February - 2012 issue > In Conversation
Indian Semiconductor Industry lacks VC backing?
Vishwas Nair
Thursday, February 2, 2012
The newly joined President of ISA, PVG Menon shares his insights about the emerging Indian Semiconductor Industry.

Outlook for Indian Semiconductor Industry

In 2010, the combined report by ISA and analyst firm Frost & Sullivan stated that the Indian semiconductor market is expected to grow to $400 billion by 2020. Though 2011 has been slightly challenging, we are still going ahead with our earlier forecast. There has been a definite slowdown in the growth.

But things seem to be on the promising side in the year 2012 and the National Electronics Policy is the reason behind it. The moment we have national mission on the surface, pretty much all vectors of the industry begin to align. Considering the developments that followed during the 60s and later, we can be sure that the rate at which this electronics mission will progress is sure to witness the same multiplier. The policy talks about 200 companies growing to self sustaining size in four to five years time. ISA envisages that we should have at least 50 semiconductor companies from India. This would in turn leverage the talent and the IT pool that we have here because we have always believed that India is a powerhouse for talent.

The tragedy is that we do not have products from India. The hope is the lot of funds will be unlocked via the EDF and other market access which will guarantee some sort of market pull for people who are coming in would create a virtual cycle in which we can get products that are made in India.

Boosting Startups in Semiconductor Industry

Compared to any other industry vertical, startups in semiconductors are comparatively few. What is more challenging is attracting VC investments in this sector. I personally feel that the VC industry in India needs to re-align its vision and re-look into what really needs funding. VCs here are risk evasive and very rarely invest in core product companies. Services companies may fulfill their wish for a successful payback in a short time but I don’t see them adding sustaining value i.e. not creating any IP from India. At ISA, we have been trying to create a supporting ecosystem to motivate startups. ISA has been working in close association with the government to set up incubators across the country. Semicon startups need access to several cutting edge technologies such as EDA tools, hardware labs and more. Hence, a shared ecosystem like that in incubation centers is very helpful. The first of such incubators will be rolled out soon, starting with Bangalore as a potential place to experiment.

Additionally, we are looking at the budgets to see what allocations happen. There are three components to it. One is the Seat component which will be capped at some level. This will be linked back to the incubator so that the cash burn that an entrepreneur does can be minimized. He not only pays his employees’ salaries but also to buy tools and other expensive equipments. Unlike VCs, the incubation centers, who will have a share in the startup, will not force the entrepreneur to merge sellout or go public before it is ready. These companies require somewhere around 5 to 7 years to establish ad be self sustaining. And we hope to give them that supportive ecosystem.

Talent Crunch: A rising concern

Though the opportunities for semiconductor companies seem to be on a rise, thanks to the Electronics Draft Policy, there is also a rising concern of shortage of skilled engineers. The entire electronic system designing ecosystem will generate around 28 million jobs in 10 years, but there aren’t enough skilled professionals in the country. From an expert engineer in an R&D to a basic technician in a manufacturing unit, there is a dearth of skilled people. Hence, to counter this ISA is actively putting together sector skills council for the hardware industry in association with the National Skill Development Corporation. We are trying to develop the hardware industry just like how NASSCOM helps the software industry. Over the last seven year, ISA has taken up several initiatives. We started with the technovation program which helped recognize academic excellence. A techno mentor would evaluate the best faculty, best MTech and PhD thesis, the best lab, and several things like that. This apart, we also have signed several MOUs with universities. The structure of this association is yet to be finalized after which, a proper rollout in accordance to the industry and academia needs will be done.

A lot of money is also being spent on things like National Program for Technology Enhanced Learning. In order to introduce the students to real world challenges while they are in the college, ISA has helped them do projects or internships in manufacturing units and factories right from the first year. This program has been quite successful, with many solutions being devised by the students for the real life challenges.

The Success Stories

Though the startup ecosystem in Semiconductor industry is not as active as other segments, it still continues to have several success stories to boast of. There are several home grown companies which have taken on category leaders and busted them at their own game. There are companies like Tejas and Juniper who are home grown and capable of competing neck to neck with players like Huawei in telecom industry. Sling Media is an example for they have revolutionized TV viewing. There is a startup run by ex-technologists from Philips who have made industry grade retina scanner at a very affordable price. There is yet another startup that has been developing cutting edge electronic components for DRDO and being used by the Indian Air Force. There are numerous success stories and we hope to see them rising.

ISA is the premier trade body representing the Indian Electronic System Design and Manufacturing ESDM industry and has represented it since 2005. It has close to 160 members both domestic and multinational enterprises. ISA is committed towards building global awareness for the Indian ESDM industry through focused initiatives in developing the ecosystem.

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