According to Dr. Walden (Wally) C. Rhines, chairman and CEO, Mentor Graphics Corp., while fabless startups have declined substantially in the West during the past decade, they are growing in India.
Given the time required to grow large fabless companies in the past, India should not be discouraged by current progress. India has key capabilities to stimulate growth of fabless companies, such as:
* Design services companies.
* Design engineering expertise and innovation.
* Returning entrepreneurs.
* Educational system.
Semiconductor frustrations abound! 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!
As of now, there seems to be too much focus on services, multinational company dominance, perceived lack of progress, perceived lag compared to China, lack of foundry infrastructure, and no clear dominant indigenous Indian company.
Of the top 50 semiconductor companies in 2011, 12 are fabless and four are foundries. Fabless IC revenue has been growing at 17 percent CAGR since 1997 and will continue to grow. Even the fabless market has been gaining in the overall market.
However, the fabless revenue is said to be highly concentrated. He added that the leading fabless companies specialize and average ~23 years since formation. Also, the VC funding for fabless semiconductor companies has been declining in the West. As for the number of fabless companies, the GSA put it at 1,200 companies, globally, at the end of 2010.
According to Dr. Rhines, the semiconductor IP market would grow to about $3,707 million by 2015, at a CAGR of 14 percent. The leading semicon IP players specialize and average 22 years in business (similar to fabless).
India is said to be among the top five semiconductor design locations worldwide (SIP + fabless + design services). India is a leading source of semicon IP, accounting for 5.3 percent globally. From the looks of it, India seems to have built a foundation for a fabless future. India can well become the next great fabless incubator.
India has the right foundation. There is worldwide leadership with the most influential design teams in the world. It remains a top destination for foreign investment and is the world’s top destination for outsourcing activities. India also has one of the richest pools of creative engineering resources and educational institutions in the world. Electronic designers in India, on average, are as talented as those in the US, Europe and Japan.
India has the capability to create multinational fabless semiconductor companies. Majority of the work is in India, with some resources in the West. Also, there is a growing pool of angel investors — in India and the West -- with strong connections to India.
Key ingredients to generate a thriving fabless infrastructure include the involvement and expertise with end equipment. There is a need to foster a culture that tolerates failure and minimizes bureaucratic barriers. There is no need to apologize for being dependent upon multinational companies. Lastly, there is a need to grow entrepreneurial connections between India and companies in the US, Europe and Asia. Give it time!!