Upswing in semiconductor design and embedded software development in India

Date:   Saturday , February 02, 2008

Semiconductor technology and embedded software domains have been high-adrenaline work areas and thus a cynosure for techies in search of new challenges both in terms of the technology and market. In the last couple of decades, the semiconductor industry has witnessed some rapid changes along with an impressive growth. Gone are the days of vertically integrated semiconductor houses that did almost 100 percent of their entire chip program completely in house. That has virtually become a bygone era for the industry.

The global semiconductor industry is now organized as fabless semiconductor companies, design houses, semiconductor fabs, test houses, packaging companies, and embedded software and content providers. Traditional chip original design manufacturers (ODMs) have recently started adopting the Fab-Lite model wherein the fabrication and manufacturing part of their business is left to the parent company, while the design engineering and markets are addressed by the spin off entities. This may be close to the example of the space shuttle getting released from the booster rockets so that it can be free of heavy fuel tanks during the ascent to the target position. Furthermore, these Fab-Lite companies have gone into private holdings so that they can retain their agility and edge with respect to market dynamics.

The semiconductor industry is going through some significant changes, mostly in the direction of consolidation. It is expected that most of the integrated device manufacturers (IDMs) will go into Fab-lite model. The Fab-lite model helps the semiconductor industry to recover its operational costs by utilizing the original fabs to fullest capacity. In this change that is now sweeping the industry, the Indian semiconductor and embedded software industries are carving a niche in the design services and product development areas.

As challenges bring in opportunities, the complex chips are creating demands for expertise and volume in embedded software development. The embedded software development is getting specialized for different market verticals like automotive, consumer electronics, and industrial automation, and is turning out to be as fast paced as the Very Large Scale Integration (VLSI) sub industry. Traditional chip companies (ODMs) are aligning with embedded software partners who can work with them in creating solutions for these market verticals. The business models are interesting and evolving for both risk share and profit share.

It would be worthwhile to have a re-look at the idea of having ‘India Captive’, where the situation is not similar to as it was 20 years back. The challenges of talent, growth, and finally investment to profitability conversion have grown multifold in recent years. Indian design houses also have a significant role to play in educating their customers towards making such decisions.

The recent news about the U.S. recession may be a great opportunity for Indian semiconductor and embedded software companies to be aggressive. The increasing need is to get the biggest bang for every R&D dollar spent and India provides exactly that. From a local market standpoint, the automotive market is facing particularly exciting times in India. Similarly the mobile and consumer markets have huge potential in terms of numbers and challenges in terms of technology and costs.

The Indian semiconductor design industry is undoubtedly headed North
Recent reports narrate the fact that India continues to be an attractive destination for some of the most demanding chip programs globally. Large multinationals and midsize startups are either already in India through design services partners or ODCs. The birth of more local establishments in the field of semiconductor design and embedded software development bear testimony to the Indian industry gearing up to meet the increasing demand of global markets.

The fact that India offers the world’s second largest English enabled population and has an ecosystem that supports English learning significantly enhances employment opportunities in the knowledge sector of electronics and embedded software. Coupled with this is the fact that India’s multi-cultural background largely lends itself to deal with the working cultures of both the Eastern and the Western global economies. India’s offshore pool of available IT and Engineering talent is more than 25 percent of the global IT and engineering talent. This makes India one of the most favored destinations for enterprises to nurture their development and R&D programs. The talent pool has grown about four times (to ~1.3 million) in the past five years. India continues to rank second in the world, after the U.S., in producing engineering graduates. Of course, not all of these engineering graduates gravitate towards the field of semiconductor design and embedded software, but a substantial part of this pool increasingly seeks a career in this industry.

We do hear in industry events that the Indian education system, though having quality and scale, has to deal with the challenge of building ‘creative thinking’. Our current education system (including the engineering streams that cover electronics and embedded software domains) is geared toward a tendency for conformity, respect for authority, and ‘doing’ rather than ‘producing’ and being a value contributing workforce. The quality of education has variations depending on the institutions and hence there is a stratum of unemployed graduates who need second round incremental education and training in embedded software or VLSI verification or analog layout that make them employable. There is no doubt that the Indian educational institutions are evolving a curriculum in embedded software and VLSI along with the local industry. However, we have covered only a small distance and more momentum needs to be gathered quickly for making a big impact in the global markets. Multi-skill development and the ability to provide solutions to the customer are keys to this.

Though the engineering resource costs are increasing significantly, the rise has been mainly in the salaries of experienced VLSI and embedded software professionals. The entry-level salaries hold parity, barring very few MNCs that have salary structures beyond the industry norms. India has an increasing need for experienced and mid management level VLSI, embedded software staff that can contribute to projects and programs beyond ‘just doing it’. These resources being in short supply, the salary costs have increased sharply and hence the overall chip program and its ROI is affected at times, especially for the leading edge technologies. The good news is that the Indian talent overseas are returning back to India to bridge the gap of shortage in mid management level. This group of talent is now proactively looking to return home, creating a good resource pool with wider experience, global outlook, and work experience. The blending of this talent with the local talent makes the pool richer with knowledge and know-how and also brings balance to the resource costs.

The local semiconductor industry in India is seen to be maturing very fast. The conclusive proof is the amount of foreign direct investments (FDI) that have been coming into this sector. Analysts have rated India as a good destination for large MNCs to set up their operations from a legal and intellectual property security (IPR) point of view. The laws for IPR and patents are improving, with the Indian government amending the IPR laws step-by-step to have a positive impact on the investing community and MNCs.

The author is VP - Semiconductor Solutions at KPIT Cummins Infosystems. He can be reached at