemant Mallapur: By the very nature of the semiconductor business, startups can only happen in fabless space. Semiconductor manufacturing requires $1-10 billion of investment and is not a startup game. Funding is critical for fabless companies and it’s not been available in a significant amount anyway to Indian startups.

A single chip in production requires $3-30 million investment, depending on complexity. Schemes like DLI will help in small ways in developing early prototypes. These can then be used to raise a serious amount of risk capital to take chips into production. Such capital is unavoidable, if India has to achieve its full potential in the fabless space.

DQ: With global supply chain hindrance and Make in India is still taking off, how should one manage semiconductors shortage, raw material shortage, and hardware shortage?

Hemant Mallapur: The current supply chain issues cannot be solved by setting up domestic semiconductor manufacturing, which has a gestation period of 3-5 years to gain sufficient scale. Longer-term risks of similar shortages can however be addressed by domestic manufacturing.

Very long lead times of 30-50 weeks for chip/raw material procurement are a real issue today (this used to be 4-8 weeks in normal times). OEM companies need better forecasting of their production volumes, which will help them plan and place orders sufficiently ahead of time from suppliers to meet production plans. There are other methods such as designing systems with replaceable alternative chips, and modules that can alleviate (but not eliminate) the supply chain risks.