Indian semicon industry: Time for paradigm shift!

Early next month, the India Semiconductor Association (ISA) will be hosting the ISA Vision Summit 2010. On the backdrop of this, I did a short study on the strengths and weaknesses of the Indian semiconductor industry, and whether a paradigm shift is the need of the hour to further enhance the industry’s image!

First, the strengths — what really makes the Indian semiconductor industry tick and appear attractive to the overseas players!

Key strengths…
Dr. Pradip K. Dutta, corporate vice president and managing director, Synopsys India, and treasurer, ISA, said, “India’s strengths include its huge market potential, availability of good engineering talent with the ability to scale up as required; and a pretty well established IP/judicial regime.”

As per Raju Pudota, managing director, Denali Software, India defintely has a great talent pool and a lot of work has been done over the last 20-25 years. “Over a period of time, India has developed a variety of skills and capabilites. We have forayed into multiple domains. There is a variety of domain knowledge that has been developed. As captive design centers, companies are having more ownership as before,” he added.

Rahul Arya, director, Marketing & Technology Sales, Cadence Design Systems India Pvt Ltd, listed strengths from business and technology perspectives. From a business perspective, it would include an expertise built over years, scalability of operations, etc. “If you look at any other emerging country, expertise could be there, but can you scale that?” Also, cost arbitrage is still valid.

From a technology perspective, India’s strengths include embedded design, verification and an increasing ownership of end-to-end SoC designs, which are well known globally!

…and weaknesses!
Now, on to the weaknesses, which I’ve actually, written about a lot in the past!

Synopsys’ Dr. Dutta said: “Although we have lot of talent, it is raw talent. The industry is more services oriented and not product oriented, with very little of systems manufacturing. Maybe, the services companies became more successful, so there has been risk averseness. However, it can change overnight with some mavericks coming in. As for systems manufacturing, the govenment of India should put together a national agenda to promote electronics manufacturing.”

Denali’s Pudota agreed that the Indian semiconductor industry is still in the services center mode. “We have not yet managed to translate the talent base into product startups. Somehow, the mindset and value proposition is: how do we get margin on the work we do. Its been like that in the semiconductor industry. You don’t see many home grown startups,” he added.

Cadence’s Arya also advocated that India needs to move away from service to product mindset. According to him, some other weaknesses include — not enough basic research and not many PhDs in the fraternity, as well as a gap of new hires — the time new hires take to become productive, and third — a gap in analog and RF engineers.

Tackling weaknesses
Now, how can the Indian semiconductor industry go about tackling these so called weaknesses?

Particularly on the subject of having more product companies in India, Arya advised: “It is a momentum we have to build, and it is more of a mindset issue. We need to keep re-inforcing and showcasing successes. We should leverage our reach to local market, understand customer pain points and serve that need. We should not box ourselves that if we don’t have a fab, and focus on applications instead.”

As for the lack of PhDs, etc., the government is already working on this area. Arya added: “There should be some good stipend to pursue PhD and MTech. We also need to scale the availability of good faculty. That is where the government can play a big role in incentivizing them. There should be better industry-academia partnerships as well.” However, he added that the univesity-academia-VC model is currently missing in India. This aspect, it is hoped, will get plugged in soon.

According to Pudota, specific to the semiconductor industry, overall, while there’s some risk taking potential, there may be some semi-product-semi-services companies. However, he believes that the investing capital available in the country has so far been more into services startups. Hence, the need for more product companies.

He noted: “Product companies definitely require two to three years gestation. Some few million dollars need to go into these companies. Somehow, the investing indusrty in India does not seem to like such kind of models. The semiconductor industry can only follow the software industry. I feel that one of the primary weaknesses is the ecosystem, which is not conducive enough to promote product type companies.”

Many system companies are moving away from chip design and are doing system integration. For the semiconductor companies., the only way to move up the value chain is to become a systems company. “We can’t move into VAS, so for us, the only thing we can do is by developing products,” he said.

Need for paradigm shift in Indian industry!
So, are all of these really the weaknesses of the Indian semiconductor industry or is there a serious need for a paradigm shift or change within the industry? Perhaps, the latter!

Every single conference I’ve attended in the past six months and this year, you get to hear speakers highlight the need for having more product development companies. I’m all for it!

Let me also mention about an event! Recently [actually, in the middle of December 2009], I was invited to a session hosted by Carson Bradbury from Cre8Ventures! Launched by Mentor Graphics UK Ltd in 2005 as an independent network, Cre8Ventures aims to help start-up electronic design companies achieve business success. Interesting!

The audience at this session, which largely comprised Indian product start-ups, got to learn more about the European Microelectronics Academy (EMA), as did I, and helped Cre8Ventures learn more about India’s interests.

Will there be an Indian chapter or an Indian Microelectronics Academy (IMA)? Too early for me to say! However, should that happen, I would surely love to be a part of such an initiative!