Tuesday, February 21, 2006

Chips Ahoy !!! India grabs the World Semiconductor Industry

India, a software giant - Emphatic YES. India, a hardware giant - Ummmm...Maybe

Well, the self doubt when somebody is posed with the above question is soon to be erased. According to NASSCOM*, the next big thing that's making the world sit up and take notice is also catapulting India into the big league of frontier technologies: CHIP DESIGN.

Say hello to a small but growing phenomenon that is slowly finding its place in the sun. Indian companies are leaders here. MosChip at Hyderabad, eInfochips at Ahemadabad, Sasken offices in Bangalore and Pune, Arasan Chip, Bluefont Technologies at Bangalore are the new kids on the block. Texas Instruments, which started designing chips in India more than two decades ago, has nearly 1,300 engineers working at its global centre in Bangalore on wireless LAN and semiconductors. Intel has opened up a chip research centre in Bangalore.

What constitutes Chip Designing?
* Design the chip
* Make the die (done at a foundry, also called a fab)
* Break the wafer into individual integrated chips
* Package the ICs
* Market and sell the ICs

Why is India an attractive place?

If India has become a hot chip design nation, it's because multinational chip producers are unable to cope with the amount of work, shrinking product lead times and rising costs. So they are outsourcing a greater part of chip design to India.

Notes MosChip's chairman and CEO,K Ramachandra Reddy: "India will definitely be an important player in the chip design business as the abundance of engineering talent coupled with low costs makes it an attractive destination."

"To get these skills we may not be able to hire and train people quickly in America' said Intel president and chief operating officer Paul Otellini at a press conference. No wonder that Intel recently announced its decision to invest $1 billion in India. Billing rates for engineering services employees in India at $25 and hour are a third of the rates in America. For instance, 80 engineers at the Hyderabad-based Pinexe Systems designed and engineered the chip that powers the iPod, Apple Computer's MP3 player. The team delivered the chip in 18 months and at a cost of $2 million --- half the development time and one-fifth the cost in the US.

Also, writing code for the chips is done by the software companies in India. Bangalore houses 47 of India's 60 chip design firms that are "doing cutting edge design work". This number, incidentally, has only been rising and includes some big names such as Motorola, IBM, Cisco, Lucent and Sun, among others, besides some Indian names such as Accel, C-DAC, Ittiam Systems, Wipro Infotech, Tata ELEXSI and Tejas Networks.

FABLESS** Chip Design Model
Traditionally, the chip design industry was the domain of big players who did everything on their own, from chip design to fabrication. The reasoning was simple. First, designing a chip was a skills-intensive industry, and needed a large team. Second, massive investments were needed to create the infrastructure to fabricate the chip, which is why many firms could not activate plans even if they had the expertise to design a chip.

Then a couple of Taiwanese companies came along and challenged this structure and turned it on its head. Taiwan Semiconductor created standalone foundries that allowed chip design companies to outsource their fabrication functions. This separated the capital-intensive fabrication phase from the people-intensive design phase. Small companies which had the talent but not the required capital found this ‘fabless’ model attractive; it allowed countries like India to get into chip design. Today the industry is highly fragmented, and has hundreds of players concentrating on different aspects of the value chain.A Indian Model with a Chip on her BindiA Indian Model with a Chip on her Bindi

With the going so good, it is just a matter of time before India claims a huge slice of the $257.7 billion in semiconductor industry ( Source : Gartner )

Useful Links
Chip Design is the Space to be in

Chip Design is moving to Asia

Foot Notes
*NASSCOM - National Association of Software and Service Companies -
NASSCOM is the premier trade body and the chamber of commerce of the IT software and services industry in India.

**Fabless - The technique of designing chips in a way wherein chip designing ( laying its architecture ) is separate from the process of mass producing it. Each can be done by different parties.

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