BANGALORE, India India's fledgling IC design industry may be poised to apply its software-development and system analysis skills to system-on-chip designs, according to a study by market researchers Frost & Sullivan.
Developing solutions that generate more sales has long been the mantra of India's software sector, but there hasn't been much to show for it so far, observers said. But now, "Global semiconductor companies and OEM manufacturers are beginning to outsource the development of even complex, 'bleeding-edge' technologies such as SoC to several Indian startups and established companies with design expertise," the Frost & Sullivan report said.
Indian companies are positioning themselves to benefit from the shift to mobile devices, multimedia, networking and broadband applications, all of which are driving demand for system-chip technology. Those advances are expected to expand over the first half of the decade. The market research house estimated that Indian companies together earned $60 million from SoC design in 2000, and that the total could grow to $183 million by 2003.
"OEMs and global semiconductor companies are increasingly focusing on brand building, business development and other marketing-related activities," the report said. "Since they outsource so much of their engineering and design activities, they would prefer to deal with a single company that offers them a total-chip solution."
India's design companies entered the SoC design market about 18 months ago. Most were ASIC design houses that understood the importance of developing product concepts and using them to design multifunctional chips.
"The big money-spinners for Indian firms may lie in the development of reusable design cores and of intellectual-property [IP] blocks for niche applications," said S.R. Dinesh, senior research analyst in Frost & Sullivan's industrial-technologies practice. "OEMs in end-user industries would seek advantage in their markets by developing products that use unique design elements in other words, IP. These OEMs would prefer to do business with design houses that have core competence in their applications."
IP development "would enable Indian companies to earn significant revenues from licensing while also creating an entry barrier for competition," Dinesh said.
Reusable design cores would also speed work for new designs and for IP verification. "As competition in end-user industries keeps rising and product life cycles shorten, time-to-market will be more important than before for OEMs," Dinesh said. "Developing reusable cores will help Indian design houses to meet that need."
Despite the global economic slowdown that continues to weigh heavily on India's high-tech sector, expertise here in the area of technology services, especially chip design, is gaining ground, the study said.
Industry leaders such as Wipro Ltd. and HCL Technologies are expected to increase their offering s in chip design. Meanwhile, a dozen startups have entered the market. Still, experts said it would take a while for Indian companies to capitalize on the global demand for SoC design expertise in large part because design tools remain expensive by Indian standards.
Chip design is also unlikely to be appreciated on the Indian stock exchanges, where investors seem to prefer software companies with low-risk models such as application software programming.
Far to go
The Frost & Sullivan study stressed that Indian companies must work harder to promote themselves, since India is situated far from the markets for its design work. "Indian companies have a long way to go before they can compete strongly against Japanese, European Union and American companies, which dominate this [SoC] sector," said Dinesh. "A primary challenge is the geographical distance between a client's bases and Indian design facilities."
To successfully compete, Indian companies must possess good system-analy sis capability and continue to invest in research and development, Dinesh said. However, research investments by Indian IT companies other than giants like Wipro have been negligible. This is why the application software model is preferred by an overwhelming majority of Indian software service companies.
According to Dinesh, Wipro has been catering to Indian defense research laboratories while also supporting embedded-device companies. Wipro "has been operating in this area for a long time but had never made it its focus area of business, as the market for embedded systems was small," he said. "But with the dot-com bust and growth in the market for embedded systems, embedded systems are now an area of strategic focus for Wipro."
Meanwhile, analysts said it is difficult to estimate which end-user sector is contributing most to the fledgling SoC design market here. Branches of international companies depend on their parent corporation to supply them with projects, while " Indian companies are startups and hence have not focused on a [specific] area to work on, looking instead for revenues from all segments," Dinesh said.
The Frost & Sullivan report recommended that Indian designers home in on new products in areas like multimedia, broadband, wireless and networking applications, which "constitute strong revenue streams," and then "graduate to offering total embedded-system solutions."