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Study downplays India's EDA, fabless forays

Posted: 10 Sep 2002 ?? ?Print Version ?Bookmark and Share

Keywords:software? IC designer? EDA tool? semiconductor IP? fabless chip process?

A survey of India's software industry has identified opportunities for the country's IC designers while cautioning the industry against adopting fabless chip-making models or attempting to break into the EDA tool market.

The study, conducted by Indian software industry association Nasscom, concluded that the design business in the country could grow more than fivefold, to $800 million, over the next three years.

But rather than embrace the fabless business model or tackle the EDA tool market, Indian design startups should continue offering design services along with creating and marketing semiconductor intellectual property (IP), the study advised.

Forsaking the fabless route goes against the views of many top IC industry executives, who maintain the fabless model would overcome the nation's lack of a major fab and the inability of most Indian companies to make large investments.

India's Armedia Inc. was one of the first fabless companies to open a design center in the country before it was acquired by Broadcom Corp. two years ago. Armedia founder Tushar Dave and entrepreneur Arya Bhattacherya (who sold his fabless design company, Arcus Technology Ltd, to Cypress Semiconductor Corp.) have advocated the fabless model after having operated design centers in Bangalore.

Risky business

But the Nasscom study concludes the fabless model "is not suitable for Indian companies, because of the long gestation period and higher capital requirements. Higher business risks make it difficult to attract venture capital funding."

The study also found India's fabless companies would face other impediments, such as the lack of a domestic market that could offer expertise in developing and marketing semiconductors overseas. A domestic market would also provide the combination of domain expertise and system design skills that are needed to create complete chips.

The EDA tool market, meanwhile, "is not an opportunity area (for Indian companies), because almost all global majors have established operations in India and EDA tool development has a long-gestation operation," the Nasscom study revealed.

Indeed, there are few Indian companies with EDA tool development expertise, though such major global players as Cadence Design Systems Inc. and Synopsys Inc. have established development centers in the country.

Himanshu Singh, acting country manager for Cadence India, agreed with the study's conclusions about the lack of opportunities in the EDA tool market. EDA tools are "definitely a high-investment industry," Singh said, and there is "a lot of consolidation in this. India's software business is built on the outsourcing model, and we are not aware of any Indian companies being in EDA tool development."

Singh added that "given the rate of change in the electronic hardware design business, the ramp-up by EDA tool vendors to keep pace needs continuous investments."

So where should domestic players invest? Nasscom said Indian startups should focus on semiconductor intellectual property (IP), since growing chip complexity is making it impractical to design chips without reusing IP blocks. "Currently, designer productivity ranges from 200 to 250 gates per designer per day. ASICs used in networking equipment may have between 1 million and 5 million gates and may reach 100 million gates in the next few years. This may necessitate a project of the duration of over 1,000 man-years," the study showed.

Estimating that more than 65 percent of ASIC designs include reusable IP blocks, Nasscom concluded that reuse is a means to bridge the design gap and improve manufacturing yields.

"Indian companies are present in a small way in basically one key segment of the (IP) market: bus interface blocks, like PCI, USB, and IEEE-1394. If Indian (IP) revenues (are) to grow, Indian companies have to begin addressing segments such as microprocessor, DSP, and memory markets," the study stated.

The report adds that IP represents an opportunity for Indian companies to design through the addition of related software solutions such as the inclusion of protocol stacks, device drivers, RTOS and firmware.

"India can play a vital role in the creation of IP," agreed S.N. Padmanabhan, vice president of hardware engineering at MindTree Consulting. The growing ranks of large organizations here are looking "for opportunities in the hardware and embedded areas, and many are looking at diversifying into this segment," Padmanabhan said. MindTree recently developed a SoC IP for an overseas customer's DVD player design.

Barriers remain to achieving the goal of $800 million in design revenue here by 2005, Nasscom concluded. They include inadequate venture funding and the small size of Indian design companies, which are unable to undertake initial public offerings. Mergers and acquisitions could eventually solve the problem, making the EDA market more attractive to investors.

Shallow pool

Another barrier is the shallow pool of homegrown hardware design talent. While engineering colleges in India currently train about 300 VLSI engineers annually, the need could be much higher by 2005. "We have to produce more hardware engineers," said MindTree's Padmanabhan.

Another worry is the lack of strong links between India's designers and foundries, a situation that could put Indian companies at a disadvantage with Taiwanese and Korean competitors. Wipro and MindTree are among the small number of Indian companies that have links to foundries.

Nasscom also found a lack of analog- and mixed-signal-domain expertise among Indian engineers. The report notes that such skills will be increasingly relevant as process technologies shrink.

"There are a number of startup design service firms in India, attracted by the market potential and low capital requirements," the study found. "Some players have (moved) from providing piecemeal services to turnkey services, while others are rapidly developing domain expertise."

Nasscom's findings parallel a separate study by Avendus Advisors on India's IC industry. Avendus estimates the total size of the Indian design industry at between $100 million and $150 million, of which design services account for 75 percent, semiconductor IP 15 percent and EDA activities 10 percent.

- K.C. Krishnadas

EE Times

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