From designs to fabs

The Indian semiconductor industry is scaling new heights but its foundation and roots had been laid as early as the 1980s. The story started with multinational companies (MNCs) outsourcing part of their internal development to regions, which were abundant in technical talent, as well as comparatively low in cost. The type of work was more exploratory, and “testing the waters” in nature. Also, most of the activities were in the areas of electronic design automation, libraries, etc.

It was soon apparent that the local workforce was hungry for increasing technical challenges. This led to more ownership in the areas of design of circuits, chips, SoCs, packages, memories, etc. (in the analog, digital, and mixed-signal domain). This spilled out into software world – especially in embedded and real-time software. While outsourcing of applications software had been going on since the 1970s, software intimately tied to the semiconductor chips being designed took off since the 1990s – these included development of automation tools, modeling & simulation, embedded software, etc. Many of the chip companies started marketing their chips along with an integrated bundle of software including applications, reference designs, performance/power optimization software, etc.

Thus a growing talent pool of resources was being created – well versed in the art of design and software. This enticed more companies to dig into the talent pool – and this created an interesting dynamic situation of companies generating, as well as feeding off, the resources. Not only were the resources good in generic design (chips, SoCs, systems, etc.) and software (embedded, power/performance optimization, etc.) – they also started becoming increasingly knowledgeable and specialized in the specific verticals of telecom, consumer, automotive, wireless, systems, networking, storage, etc. And they continued to further consolidate in the “horizontal” expertise of real-time and embedded software, modeling and simulation, circuit and chip design, design for manufacturability, packaging, etc.

It needs to be kept in mind that while the MNCs did help to seed, and grow, semiconductor talent in India, as well as Indian companies also contributed significantly. The general trend was to start as design services houses, and then branch off into IP and product development. With time, many big companies became truly global players in services, as well as product development

The semiconductor ecosystem
It was inevitable that an ecosystem started to evolve and establish itself, which helped each player to grow and bootstrap the other.
· The demand for high talent in large numbers brought the universities into the loop with many graduate and post-graduate courses being modified to cater to the demands of the industry.
· Cost was no longer the main arbitrage as the demand for talent in design and software became the critical.
· The industry “fed back” into the universities via sponsorships, research projects, fundings, joint collaborations, etc.
· The government introduced the Software Technology Parks of India (STPI) to help bring in capital equipment via duty-exemptions (with certain forex obligations to be satisfied), which was the start of a fruitful industry-government interaction.
· The semiconductor industry formed an association, the Indian Semiconductor Association (ISA), which became the nodal agency for all semiconductor aspects in India.
· Venture capitalists began to look at start-ups in India favorably.
· Intellectual Property Rights (IPR) and their policy formulation got a renewed shot in the arm.


Manufacturing
With this as a recent scenario at the beginning of the millennium, there have been speculations as to what could fuel the next growth. Various aspects such as India’s talent base, the growing customer base for semiconductors and electronics products, an increasing band of middle-class with enhanced spending power, aggressive investor-friendly policies by various governments (central, and state), increasing product ownership in India, as well as the setting up of manufacturing plants in the areas of automotive, pharmaceutical, wireless, etc. have helped create a mindset that made the industry and the government look favorably towards semiconductor manufacturing in India.

Market research firm iSuppli Corporation predicts that the Indian EMS and ODM industry will grow to $2 billion in 2009. EMS companies are either setting up or expanding their India presence to build telecommunications and consumer electronic equipment for OEMs for the Indian market. In 2007, ISA/Ernst & Young Global competitiveness report rated India highly on several factors including market potential, design work, business environment, and advantages of operational costs.

Given the above, as well as the success of the semiconductor design and services industry, it is natural to think of semiconductor manufacturing as the next big step.

The Indian government has announced a semiconductor policy to attract large investments in semiconductor manufacturing. Indian and multinational companies have evinced keen interest. Many state governments are enabling ease of investments. All this will further enable the growth and consolidation of the associated ecosystem.


Towards Semiconductor Fabs
Recently the government announced its intention to invest about US$7 billion in semiconductor and solar manufacturing. The investments, which will be made over five to 10 years, show that there is a strong inclination of government and private players towards energy efficient technologies.

The semiconductor market is also witness to the growing demand for solar energy efficient chip-sets. Despite ongoing polysilicon shortages in the market, world solar photovoltaic (PV) market installations reached a record high of 2,826 megawatts (MW) in 2007, a 62%t jump over 2006, according to Solarbuzz LLC, a San Francisco-based solar energy consultancy firm. India's renewable energy ministry has announced a new program designed to expand solar power generating projects up to a maximum capacity of 50MW. According to the European Photovoltaic Industry Association (EPIA) study 40% of world’s energy needs will be supplied by solar by 2100. The scope is plentiful as the types of equipment used in solar and semiconductor fabs are similar.


Important Questions
It is important for the fabs to set their strategy in place. Some points to consider would be:
· Are they likely to be at the leading edge technology, with regular investments to stay ahead?
· Do they prefer to be 2-3 technology nodes behind, and address the relevant lucrative markets such as automotive, white-goods, etc?
· Do they prefer to concentrate on analog, mixed-signal, RF, etc?
· Would they stick with CMOS, or look at GaAS, etc?
· Are they able to provide the necessary differentiation and value-add to the customers as compared to the more established fabs?
A detailed study of such questions would be important to any player considering entering the manufacturing space.

Conclusion
India’s unique advantages of technological expertise, developing ecosystem and an increasing consumer base, present huge potential for growth.

It is important to think of setting up semiconductor manufacturing and its associated ecosystem as the next big step; and the solar industry as a good stepping-stone towards that. The benefit to society in terms of clean renewable energy is also too compelling to ignore. A synergistic approach in this area by the industry and government will not only enable setting up the necessary infrastructure, but also address the critical energy issue in an environment friendly manner.


You can reach Dr. Madhusudan Atre at amind_corporateaffairs@amat.com