Turning India into World’s R&D Center

India has moved fast towards establishing itself as a global powerhouse in software. Software and applications and embedded software are an integral part of any electronics product-and growth in these is playing a crucial role in propelling more R&D in hardware in India.

For several years, R&D centers were located within the confines of the home country, however this gradually expanded into countries like India with the aim of being close to the newer markets, availability of talent and cost. The increasing number of R&D facilities in India is reassuring global faith in India as an R&D centre, what with GE, Intel, Microsoft, Philips, Siemens, and Xerox having their centers here.

There has been significant growth in R&D activities across the globe, signaling buoyancy in world economy, which had earlier recorded a drop in R&D investments in 2010. R&D can enable more value addition in the country. For example, an Apple product's key differentiator is its innovation & design. While most Apple products are manufactured in China, the real value addition happens in the US with design and innovation. Hence a strong vibrant R&D and innovation ecosystem is essential for the growth of the ESDM sector in India with higher value addition.

There are several factors that by its sheer size are driving demand in the Indian market. Today, the semiconductor design industry alone is estimated to be around $6.5 bn in India. In just this area, there are 120 design units in India including many captive units of global companies, but literally all of the designs are for the world and hardly a few are focused on the Indian market. There exists immense talent locally but the need of the hour is for it to be strengthened more with strong IP policies to support R&D and IP creation in India.

A challenge to the growth has also been the lack of a semiconductor fab capability in India. We need products that are designed and created in India for the Indian market like the six volume products recommended by CAREL (Core Advisory Group for Research and Development in the Electronics Hardware)-set top boxes, smart energy meters, smartphones, tablets, smart cards, micro ATMs. A lot of these products will need deep R&D including creating SOC's (system on a chip) thus driving volume.

To encourage more R&D in India for India it is essential that there is more availability of risk capital. Today all venture capitalists only understand software and infrastructure services and hence this does not exist for hardware design and R&D.

POWERING ESDM

Therefore, to enable this, the committee I chaired on recommendation for growth of ESDM in India and had recommended setting up an Electronic Development Fund with an initial corpus of 5,000 crore for innovations, R&D, IPR and product development. This fund will be a fund of funds and will support seed, angel, and VC funding. The idea was to do away from the normal process of supporting R&D only in the government to funding the private sector in addition. This was approved and taken up in the Electronics Policy announced by the Government of India.

If we look globally, there are several examples of countries that have adopted measures to boost R&D locally. The Israeli Government for example, introduced the Yozma program, which is an example of a very successful strategy of a country in creating new companies through private capital and government support. Professional managers were brought in to manage the fund of funds and each daughter fund. Korea also introduced a plan where it supports up to 50% of R&D expenses when private industrial institutions are involved in national R&D projects for core and fundamental technology development. Taiwan formed the Industrial Technology Research Institute (ITRI) to support applied research and technical services too.

In India, with just 0.9% of GDP involved in R&D, we need to change our approach and encourage more R&D in the private sector too. We must not forget that as an R&D center, the operating cost in India is still 25% lower than China. Coupled with the right impetus from the government and private sector, we can be highly cost competitive against the Western world. The government also needs to evaluate global R&D practices and introduce effective policy measures to create an ecosystem of mentorship and innovative financing.

India offers a very attractive proposition for global players to set up their R&D operations here. The immense intellectual power that India possesses also makes it a perfect destination for R&D from the standpoint of technology and innovation. However, we must innovate and do R&D for India also. Therefore, the need of the hour is to drive this R&D innovation in India for India. The Electronic Development Fund envisaged by the government must be implemented. As we go forward with the encouragement of manufacturing of electronics in India, we must also add more value. For higher value addition, we have to nurture the innovation and entrepreneur ecosystem in India and provide the right amount of funding. With this in the next 5-10 years, we can definitely see great products being designed in India that can also be exported to all developing countries.