News Article
India’s chip design industry set to nearly quadruple by 2010
India’s Integrated Circuit (IC) design industry is booming, with market revenue expected to reach $2.1 billion by 2010, rising at a Compound Annual Growth Rate (CAGR) of 29 percent, up from $596 million in 2005, iSuppli Corp. predicts.
India’s Integrated Circuit (IC) design industry is booming, with market revenue expected to reach $2.1 billion by 2010, rising at a Compound Annual Growth Rate (CAGR) of 29 percent, up from $596 million in 2005, iSuppli Corp. predicts.
The growth in India’s IC design industry is being driven by factors including:
· Global corporations establishing new captive design centres or expanding the capacity of existing design centres in India
· New start-up design service providers
· Indian design companies moving up the value chain
· The constrained but consistent supply of design professionals
The Indian semiconductor design market consists of captive design centres of global semiconductor companies and Independent Design Houses (IDHs).
“Most of India’s high-end design activities are being conducted at captive centres,” said Dr. Jagdish Rebello, director and principal analyst with iSuppli Corp. “Approximately 50 percent of the design activities in India are carried out in the areas of wireless and wired communications. Consumer electronics represents the next-largest application. Designs at geometries of 90 nanometres and larger comprise approximately 90 percent of the total design activities in India,” Rebello added.
While captive design centres increasingly are engaged in high-end R&D projects intended to serve the needs of the global parent company, the role of IDHs in India is rapidly growing as these companies provide flexible business models for design engagement.
Most of the IDHs in India are involved primarily in front-end design work, providing testing and verification-level services. However, a few of these companies also are involved in end-to-end design activities, ranging from specification to tape outs.
As these Indian companies continue to mature in terms of experience and capabilities, iSuppli projects that their contribution to the total market will grow to 49 percent by 2010, up from 35 percent in 2005.
Growth of design activity in India is a result of the cost advantage provided by the large talent pool available in the country. However, as the nation’s design industry matures, market attractiveness has grown beyond simply cost. Indian design teams’ capability to execute complex designs has assisted in increasing the value proposition of India as a design destination.
As the demand for design professionals increases, the quality of the new hires is becoming a more important issue. The cost incurred by companies for training these new hires will add to overall costs.
The average workforce experience within the industry is low. Professionals with less than three years of experience account for 50 percent of the total workforce. The low proportion of experienced professionals also limits the capability of the industry to take up end-to-end projects.
The regulatory environment in India remains favourable for the growth of the industry. VLSI design companies can establish operations at the Software Technology Parks of India (STPI), and can take advantage of tax breaks and other incentives. The Indian government also has taken steps to strengthen laws in the country that protect Intellectual Property (IP), and it is in the process of setting up an IP registry.
The government’s semiconductor policy, which is expected to declare initiatives and various tax incentives to fabrication units, has been delayed because the extent of the concessions has not been fixed. The policy is expected to be unveiled by the end of 2006.
While the Indian design industry is poised for growth, there remain several major challenges that have to be addressed:
· The talent crunch at the middle-level technical and managerial level, resulting in attrition.
· The rising cost of staff, putting pressure on India as an outsourcing destination.
· Competition from other design destinations such as Eastern Europe, the Middle East, China and Israel.
· The absence of semiconductor fabs in India.
iSuppli believes that India has the potential to address these challenges and grow as the outsourcing/off-shoring destination for semiconductor companies worldwide.
