VLSI Design Services Ecosystem in India: A Study
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VLSI Design Services Ecosystem in India: A Study

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Incepted in 2010, BlackPepper is a new generation, Silicon to System Design Service Company that is committed in providing differentiating design service capability from Tier-1 to Tier- 3 semiconductor companies across the world.



The history of the semiconductor industry in India dates back to the mid1980s, when multinational giants from U.S. started outsourcing chip design and SW development to India to take advantage of the low labour costs and talent pool. India’s semiconductor market has seen significant growth over the last decade, which accounts for less than five percent of the global market though.



At present, there are around 170 companies in India which are working in the areas of chip design, embedded software development and board design. India VLSI design service market is driven by both captive and non-captive design centres. These design centres are designing chips in a factory model for all the major industry verticals including Telecommunications, Networking, Consumer Electronics, Industrial, Healthcare, Automotive, and others.



According to reports, India VLSI design service market is expected to reach $3.02 billion by 2017, growing at a CAGR of 16.25 percent during the period 2012-2017.



Has Indian VLSI Design Services Ecosystem Measured Up?



Indian VLSI services companies have been playing the low end game of staff augmentation by mostly deploying junior engineers in the customer projects - which doesn’t serve the purpose in the emerging IOT space - predicted to be $2.2 trillion market by 2020, where customer is looking for service partners to take ownership of silicon and systems programs and deliver.



India VLSI Design services ecosystem has failed to build companies like GUC, eSilicon, Open silicon - who mainly deals with Turnkey Silicon programs - providing high end technology services.



In the changing ecosystem, the Tier 1 customers are looking for service providers who can take complete ownership of programs and ensuring predictable high quality delivery with short Turn Around Time (TAT).  Also, Tier 3 customer who has a product idea is looking for service partner to take up complete project ownership which involves silicon implementation, system design and product design - through getting engineering samples.



IT Companies Offering VLSI Design Services                                            



WIPRO Technologies, TCS, Infosys, HCL Technologies, Sasken Technologies, MindTree, L&T  Infotech are mainly into IT services. They also have VLSI Design services as part of their offerings.



WIPRO has been in to VLSI Design services for more than two decades now and their peak team size was around 2200 engineers in 2008.  At that time, WIPRO’s was the largest VLSI talent pool size in India. Currently the VLSI team in WIPRO is around 600.  



The VLSI team strength in most of these companies peaked around 2008, from then came down drastically to the current levels.





 VLSI Design Services offering by IT companies in India- What this means to the Ecosystem? 



Business creation for VLSI Design services is easier with their established brand and large sales force for the mainstream IT companies. Some of these companies provide skilled resources for IC Design, Board design, embedded software, Application software and Product support - which help the customer to staff augment their project teams. The employees feel as part of a larger organization and can identify themselves with the brand.



IT companies – whose operating margins are quite high for their SW services - find it difficult to sustain the VLSI Design services business where the cost involved in hiring and retaining high quality VLSI design engineers are high.  



These companies mainly concentrate on TnM models, take up low end activities where in juniors can be deployed and the cost of operation is low. Also, they build team with less niche skills - for example the ASIC Verification. Most of them have not been successful in building niche skills like PD, STA, and PSV.



VLSI design services offering is mostly seen as an enabler for getting Software business by these companies.



The above said factors don’t help in building strong VLSI talent pool and sustainable business.



Pure VLSI Design Services Companies



Starting second half of the first decade 21st Century, pure play VLSI companies like SmartPlay, Sicon, Mirafra, Sankalp, Karmic and Whizzchip have played a disruptive role with their business model and have been successful in ramping up and serving the customers.





IT Companies Acquiring Pure Play VLDI Design Services Companies - Affects on the Ecosystem



In 2006, L&T Infotech acquired GDA technologies to increase its VLSI Design team to 350+ engineers. Back in 2007, mainstream IT services company MindTree acquired Purple Vision in 2007 to strengthen their VLSI Design services. With the acquisition the strength raised to 350+ engineers. Recently, France based technology consulting firm Altron has acquired Sicon Technologies. IT services company Aricent has acquired SmartPlay. 



With these acquisitions, the VLSI Design Services industry has come through one full cycle. We have seen the IT services companies ramping up their VLSI Design team over years and losing them to the pure play VLSI design services companies and the Semiconductor MNCs.



With the pure-play VLSI design service providers, who came to existence with a disruptive business model of low margin, high salary, pure staff augmentation model, it is obvious that with their shortsighted business model and no clear technology road map it has not been successful and neither the ecosystem gets benefited in the long term.



Conclusion



It is clearly evident that it is not a sustainable model when it comes to IT services companies offering VLSI Design Services. While some of the pure-play VLSI design services companies could do this job well, in terms of hiring and retaining the talent pool, being only staff augmentation players without a clear business and technology roadmap are being acquired by the IT services companies, which is not a good for the ecosystem.



The future belong to those Hardware System Design companies who can serve the Tier 1 as well Tier 3 semi-customers by making sure customer gets the cost advantage by deploying least number of highly capable engineers who can handle the end-to-end tasks, while making sure that sure-shot delivery happens in a predictable manner while ensuring shortest Turn Around Time (TAT). By doing so, these companies can bring lot more value addition to their employees and the ecosystem.



In ever evolving semiconductor ecosystem, companies who can offer high end technology services- being a single stop solution to take up Silicon turn-key, System Design and Product design projects and execute them flawlessly can play a crucial role in the emerging IOT space.



In short, it is time to build a high value pure Hardware specific System Design company out of India.
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Reader's comments(5)
1: Good article, But I am skeptical about data. Wipro strength 600 now?
Posted by:Shivappa - 26 Sep, 2016
2: "The future belong to those Hardware System Design companies who can serve the Tier 1 as well Tier 3 semi-customers by making sure customer gets the cost advantage by deploying least number of highly capable engineers"

Dear Jei,

1) How do you expect people building a career in VLSI to reach the state that your above statement mentions?
2) In any market, a hard-to-get skill is not "cheap". So then how does "highly capable engineers" create a cost advantage?
Posted by:Mahesh M - 29 Apr, 2016
3: Jei,

Including you and founders of your company being trained in Wipro. Please do not forget that.

-RK
Posted by:R Kumar - 29 Apr, 2016
4: Jei, don't agree that Wipro kind of companies were mostly into T&M and not successful in niche skills like PD...:) Turnkey and PD have been the strengths of Wipro and you know it better. Don't you?...:)
Posted by:satya - 05 Oct, 2015
5: Good Article Jei.
Posted by:Raghavendra - 21 Sep, 2015