By Srabani Sen
The Indian semiconductor industry represents every aspect of the semiconductor lifecycle—from cutting edge electronics design automation (EDA) and very large scale integration (VLSI) design companies to an evolving manufacturing ecosystem. The semiconductor industry has grown into a prominent player in the past couple of decades and has been a vital contributor to the nation’s economy. The growth of the mobile handset, consumer electronics and telecommunication industries has contributed to the growing revenues of the electronics industry, and this, in turn, has helped the growth of the Indian semiconductor industry.
The year 2009 was a challenging year for the entire global economy, and industries like electronics, semiconductors and EDA were affected. Semiconductor companies became cautious, and by delaying their purchase decisions, impacted the overall electronics industry. To cut costs, they focused on core strengths, and consolidated and realigned resources to complement their existing product lines.
Since then, the Indian semiconductor design market has gained strategic importance, and has consequently helped the industry move up the value chain. An ISA-Frost & Sullivan report stated that the Indian semiconductor market is poised to grow at a CAGR of 13.4 per cent from US$ 5.9 billion in 2008 to US$ 7.59 billion in 2010. This actually represents a growing market despite an overall decline in the growth rate.
Casting light on this phenomenon, Rahul Arya, marketing director, Cadence Design Systems (I) Pvt Ltd, says, “There are signs of revival in the global semiconductor industry and optimism among semiconductor players on account of strong domestic sales in recent times. In a way, the recession has brought about a positive impact on the Indian market as most of the players streamlined operations and focused on productivity and building expertise to increase value-add.” Cadence has had a longstanding commitment in India. The company was one of the first to invest in an offshore development centre when it set up its India Engineering Center in 1987.
Commenting on the impact of the recession, M K Mak, regional vice president of sales for Korea and South Asia, ON Semiconductor, states, “The impact of the last recession on the electronics market in India was relatively small and short lived. The market recovered quickly and restored its growth momentum, and indeed, in several segments, grew faster than before, especially for applications requiring high energy efficiency.
Agreeing to the statement, Ganesh Guruswamy, vice president and country manager, Freescale Semiconductor India Pvt Ltd, says, “Last year’s slowdown did have a profound effect on the market dynamics. Softer spending by consumers resulted in a slowdown of the market’s growth. However, during the later half of last year and the beginning of this year, we saw renewed growth. Moreover, according to industry estimates, India’s electronic equipment consumption is likely to grow to 5.5 per cent in 2010 and to 11 per cent by 2015. This presents an excellent opportunity for growth of semiconductor companies in the country.”
Freescale India is well positioned to take advantage of the growing market. “Our consistent investment in R&D and introduction of the latest technologies will help us differentiate ourselves from our competitors. Our quality products, coupled with aggressive pricing, helped us to capture market share,” adds Guruswamy.
Application areas that drive demand
The market scenario has changed quite a bit over the last decade. While the communications and computing sectors continue being the key drivers for the industry, there is a renewed interest in the consumer sector that has resulted in opportunities across various applications. This is especially true in the auto sector, with focus on auto infotainment systems and auto electronics for safety and security. “The downturn resulted in many regions cutting down on their vehicular production by nearly 34 per cent, as a result of which many silicon companies witnessed a decline in their revenues during Q1, 2009. NXP, however, spotted an opportunity in the growing automotive market and managed to take the top position in the auto infotainment semiconductor market with its comprehensive range of products. According to iSupply, NXP is No 1 in car entertainment systems,” explains Neeraj Paliwal, vice president and managing director, NXP India, design services global manager, central R&D.
Arya feels that growth for semiconductor companies will come from energy related and low power technologies, telecom, automotive, industrial electronics and consumer electronics. However, Mak says that besides these sectors, opportunities in power management and LED lighting segments would continue to be very interesting and attractive.
India has great potential as a semiconductor market due to huge domestic demand for electronics equipment. While the urban demand for electronic gadgets is a huge opportunity in itself, there is also an untapped and vast opportunity for locally made products for the non-urban market, especially in verticals such as telecom and wireless applications.
While emphasising the driving forces of the semiconductor market, Guruswamy says, “2010-11 will witness an upsurge in products that will use technology to revolutionise the way people communicate. The healthcare industry is another sector that is driving the semiconductor industry this year. There is a huge opportunity in the smartbook market as consumers are demanding more cost effective and higher performing solutions.” Freescale has entered this fast growing smartbook market. Its core focus is on the automotive, networking, industrial and consumer sectors.
“Today, low consumption of energy by devices and fuel efficiency has become imperative. The global and Indian semiconductor industry foresees an impending revolution in the area of energy generation and consumption. Solar energy is going to be a major player and will address much of the energy requirements. We need to integrate solar power into India’s growth story and capitalise on the potential of turning India into a solar hub for the world,” adds Guruswamy.
Another key area that is generating demand is microcontroller based embedded systems, which are being driven by applications in the areas of industrial automation, medical equipment, point of sales terminals, digital weighing scales, printers, three phase energy meters, etc. “Soon you will see almost every application using 32 bit MCUS NXP’s LPC 1100 is one of the most cost effective ARM 32-bit microcontrollers in the market today.
NXP will drive this change further by introducing its high performance mixed signal and innovative products to meet the high volume application requirements in India,” adds Paliwal. NXP’s core strategy is to strengthen its high performance mixed signal (HPMS) based product design and development for embedded systems, identification, automotive safety and security. It also focuses on new products and business innovation.
New application areas
A growing consumer base with an increasing disposable income also presents the opportunity for semiconductor companies to develop products in telecom, wireless and medical applications for the domestic market and, potentially, other emerging markets. “From solar powered LED lanterns and digital inverters to hand held medical diagnostics for rural customers—we see this trend growing. We could evolve into a systems design hub in the future. In terms of emerging segments that will drive growth in the semiconductor industry—healthcare, smart grids, 4G phones and automotive applications will make increased use of semiconductors solutions. A number of semiconductor companies have already invested in or are considering investing in alternate green technologies like solar panels,” cites Arya
According to Guruswamy, smart meters is another area with the potential to change the power industry. Smart meters enable control over energy usage and help save money and power. The meter comes with an LCD that displays the current power usage, enabling individuals to gauge and curb their energy consumption, which simultaneously leads to reduced household utility bills and emissions.
Given the fact that 3G in India will soon be a reality, it will generate a need for wireless communication devices such as e-books, smartbooks and tablets that are low cost and enable people to be connected at all times. Freescale already has about 90 per cent market share for microprocessors, semiconductors, etc, for e-books, globally, and is in the process of launching itself in the Indian smartbooks market as well with its OEM partners.
With a growing penetration of electronics in the automotive industry worldwide and in India, this sector is another promising area. Opportunities in India are getting bigger with the nation positioned as No 1 in the three wheeler and two wheeler markets, second in the tractor segment, fifth in commercial vehicles and first in motorcycle manufacturing. As per reports, in the financial year 2010, the automobile industry of India is expected to witness a 10-12 per cent growth in its vehicles sales.
Says Mak, “There are more and more semiconductor contents in automotive applications, which is a very high growth area in India. The other one is LED lighting, as the government endorses this initiative to improve the energy efficiency of the nation. Apparently, the growing economy also enables consumers to enhance their homes with electronic products and appliances.” ON Semiconductor leverages its strengths and experience acquired from around the globe to develop products for Indian customers, in tune with local requirements.
According to Paliwal, one emerging area that can potentially result in business for the semiconductor industry is RFID/smart card based products. “Due to the escalating security consciousness all over the world and the need for security related projects, smart cards have found greater application in e-government projects, banking services, access control (physical and logical), large scale national ID projects, telecom, automotive, transport, etc—all of which are driving growth,” he says.
NXP has been a pioneer in contactless technology and applications in the field of transportation, e-governance and banking, and follows the global standard, i.e., ISO/IEC 14443, for contactless smartcards. NXP has recently tied up with the Centre for Railway Information Systems (CRIS), an IT organisation under the Ministry of Railways, to power contactless smart cards for automatic fare collection using automatic ticket vending machines (ATVMs) across various cities in India.
Other potential areas that can result in business for the semiconductor industry are medical electronics (such as glucometers, digital thermometers, electronic weighing machines, etc); solar PV power generation and management; electric/hybrid vehicles with higher semiconductor and embedded system content, and e-commerce.
Current trends in India
Growing local markets and rising consumption levels: According to Vivek Sharma, regional VP, Greater China and South Asia region, India operations, director, India design centres, STMicroelectronics, growing local markets and rising consumption levels is one of the current trends in the Indian Semiconductor sector. The rising incomes as well as growth of middle class is fuelling the consumption levels in India. The effect is even visible in the so called bottom of pyramid opportunities, affecting the large sections of society. However, there is still a large discrepancy in the consumption levels and the demography size, which is generating high demand for consumer goods, which will boost the local semiconductor markets.
“As compared to last downturn, where India became a favourite destination to outsource, we saw a spate of companies offshoring their operations to India to save costs. This time, rather the focus has been in the growing local markets—be it digital consumer or automotive or wireless handsets,” says Sharma.
Emerging entrepreneurship activity and innovation: Says Sharma, “Rising demands as well as the potential of huge markets for electronics applications is giving rise to high opportunities, which is being tapped by budding entrepreneurs apart from large and established companies. Wireless sector is one such example, where we are now starting to see many players apart from established brands. It is further enabled by the huge diversity of India, which brings forth wide opportunities starting from the entry level applications for the bottom of pyramid opportunities and going way up to high end sophisticated applications.”
Other untapped segments like healthcare, education, etc are also fast emerging as potent markets. Therefore, strong entrepreneur activity in the field of electronics applications will emerge.
Though high level innovative products are not yet fully manifested, there is a strong need for cost effective products in high price sensitive local markets. This will give rise to another form of innovation—’frugal innovation’—which is further boosting the need for local entrepreneurship. Cost effective laptops are one such example.
Electronics system design and manufacturing (ESDM): Sharma further explains that the rising local consumption levels are also driving the need for local electronics manufacturing. “There is already multiple transnational EMS companies operating in India. Together with the electronics systems design, both by local as well as multinationals and electronics manufacturing, India is going to witness a very strong ESDM ecosystem capable of contributing about 10 per cent of the Indian GDP by 2020, he says.
Leapfrog technologies: India is leapfrogging by the latest technologies without the need for going through the intermediate technologies. This trend is also currently visible. Mobile phone technology has already demonstrated this aspect by outpacing wired line telephony. Direct-to-home (DTH) and solar energy are other technologies which are becoming such leapfrog technologies enabling and connecting many households, which otherwise could have taken years if not decades to have these facilities. Telemedicine is another such leapfrog technology which can bring healthcare to the doorstep of people who otherwise have no accessibility to this vital human need.
Products ‘made in India’ for India: Sharma further points out that in the semiconductors space, design centres have started almost two decades back with talented young engineering workforce. “In due course, this has matured and now we are finding engineering capable of building the whole systems, that is, system on chips (SoC) with both hardware as well as software.” he adds.
“This along with the other trends is giving rise to locally designed products for local markets as well, which was mainly visible in global markets before. This will bring a paradigm shift, as the local design teams will be now in direct touch with the customers, which will further develop the capability of high innovations,” Sharma adds.
STMicroelectronics, a world leader in supplying semiconductor solutions across the world in vast application areas like consumer electronics, computers peripherals, automotive, industrial, memories, MEMS, smartcards, etc, has broad product portfolio and is in a position to support all the above mentioned trends, as it can provide solutions to high number of varied applications.
“India is an important design centre for us, which is one of the largest design centres outside Europe and represents close to 18-20 per cent of our design activity. With the investments done in the past two decades, we plan to leverage very well our high design capability in India to serve both the global as well as the fast growing local markets.” points out Sharma.
Commenting on the current trends in the semiconductor sector, Paliwal says that there are five top trends in India—concept-to-end product design; more complex platform based designs; specific solutions for emerging markets; more analogue and mixed signal designs; and more product and system solution development as against outsourced services. “At NXP, we focus on conceiving and developing end products especially for emerging economies. This also enables us to make absolute optimisation of our ecosystem of product and solution design and development,” says Paliwal.
Arya stresses that as the semiconductor ecosystem is undergoing a disruptive transformation, the semiconductor companies must provide more than just hardware. “They now have to provide some or all of the software stack, in order to build an application-ready platform. At the same time, they’re anticipating potential of US$ 100 million SoC development costs. In this environment, the problems our customers face are significant, and working together to solve those problems will have a huge impact,” he says.
Systems companies are now able to differentiate themselves and sell their value proposition by offering the latest applications. They are demanding that their semiconductor suppliers build integrated hardware/software platforms ready for applications or apps development. This is true not just with cellphones, but other segments as well. This scenario, according to Arya, has three consequences. First, EDA and semiconductor industries have until now focused on design creation. With around US$ 100 million development costs on the horizon, there will be fewer creators. Many designers will become integrators, who make heavy use of pre-designed intellectual property (IP) to build SoCs and systems. EDA tools so far have only addressed creators, and this must change. Second, EDA has primarily focused on helping creators overcome the productivity gap. This work must continue, but what integrators are most concerned about is a profitability gap. Closing this gap requires new tools and approaches that can reduce design costs and bring in more revenue. Third, designs will be driven by applications. People will start with applications and then build or source highly optimised hardware/software platforms. The traditional approach, in which hardware is built first, and software and applications are tacked on later, has become too inefficient and costly. Thus, traditional design tools and methodologies must evolve, Arya explains. Cadence’s EDA360 Vision addresses these challenges.
Another trend is software as a service (SaaS) offerings for semiconductor design. SaaS provides an innovative business model for companies to ramp up or augment their design teams. Cadence launched its SaaS program in 2008. These production proven, ready-to-go design environments are accessible via the Internet and provide design teams a faster time-to-productivity with reduced risk and cost. Cadence-hosted design solutions are available for custom IC design, logic design, physical design, advanced low power, functional verification, and digital implementation, adds Arya.
Mak believes that the expectations for high energy efficiency and reliability are increasing. “As the standard of living improves, we also see consumers going in for higher end products with enhanced features. Advancements in telecommunications, both voice and data, are driving demand for both infrastructure and end user level equipment,” he says.