There is more to IT in India than software like chip design

The newly-formed Indian Semiconductor Association (ISA) plans to be for the semiconductor industry what Nasscom is to the software industry. It will help interaction within the industry, with the government and with similar associations internationally. The two-week old association already has 35 members. ISA chief mentor Dr Sridhar Mitta said that there were a total of 120 companies in India, with around 80 in Bangalore alone. He spoke to Chitra Phadnis of FE on the industry. Excerpts:

Why did you feel the need for such an association at this point in time?
India is a software country. When we started activities other than software like chip design we never called it chip design, we called it software because we didn’t know how government would look at it. We were riding on the software brand. We did interops and we called it as testing. We did tech support but called it software. Now as the industry is maturing, we have different sectors emerging, like ITes, BPO and so on. That’s also one reason that we do not want to be a special interest group within Nasscom, but a separate body, though we work closely with them. The issues in software are different. There are no physical goods in software. Our issues are different.

You also said that India’s activities in chip design was not known globally...
Even today there is no international recognition for India as a potential chip design centre. For instance, Shanghai needs 1,50,000 design engineers and it was looking at sourcing them from Taiwan and Hong Kong. India came last on the list.

So what do you see as the potential for India in the hardware side?
Just because we don’t have a fab, does not preclude us from becoming a semiconductor destination. Don’t look at just chip design. Chip design, frontend, backend, testing — other than fab, all processes can be done in India. Let’s assume a $10 cellphone for India, which is low-cost, low feature, which nobody will buy in the US. It can be conceived and designed in India. The chip could be made by an Analog or a Mindtree, and manufacturing could be done in Singapore. If the US is going to Taiwan for fabrication, what’s wrong with India going to Singapore? For instance, there is this MNC which contracted the design for a set top box to India for around $200,000. The design was transferred to Taiwan for fabrication — which would have cost around $50,000 and the product is sold in the US for $1 billion. The major work is done by us. We are creating value but we are not capturing it.

How can you capture value?
You have to do all the things in the value chain design software, package them here, sell it and support it from here. You have to take investment risks and inventory risks.

Has anything changed in the external environment to accelerate growth of the Indian semiconductor industry?
Yes. Firstly, the fabless model is proven now. Secondly, the life time of the product is reduced, and thirdly the cost of the design has gone up. Based on that, people are looking at alternatives.