Semiconductor Design: The Buoyancy Continues

Semiconductor consumption is going up every day, it's something like the big data or the cloud phenomenon in the software world; and the same is happening for semiconductors. The chips inside your cable STBs or the medical imaging devices to cell phones to data access devices-these are chips that make the devices intelligent and make them work. With the unlimited potential of the connected world and its multiple devices, the semiconductor market in India is in for a bullish ride.

Over the year the release of the draft National Policy on Electronics 2011 further set the tone and augurs well for this segment. The government's proposed National Policy of Electronics, 2011 envisions creating a globally competitive Electronics Systems and Design Manufacturing (ESDM) industry including nano-electronics to meet the country's needs and serve the international market.

The draft policy sets out to achieve a turnover of about $400 bn by 2020 involving investment of about $100 bn. It also aims at ensuring employment to around 28 mn in the sector by 2020.

This includes achieving a turnover of $55 bn of chip design and embedded software industry, $80 bn of exports in the sector. The policy also proposes setting up of over 200 electronic manufacturing clusters. Another important objective of the policy is to significantly upscale high-end human resource creation to 2,500 PhDs annually by 2020 in the sector.

Of the three sectors-IT, telecommunications, and electronics-electronics presents special challenges. The draft policy seeks to address the major barriers which include lack of a strong base, an adverse international environment, and failure to build an enabling ecosystem.

Market Dynamics

As we reflect on some of the leading market reports, it seems to just reaffirm our bullishness. A report by RNCOS titled Global Semiconductor Market Forecast to 2015 says, "The India semiconductor market is anticipated to grow at a CAGR of around 22% during 2012-15." As we look at other reports, it also demonstrates the same level of bullish optimism.

"There is a move to increase in the complexity of designs being undertaken by Indian design houses," says PVG Menon, president, India Semiconductor Association (ISA).

"As per the ISA-E&Y Report of 2011, the VLSI Design industry is poised to grow at a CAGR of 17.3% from a base of around $827 mn in 2009 to around $1.3 bn in 2012. Around 35% of the chips being designed in India are for consumer electronics products, around 31% for telecom related products, slightly more than 15% for wireless products. In terms of complexity, almost half of the projects being handled from India are in the 1-10 mn gate count area, whilst a third are in the 10-20 mn gates area. Digital designs dominate the market."

Going by the ISA-Frost & Sullivan (ISA-F&S) Report of 2010, the hardware board design industry is growing at a 17.3% CAGR. From a base of around $417 mn in 2009, the industry is expected to grow to around $672 mn by 2012. Whilst more than half of the designs being done out of India will be up to 10 layers, around 38% will be for up to 20 layer boards, and around 10% will be for very complex 20+ layer boards.
More than half of these designs will be for boards with speeds of 500 Mhx to over 1 GHz-all of this is evidence to the increasing complexity of designs being done out of India.

If we look at the ‘Embedded Software' space, as per the ISA-E&Y Report of 2011, the embedded software industry is growing strongly at slightly more than 17% CAGR, and will touch around $8.5 bn in revenues by 2012. Similar to the VLSI design industry, the bulk of the work is focused on the consumer, telecom, and wireless verticals.

Work is almost evenly spread across the areas of OS-related programming, development of middleware, chip-level programming and development of protocols, and testing. So clearly according to ISA the overall semiconductor design market in India has to be seen as a summation of the market size of VLSI design, embedded software design, and hardware board design. That is expected to be around $10.5 bn in 2012.

The Captives

Industry experts say that the captives and the ODC's run for OEMs by Indian services companies account for more than 60% of the total design workforce in India. So the CAGR of 17% plus that is forecasted for the industry will also include them, either directly in terms of workforce employed by the GIDCs or indirectly in terms of the workforce employed by their ODC partners.

When we look at captive operations out of India, there are two types. Companies like Texas Instruments (TI) leverages India as a design hub as well as a market for its offerings. For others India is a pure design hub making for design support for the products.

Says Rajiv Kapur, managing director, Broadcom India, "India is an important R&D center for Broadcom. Since India contributes significantly to Broadcom's overall growth, we are reinforcing our commitment to India by expanding our facilities in the country to accommodate the continuous growth. In India the headcount growth has been high in past several years and currently open positions in India are high in number-we have been hiring and are still hiring. Currently we have over 1,000 employees across 3 cities of Bengaluru, Hyderabad, and Mumbai."

Broadcom's strength is in its large and diverse R&D centers across the globe. India center is contributing tremendously across the entire chip engineering process-right from specification to design to post-silicon bring-up activities.

From technical specifications to early stage of RTL, high-level design, and verification. It is also very active in software development, delivery, and system engineering. Approximately 90% of Broadcom operates in R&D globally.

As we look at some of the other companies that had started leveraging India in big way, like AppliedMicro. Says Vinay Ravuri, vice president and general manager, processor business unit, AppliedMicro, "We are working on some disruptive technologies on the server side and our architecture X-Gene is indeed path breaking. We are the the first and only company to have developed and demonstrated a server chip based on the 64-bit ARM architecture."

The company announced its chip ‘X-Gene' in October 2011. By doing so, it becomes the only company in the world to have a ‘server-on-a-chip' solution. With X-Gene, AppliedMicro is aiming at the expanding server market occupied by Intel and AMD.

According to industry experts, if Applied Micro's X-Gene goes according to plan, it has the strength to cause more than a ripple in the server market. The company is also leveraging India as the key design hub.

There are numerous other older captives that are already doing cutting-edge work-like TI, Cadence, and a host of others, and what will define the market in the days ahead is the kind of design form factors Indian engineers can work on and their ability to come out with more patents that the parent companies can manifest in innovative products.

Says ISA's PVG Menon, "Some of the challenges that the industry faces are the increasing cost pressure due to salary increases in India, the appreciation of the dollar, the availability of cutting-edge R&D work being done at academic institutions, which can lead to development of Indian IP, and the scaled-up availability of skilled manpower. We at ISA are working closely with the major stakeholders in the ecosystem, viz, academic community, industry, and government, to address these issues. As the solutions are long drawn out in nature, ISA is reaching out to all other allied industry bodies to try and build consensus to a common approach to solving an industry-wide problem which affects all our member companies."

Moreover observers point out that India needs to come out of its perception as low-cost geography, it needs to morph into a market for key skills that is not available else. However as we look at recent developments India is indeed adding critical value to the captives.

Analysts say that on the technology front, Indian companies have designed chips on a 28 nm scale that have already been successfully taped out. In 2012, it is expected that 22 nm scale chips designed in India will also be taped out to hit markets across the world. Further, it is expected that Indian companies will graduate to 3D-chip designing in the forthcoming quarters.