"More than 53 per cent of the firms in Silicon Valley outsource a part or all of their operations and almost half of the jobs that Silicon Valley outsources comes to India.1"
Every major IT outsourcing firm (including Accenture, CSC, EDS and IBM), major IT software companies (CA, IBM, Oracle, SAP), hardware vendors (IBM, Intel, Motorola, Sun, Texas Instruments) have opened operations in India.
As per Partha Iyengar, vice-president and distinguished analyst at Gartner, "We also think India is worth the effort when the problems you are attacking and opportunities you are chasing match what India can provide." He is coauthor of book "IT and the East", which articulates the challenges that new business scenarios and capabilities in India and China pose for Western technology firms.
Lets look at some numbers:
- India's real GDP grew by 9.2% in the year to last September. Over the past four years it has clocked up an average annual pace of more than 8%, compared with around 6% in the 1980s and 1990s.
- In 1995-1996, India's exports of IT services were worth about $1 million. In 2006 IT export of IT services has increased to $13.3 billion as shown by Table 1. Services exports are estimated to be growing at 32.6 percent in FY2007.
|
IT Services (USD billion) |
2004 |
2005 |
2006 |
2007E |
|
Export |
7.3 |
10 |
13.3 |
18.1 |
|
Domestic |
3.1 |
3.5 |
4.5 |
5.6 |
Table 1:IT Services growth
In global semiconductor revenue, India accounted for a share of just below 1 percent in 2003.In 2005 it increased to 1.2 percent and is expected to reach 2 percent in 2007, as per ISA estimates as shown in these Figures.
|
Figure 1 |
|
Figure 2 |
Revenue Growth in India's IC Design Industry is shown in Figure 2.
- The EDA market in India is expected to grow at a rate of around 35 per cent in 2006-07 from the level of around $100 million in 2005-06, according to Raghu Panicker, country manager and director of sales, India for Mentor Graphics. In 2005-06, India's EDA market had grown at 30 per cent over the previous year's level. As per Panicker, the Indian EDA market contributed to around 18 per cent of the total Asia Pacific EDA revenues. Asia's EDA market, with revenues standing at around $524.7 million in 2005 is estimated about 11-12 per cent of the worldwide EDA market. India is rated among the fastest growing consumption markets for EDA tools throughout the world.
The numbers seem to suggest that India's electronics industry is seeing an upsurge. One of the reason is the growing middle class population of nearly 40 crore people. The segments set to grow exponentially in India are: Wireless, Industrial, Consumer, Medical, and Automotive. Consumers and Communications are the two segments in product design that are driving growth and innovation in the Indian market. DVD players, set-top box (STB), digital still cameras and MP3 players are the key drivers in the consumer segment. The communication segment is also witnessing product design innovation to address the demands of the rapidly growing mobile segment in India. Let us checkout the Indian Semiconductor ecosystem.
India Semiconductor Ecosystem
Ten years ago, there was not the slightest sign of a semiconductor industry forming in India. India is now home to around 120 chip design companies that work in the areas of system on chip designs, library creation, defining the flow, methodology for ASIC designs, verification, validations and finally to testing, assembly and packaging. All the global top 10 fabless design companies have India operations and 19 of the top 25 semiconductor companies are already present. AMD, Analog Devices, Broadcom, Conexant, Freescale, Intel, Philips, ST Micro, Samsung and Texas Instruments are a few companies that are present in India.
As India is becoming a large market for electronic goods, a few companies have started electronic design, and a large number of vendors are planning to manufacture products in India. Alcatel, Nokia and Flextronics, have established manufacturing facilities in India.
The Indian semiconductor industry has grown to important R&D centres in Bangalore, Delhi (Gurgaon and Noida), Hyderabad, Chennai, Pune, Ahmedabad and Goa. India semiconductor ecosystem is shown in Figure 3 below.
Figure 3: Indian Semiconductor Ecosystem
Articles India the land of Service Outsourcing, by Jack Horgan(Nov 2004) and EDA in India by Peggy Aycinena ((March 2007) are great articles on this subject.
Lets examine some of the companies in Indian semiconductor ecosystem. The Indian Chip industry was born with Texas Instruments (TI) establishing its chip design facility in 1984.
Texas Instruments
- Entered India in 1984.
- TI India is primarily a Design Centre in Bangalore. It is one of TI's largest Design Centers outside of the US.
- Around 300 patent applications were filed from TI's Bangalore development center - the most filed from any technology company in India (source: Dataquest July 2005).
- TI India Design Centre is in frontline development in analog and digital chip design and applications software, SOC, library and software tools, microcontroller and signal processing technologies
ST Microelectronics
- It is one of the leading suppliers of semiconductors in India
- Entered India in 1987 and has today grown to more than 1700 employees.
- Advanced R&D centre at Greater Noida is the company's largest outside Europe
- Also has sites at Bangalore, Mumbai, Pune , Chennai & Hyderabad.
- Has strong relation-ship with premier research institutes like Indian Institute of Science
- ST's facility develops libraries of reusable IP that are used by ST and its customers around the world, especially in advanced system-on-chip (SoC) solutions for digital consumer, computer, telecom and automotive applications.
- In addition to its worldwide role as an R&D center, ST India is a major facility for application support.
Intel
- Intel India Development Center (IIDC) started in July 1999 and today has over 1300 employees.
- The largest non-manufacturing international site for Intel
- Last year, a total of 14 invention disclosures with 8 of them accepted by the Intellectual Committee for patent filing
- IIDC is the fast-track developmental center that brings synergy across multiple divisions in India, encompassing the following focus areas: Chip Design, Communications Software, Compilers, Digital Signal Processing ,e-Business Technologies and Applications ,Graphics Drivers, Networking Products, Manufacturing Applications and Stack Optimization
Applied Materials
- First India office opened in Bangalore for information technology application development and support in 2002
- In 2003 Started engineering design and services support in Bangalore Started manufacturing execution Software development in Bangalore
- In 2004 650 engineers working on our behalf in Global Development Capability, India
- In 2005 Opened regional headquarters in Bangalore
Cadence
- Cadence India was established in 1987 as an R&D site at Noida, on the outskirts of New Delhi
- With more than 350 employees, it is now the largest Cadence R&D site outside of North America
- The sales and marketing organization was established in 1997 in Bangalore, India
- R&D centre includes groups as PSD, Custom IC, Digital IC, DFM, and SFV as well as Customer Support and IT
- Cadence is also creating partnership programs with premier engineering institutes in India including software grants, joint product development programs and fellowship programs
Synopsys
- Synopsys India started operations in Bangalore in 1995 as an offshore development center with $4 million initial investment.
- Synopsys India is now a $25 million corporate R&D center with representations from every major Synopsys business unit
- It has over 100 people
- Activities include software development of EDA tools, verification, chip design applications and methodologies, design services and consulting.
Missing Link: Fabs
India is at the forefront of the global semiconductor industry, but for one missing link-manufacturing. In the absence of a fab, manufacturers are entirely dependent on imports of semiconductors.
There is a debate as to whether or not India should be putting up a fab, or a latest-technology fab. On one side there are already expert fabs elsewhere -- really, Can one compete with TSMC? Manufacturing is a volume game, and India is late getting into that game. On the other side, in order to capture a larger portion of the semiconductor value chain, one has to move manufacturing to India. Domestic manufacturing would help product development immensely, because product development and manufacturing normally go hand in hand. When Tejas Networks ( http://www.tejasnetworks.com/) developed its optical switches in India, it could use the manufacturing facilities from Flextronics and Solectron in Bangalore. Tejas's development gives an indication of changing times.
To provide the missing link, Department of Information Technology (DIT) announced on February 22 the semiconductor policy. The three key aspects of the policy are: grant of Special Economic Zones (SEZ) status to the electronics industry; definition of a minimum threshold level for investment; and inclusion of the entire electronics ecosystem for the incentives. The Indian government said it expects its new chip policy to attract more than Rs.22,060 crore ($5 billion) in manufacturing investments over the next three years. India's chip policy offers incentives like tax breaks and interest-free loans of up to 20 per cent of total capital expenditures incurred in the first 10 years of manufacturing.
There is proposal of construction on a prototype fab, which will be part of the India Design Centre in Kolkata. The information technology ministry of West Bengal, with support likely from federal agencies, is establishing the fab. The prototype fab will be part of the approximately Rs.528 crore ($120 million) design centre which also houses incubation centers, chip design and EDA tool development companies.
On November 15th 2004, Korea-based Intellect Inc, a semiconductor/chip fabrication company, had decided to set up a plant in Hyderabad with an estimated investment of around $1.6 billion in two phases. To be set up as India Semiconductor Manufacturing Company (ISMC), the Korean company has proposed to invest $600 million in phase I and another $1 billion in phase II. It was expected to provide a direct employment of 10,000 people; the company was to manufacture chips for SIM cards, microprocessors and other applications, including telecom. (Note: Other than this announcement I was not able to get more information on its current status)
Indian chip designers of mobile phones, digital cameras, MP3 players and gaming devices are hoping to ride the local manufacturing wave.
Not a bed of roses
The ISA this year commissioned Ernst & Young to deliver a benchmarking study to the Indian electronics industry. The consultant compared India with China, the Czech Republic, Israel, Taiwan, the U.K. and the United States. On availability and scalability of talent, India was at the top; on talent cost advantage it was the second best location; and on semiconductor market potential, the fourth behind the United States, China and Taiwan. Ernst & Young also identified areas of challenge: quality of technical education, maturity of semiconductor design sector, quality of business environment and legal/IPR regime. While the firm said that the advantages outweigh encumbrances, there is no denying that India is weak in areas that either needs government intervention or at the very least government support.
Far from having an endless supply of brilliant engineers, India is in great danger of losing the race for tech know-how to the United States and China, indicates a new report. Vivek Wadhwa of Duke University, the lead author of "Seeing Through Preconceptions: A Deeper Look at China and India", produced by the US National Academy of Sciences, warns: "China is going to eat India's lunch unless India invests in the long term." All the IITs together awarded only 2,274 bachelor's degrees in 2002-03. The same is true about India's PhD holders in engineering and technology. China increased its PhD holders five-fold between 1994 and 2004 to almost 10,000. The US produced about 8000 in 2004. India produces less than 1000. The trend has been flat since 1995
The experience of the semiconductor industry in the US indicates that university research has been one of the key factors of the industry's growth. Although in India there are instances of industry-academia research linkage, these however take place in discrete pockets, and are not widely prevalent. There are over a handful of examples of one-one research collaboration in India. Institutes such as the Indian Institute of Science, Bangalore, and the Indian Institutes of Technology at Chennai, Mumbai, Kharagpur, and other prominent institutes have all deployed that model in areas of interest to the semiconductor industry, and have ongoing research engagements with companies in various industries on a one-one basis.
Organizations
To establish India as 21st century's powerhouse, to promote the interests of the Indian industry various organizations have been set up. Few of them are mentioned below:
India Semiconductor Association (ISA), was formed in Nov 2004 to promote the interests of the Indian semiconductor industry within India and outside. The association provides large, small, startup, integrated or fabless semiconductor companies with a powerful voice in the semiconductor industry. ISA's key objective is to create an ecosystem that catalyzes industry growth, leadership and drives the vision for the semiconductor industry. It has more than 150 members including global firms such as Analog Devices, Intel and Qualcomm, Texas Instruments, and local giants such as Wipro http://www.isaonline.org/index.asp
entrepreneurs and semiconductor industry veterans to realize the huge semiconductor and electronics potential in India. The primary objective of SemIndia is to act as a catalyst for the growth of the semiconductor industry in India and making India a global hub for semiconductor products, manufacturing and intellectual property creation and enhancement. http://www.semindia.in/index.html
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. NASSCOM is a global trade body with over 1100 members, of which over 250 are global companies from the US, UK, EU, Japan and China. NASSCOM's member companies are in the business of software development, software services, software products, IT-enabled/BPO services and e-commerce.NASSCOM was set up to facilitate business and trade in software and services and to encourage advancement of research in software technology. NASSCOM's vision is to establish India as the 21st century's software powerhouse and position the country as the global sourcing hub for software and services. http://www.nasscom.in/
Conclusion
World is getting flat. India is becoming part of large global complex supply chains that extend across oceans through a process called outsourcing, providing everything from service representatives and X-ray interpretation to component manufacturing. The World is Flat: A brief History of the Twenty-first Century is a best-selling book by Thomas L. Friedman analyzing the progress of globalization with an emphasis on the early 21st century
India, both as design community and end-product market, is emerging as a force to be reckoned with. Small steps have been taken but miles to go. It is time the government, industry, and academia in India work together to make India march ahead
As per ISA Frost and Sullivan report the opportunity and potential for electronic industry for year 2007, 2010 and 2015 is given below.
I end the article with some quotes of world class leaders on India.
"A truly global company will be one that uses the intellect and resources of every corner of the world. India is a developed country as far as intellectual capital is concerned. The openings of (offshore) development centres mark a new level of commitment by GE in India."- Jack Welch, General Electric
"We are expanding our presence in India to take advantage of the ample research and development talent available...our Global Development Centre is a critical component of our future success." -John Chambers, CISCO Systems
"Three years ago, during my visit to India, the country was emerging as an IT superpower. Today, the country is handling the most sophisticated projects in the world...I am impressed with the talent we have in our India Development Centre and the quality of software being developed- Bill Gates,, Microsoft
"I love Indian food and only a few minutes away from my house in Redwood Shores is Gaylord where I eat a lot of naan, dal makhani and baingan bartha. Oracle is committed to India and has invested huge amounts of money in engineering. Yes, symbols are important for other top CEOs like Gates, John Chambers and Carly Fiorina have come to India, but I am deeply committed to the Indian venture where we have 2000 employees, which we will scale up to 4,000."- Lawrence J Ellison, Oracle Corp
"If you are not here in India, making the right investments and finding and developing the best employees and business partners, then you won't be able to comboine the skills and expertise here with skills and expertise from around the world in ways that can help...clients be successful. I'm here today to say that IBM is not going to miss this opportunity"- Samuel Palmisano, IBM
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