Source : The Economic Times Network
Dated : 06/01/2007
India may emerge as the global chip design capital, but it is the world that will make the capital. This is because chip fabrication and manufacturing facilities are yet to take off here. Indians are designing chips for MNCs for myriad applications – cars, cell phones, medical devices, set-top boxes (STBs), MP3 players, and so on. Yet, India gets peanuts as the chips and products are manufactured elsewhere.
Sample this: In the past year, 85% of STBs have been designed in India by Broadcomm Corporation, Conexant, ST Microelectronics (STM) and others. The global market for STBs is over $7 billion a year. But India captures less than $40 million of this as it is only involved in design and not manufacturing the chips or STBs. The STB that you installed recently is probably designed in India and made in South Korea, China or Taiwan.
PortalPlayer designed the iPod chip, which has a complex hardware layout and software coding, at Hyderabad and the US, but doesn’t make them in India. “Hence, in an over $4-billion iPod market, India got less than $25 million (this comprises salaries and design services). If the chip and the iPod were made in India (most iPods are made in China), India could have captured at least $2 billion,” says Sandalwood Partners managing partner Bob Kondoomori. Sandalwood is a key investor for SemIndia.
Citing another example, Mr Kondoomori says, “Motorola sells over 2 million Razr phones a month – an over $2.4-billion product line. Part of these are designed in India, for which India got just about $20 million. We lose out because we don’t have fabs. For every design that India gives, China is benefiting more. They are making a killing. When design is happening here in a big way, why do we let manufacturing happen elsewhere.”
STM, the $8.88-billion European chip maker, recently announced a made-in-India chip. The 60-people India team took 160 man-months to do the complete hardware and software design of the chip, but it won’t be manufactured in India. The chip is for a digital set-top box and has several features like enhanced security, usability for pay TV applications and interactivity. Says STM vice-president (emerging market region) and India Design Centre director Vivek Sharma: “India is a growing market, but we have enough manufacturing capacity worldwide for another 4-5 years. However, today anything designed in India does find a market worldwide.”
The India Semiconductor Association (ISA) says India will face a $70-billion worth deficit of computer hardware by 2010. Majority of imports will be from China, thus conceding them a major advantage in the worldwide hardware market. The present demand of $24 billion is met by importing two-thirds from China, South Korea, Taiwan, EU and the US.
Chip inputs are becoming increasingly significant in all devices. For instance, the chip usage in the $90-billion medical equipment industry is worth about $2 billion, growing at 17-20% a year. Says Texas Instruments global manager (medical electronics solutions) Shekar Rao, “Everything from patient monitoring devices to pacemakers and scanning machines are going digital. Design is happening in India and I do see some co-location of design and manufacturing taking place, albeit slowly, in India.”
It’s about time India got a bigger push and more end-product manufacturing. Apart from checking the revenue flight for all the hard work done by Indian engineers in designing chips, manufacturing will create over 9 millions jobs directly in India in the next 10 years, according to the ISA.