Study on semiconductor design, embedded software and services industry in India

April 6, 2011

The India Semiconductor Association (ISA) has released a study on semiconductor design, embedded software and services industry, along with Ernst & Young.

According to the report, the key challenges constraining the growth of the semiconductor design industry are summarized under five major issues:
i) Quality, availability and maturity of talent.
ii) Absence of a startup and SME ecosystem.
iii) Lack of a semiconductor ecosystem.
iv) Lack of adequate infrastructure, policies and implementable incentives.
v) External issues such as competition from Asian countries and protectionist policies by some countries.

The report then goes on to tackle each one of these issues in detail under elaborate recommendations.

These recommendations require the concerted and co-ordinated efforts by the government, industry and academia to aid India reach the next level of growth and achieve the specific goals envisaged for the industry. The goals are:

Goal 1:
Maintain leadership in semiconductor design by incubating 50 fabless semiconductor companies, each with the potential to grow to $200 million in annual revenues by 2020.

Goal 2: Build on India’s favorable intellectual property protection image and make it among the top 5 destinations for intellectual property creation in the semiconductor design industry.

Goal 3: Capitalize on indigenous demand in strategic sectors to provide impetus to the Indian fabless semiconductor industry.

Goal 4: Sustain and nurture high-class semiconductor design manpower at a growth rate of 20 percent year-on-year to double its current output levels to reach a workforce size of 400,000 in the next five years.

The very first goal itself is a bit far fetched, but not that it can’t be achieved. To reach anywhere close to this goal, a concerted all round effort would be required from all in the industry. The fourth goal would have been better as the first goal, but never mind.

The second goal looks fine, but it is the third goal that seems a bit far off. This is April 2011, and still, there are talks about capitalizing on the indigenous demand in strategic sectors in order to provide impetus to the Indian fabless semiconductor industry?

I recall a discussion in mid-2005 where an industry expert mentioned that fabless was the way forward for the Indian industry! Between then and now, fabs were supposed to come up, but they failed. Nevertheless, one must not give up hope!

The report’s overview says that the Indian semiconductor design industry, consisting of VLSI design, embedded software development and hardware/board design is estimated at $7.5 billion in 2010. The top 10 global fabless companies and the top 25 semiconductor companies have operations in India. My question: Where are the Indian companies in this list?

Another chart depicts India to be ranked among top three in the sample set; implying best in the league. That’s correct! Yet another label ranks India between fourth and sixth among the sample set countries, thus implying average standing among sample set countries. India is ranked among the last two in the sample set, indicating areas of improvement, says a third label.

Source: ISA-Ernst & Young.

Source: ISA-Ernst & Young.

On the semiconductor design projects split by consuming industry segment, the study notes an increasing consumer electronic good sales, telecom/ networking market and growth in the use of portable/ wireless products globally, is driving the growth of the semiconductor design industry.

There is said to be emergence of technologies like LED screens, 3G, Wi-Max translates into increased demand for semiconductor design. Also, automobile electronics in passenger and industrial vehicles are increasingly getting “smarter” with on-board computer systems used to enhance safety and customer experience.

On the installed talent pool, 2009-2012 (in ‘000s), the study notes that the presence of talent continues to play a major role in India’s positioning in global semiconductor design. India employed a workforce strength of 160,000 in 2010. The presence of a young industry workforce with 80 percent of the workforce consisting of B.Tech graduates and 60 percent with less than eight years of work experience, should see India in good stead.

However, it points out that the lack of product conceptualization, and management skills and analog design skills are some talent related challenges. How are these challenges going to be solved? Again, it is 2011, and not 2001.

I had said back in 2007, when there were talks about having fabs in India, that the Indian industry is a good 10-15 years behind the global industry! There is really nothing new in this latest ISA-E&Y report that will make me change my opinion!! However, I would really love to change it, if possible!!!

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