ISA's BV Naidu on India's way forward in semiconductors

B.V. Naidu, Group Chief Executive Officer, Genexx Enpower Corp. Pvt. Ltd, and currently Vice chairman Of Matrix Enport and Group CEO, VANPIC Projects, recently took over as the chairman of the India Semiconductor Association (ISA). He brings over 23 years of experience in developing the IT industry across India as part of the Department of Information Technology/Software Technology Parks of India (STPI).

Naidu's tenure at ISA's helm should turn out to be a very interesting one, given that India now has a new Union Government and Union Cabinet in place, and the latest Union Budget is likely to be announced soon. In this interview, Naidu also talks about the industry's expectations from the Central Government, on the fabs vs. fabless debate, and on the need for building a system for incubating Indian start-ups, respectively.

A very interesting development would be the ISA's proposal of the India Semiconductor Vision 2020 Document for the country. When this document is tabled, it should interest those countries, and companies, looking to invest in India -- as the document would lay out all of the clear, long term goals for the Indian semiconductor industry. Exciting times seem to be ahead for the Indian semiconductor industry. Excerpts:

Main goal for ISA
Naidu said that the ISA needs to get adopted to the changing dynamics in the industry with the increasing domestic market. It is necessary for India to enhance the product design capabilities -- which are made in India for India. In view of this, the ISA is enhancing its scope to cover the embedded software and systems companies.

"As a result of the new semiconductor policy, there has been spurt of the growth of the solar PV industry in the country. ISA has spearheaded the semicon policy, ISA is also covering the solar PV industry. Thereby, ISA is spreading its reach to cover the embedded software, electronic products as well as photovoltaic sectors," he said.

Top five points on ISA's agenda
BV Naidu: According to ISA, these should be:

i. ISA would work along with industry, academia and the Government, and formulate the strategy for the growth of fabulous design companies, product design companies, ecosystem companies and solar PV companies.
ii. ISA would also propose the India Semiconductor Vision 2020 Document for the country.
iii. ISA would enhance its activities focusing on increased product desired companies.
iv. ISA will put up a plan for working along with entrepreneurs, mentors, venture capitalists and academic institutions to enhance entrepreneurship and IP creation.
v. ISA will work with the Union Government to enhance the growth of the solar PV sector, its visibility and Government incentives to make this industry viable for growth in India.

Building semiconductor ecosystem in India

BV Naidu said that the ISA is taking several steps. These are:

ISA will strive to enhance the strategic value to its member companies -- semicon, systems and solar -- by creating balanced eco system around the its stakeholders -- industry, government and academia.

ISA should be accepted as a tier 1 industry body and think tank/advisory body for influencing policy for the Central and State governments. ISA would also encourage an entrepreneurship ecosystem focus in innovation and design. As for talent, ISA will aim for 100 PhD enrollments in research in medical and energy over the next five years.

With regard to what ISA would be doing in the coming year and in the current economic scenario, it would include the following:

For the government:

* Aim to remove anomalies in duty structure for semicon companies (Mo Fin/Com).
* Grow further fabless design companies in India (DIT).
* Roadmap for electronic manufacturing in India (NMCC).
* Take forward recommendations of SPV report (MNRE).
* Take forward the Semicon Policy implementation.
* Strengthen ties with state governments.

For SMEs/startups:

* Create platforms for mentoring & funding interaction with VCs.
* Make the ISA website a resource centre on the Indian semicon industry.

Market facing activities:

* Increase domestic market.
* Made in India for India.
* Increase competitiveness of product design, mfg & market reach.
* Position India as solar PV hub.
* Publish market sales data on a quarterly basis.

For talent:

* Aim for at least 20 PhD enrollments in research in medical and energy over the next 12 months.

Education and research perspectives
BV Naidu added that the participation of education and research would be as follows:

* Aim for 100 PhD enrollments in research in medical and energy over the next five years.
* Close working partnership between ISA and VSI to drive research agenda.
* Strong existing commitment to this agenda from VSI through corpus.
* Need each ISA member to sponsor at least one full time PhD student each year over the next five years.
* Commitment to be financial (Rs 25,000 pm), mentoring and test chips.
* Sponsorship amount will also cover international paper presentation, faculty support, kits, etc.
* ISA will work with DST to potentially match the aid from industry.
* VSI will work with universities and sponsoring companies to identify and mentor the scholars.
* All fundamental IP from the research will be available to the pool of sponsoring companies.

ISA's goal is to drive the fundamental pre-competitive semiconductor research in medical and energy in India.

Boosting semicon manufacturing
According to BV Naidu: India’s chip manufacturing has been restricted to captive centers for defense and aerospace to date. The announcement of the semiconductor policy 2007 is likely to see the opening of doors to global investors in both chip manufacturing and its ecosystem, and related hi-tech manufacturing.

The Government of India has announced a national semiconductor policy. It seeks to establish India as an attractive destination for global investors. The policy has financial subsidies and it is necessary that due diligence takes place before these benefits are sanctioned. The appointment of the Appraisal Committee and the setting up of guidelines to evaluate investments are the key for the long-term effectiveness of the policy and to build the sector.

The solar photovoltaic industry has received a real boost with the introduction of this policy and given India an opportunity to be a global player. It has also opened up opportunities for investments and employment.

Given the current economic climate, it would not be an uncommon request if the semicon policy is extended from 2010 to at least 2014/2015!

"ISA, particularly, will work along with the Government of India and various state governments to create manufacturing clusters around the country. The ISA also conducts the Excite exhibition to bring all the ecosystem players who could bring the manufacturing industry together," he added.

Fabs vs. fabless
Fabs vs. fabless has been an interesting debate. What should be the way forward for the Indian industry?

BV Naidu said: "Currently, the Indian semiconductor companies mainly focus on IC design services comprising VLSI design, board design and embedded software and are mostly in services, with a small number of product companies. There is also some amount of board level fabrication and testing activity.

"India has the potential to become a global design centre and a leader in product design, development, testing, fabrication and distribution. As a strategy, one should focus initially on product design, development, assembly and test, while leveraging wafer fabrication capability from the most competitive sources in the region."

Incubating start-ups
We haven't seen many start-ups in the recent past. How can the India industry go about trying to build a system for incubating Indian start-ups?

BV Naidu: It would be appropriate if the Government of India could provide seed and start-up capital for the new ventures and set up a focused venture fund of about Rs 200 crores. The technology development board could administer these funds and the fund may provide up to 80% of the approved project cost with equity balance being brought in by entrepreneur.

The Government can also subsidize the acquisition of EDA tools by start-ups and other SMEs in this sector.

Prototype development centers with adequate fabrication facilities can be set up as well. These centers can be managed by industry associations. Recurring costs could be met by charging user fees. ISA can be given a grant for this purpose.

The above steps will encourage entrepreneurship eco-system focus in innovation and design.

Finally, what are the industry's expectations from the new Central government?

BV Naidu said that the key areas of focus include the following:

a) Semiconductor manufacturing
i. Extension of Semicon Policy

b) Semiconductor design
i. STPI extension
ii. Transfer Pricing

c) Solar PV
i. Duty structure (point no. 3 under chapter VII on Solar PV in our pre-budget memo).

We have also made the following requests with the Government of India:

* Significance of semiconductor industry – need to accord it National Agenda status.
* Government of India Semiconductor Policy 2007 – suggested amendments.
* Domestic electronics hardware manufacturing – proposals to enhance its competitiveness.
* Fabless design companies – recommendations for growth.
* Semiconductor related research – a focus area.
* Other key proposals
* Solar PV manufacturing – Recommendations to promote domestic industry.