What India now offers to global semicon industry!

This semicon blog post is very timely as I keep getting a lot of questions on the topic: what does India NOW offer to the global semiconductor industry in this recession! In fact, several industry friends asked me this question during the recently held ISA Vision Summit 2009.

By the way, I have two good sessions from the ISA Vision Summit 2009 to blog about, and those will happen after this post! So, stay tuned folks!! :)

Back to the key question: What does the Indian semiconductor industry now offer to the world?

My quest for answers took me to S. Janakiraman, former chairman, India Semiconductor Association (ISA) and President and CEO-R&D Services, MindTree. Incidentally, Jani Sir, had highlighted some time ago that despite the lack of wafer IC fabs, fabless India continues to shine brightly! And, I agree with him! Even at Dubai last year, during the IEF 2008, Jani Sir had talked about India's growing might in global semicon. I consider him to be the right person to discuss how India should frame its semicon path forward.

According to Jani Sir, we will remain in a tough economic scenario for some more time to come. "The cost of R&D, be it development or re-engineering or support is critical for the survival of semiconductor companies, but all of this needs to be done at lower costs. India will continue to be a cost leader to get more engineering done at the same cost or the same engineering done at a lower cost. India will continue to be a safe haven for such investments," he contends.

India itself is a high growth market that will get sizable in the next five years for the semiconductor companies. No one can understand India and the emerging market requirements than the companies who are located here. That can be leveraged by the world to create value for many products that will serve the emerging market needs.

Janakiraman said: "Indian companies are also investing in technologies and creating intellectual properties/building blocks of technologies. These are the essential elements to create products/solutions in a shorter time-frame when the market starts recovering and builds up the appetite for consumption. Hence, Indian companies need to invest more in such areas and position themselves as value-add vendors to source technologies."

Newer markets such as electronics in healthcare and renewable energy space provides a level-playing field since India's maturity level is no less inferior to the western world. "We need to invest, and create solutions and products that can establish India not only as a market, but also a leading technology provider for the global market," Janakiraman advises.

Has Indian semicon lost its way a bit?
Some folks believe that the Indian semiconductor industry has slightly lost its way since the SemIndia fab debacle late last year. I've mentioned earlier that hardly anyone wants to speak about having fabs in India at this point of time. Nevertheless, we'll need to explore whether the Indian semiconductor industry is still on track!

According to Janakiraman, while the global consumption of semiconductors has seen a drastic drop in Q4 of 2008 and is likely to see a negative growth in H1 of 2009, India will be one among the few markets that will see an increasing consumption through the sales of electronic products.

He added: "The captive and design services companies serving the semiconductor market are facing a head wind, no doubt. However, the impact on them is much lesser compared to what is happening in the rest of the world."

With the Indian semiconductor market continuing to grow, while the global market is in decline, it is possible that India may end up seeing a slower growth, but with an increased market share.

Janakiraman said: "I see the dynamics in the market will lead to India gaining way for the longer term, even though we can’t escape the short term pains. When the recovery starts, India will gather much stronger and faster momentum of growth as it will be a lucrative market for selling and the lower cost market for sourcing for any of the global semiconductor players."

Finally, what really needs to be done to get the industry in India buzzing? For starters, don’t give up hope!

Added Janakiraman: "Look at it as an opportunity to get into a level-playing field rather than a losing ground. Consider India as a potential future market. Look at and invest in the emerging opportunities such as healthcare/security/energy, and build products like telemedicine, surveillance systems and power management systems. Invest in idea creation and product management systems, and get ready for the new model of business when recovery starts."

I wonder why Jani Sir didn't deliver the keynote at the ISA Vision Summit 2009! He is just the right person as far as propping up Indian semicon is concerned!!

ISA Vision Summit 2009: Local products, emerging opportunities!

The first session on day 1 of the ISA Vision Summit 2009 focused on local products and emerging opportunities in India, especially in healthcare, automotive electronics and mobility. It was great to see companies present solutions developed for India, by Indians. If earlier, it used to be "made by the world for India," today, it has changed to "made by the world, in India." This focuses highly on India's well known strength in design services.

In the picture, you can see Ajay Vasudeva, Head R&D, Nokia India, making a point, with Prof. Rajeev Gowda, IIM-Bangalore, Ashish Shah, GM, GE Healthcare, and Dr. Aravind S. Bharadwaj, CEO, Automotive Infotronics, listening very attentively.

In his opening remarks, Prof. Rajeev Gowda, IIM-Bangalore, said: "As the world is in recession, we are still cheerful, and we are still growing." He called upon the industry to focus on healthcare, which is an area where work is going on. Agriculture is yet another area to look at! According to him, Bangalore had become an IT center, it had yet to become a knowledge center. "As an industry, think about reaching out to colleges, and get people to think innovatively and creatively," he added.

Dr. Aravind S. Bharadwaj, CEO, Automotive Infotronics Pvt Ltd, a a joint venture between Ashok Leyland and Continental AG, in his presentation, highlighted that infotronics for automotives is an opportunity for India. He added that the infotronics content in automotives was growing, and is likely to touch around 40 percent by 2010. In India, the auto industry was growing at a CAGR of 11.4 percent, and auto electronics was growing at a CAGR of 21 percent.

What is the India advantage here? "We definitely have a high level of expertise. India can also become an automotive embedded powerhouse," he said.

Dwelling on the current trends in automotive electronics in India, he said that there has been an increase in demand by customers for technically advanced in vehicles. Also, there are strict emission and safety regulations in place. Some other trends include the increase in automotive exports, and fuel economy in Indian driving conditions.

Dr. Bharadwaj cited the example of the fleet management telematics solution at the Koyambedu bus terminus in Chennai. He added that embedded automotive applications will dominate the future automotive applications.

Healthcare market to explode!
Ashish Shah, General Manager, GE Healthcare Global Technology Organization, India, said that two sectors will undergo tremendous growth in India: healthcare and energy, and added that the country is now ready for growth. He highlighted the fact that about 20 percent of GE's engineers were Indians, thereby indicating a huge talent pool within the country itself.

The drivers for Indian healtcare market include: medical tourism: About 175,000 foreign nationals; up 25 percent; huge investments: government spending up 1-2 percent of GDP; disease patterns: such as lifestyle diseases; and increased spending in healthcare.

The bottom line is that growth is for real! The Indian healthcare market is about to explode," said Shah.

Shah displayed an ECG, the MAC 400, which has been developed for India. While the company shipped 3,600 units last year, and of these, about 500 units in India, GE projects selling 10,000 units during this year. The selling price of this device is an affordable $700. GE is also making maternal infant products, as well as x-ray programs. It is also developing an MRI application, which would not require the injecting of a contrast agent, thereby, leading to 50 percent savings!

In his presentation, Ajay Vasudeva, Head R&D, Nokia India, focused on the tipping point for mobility today. More people have access to a mobile phone than a PC, and most use it to access the Internet.

He highlighted some of the applications Nokia is developing, such as those for mobile rural/irrigation applications, mobile banking and NFC (near fied communications), and mobile healthcare and diabetes checking -- all using the mobile phone! Livelihood, such as agriculture, and life improvement, such as education, services are highly relevant in India. Of course, entertainment has the widest appeal!

Vasudeva concluded by remarking, "Together, let's create devices, products, services and solutions, that can change peoples' lives."

In his concluding remarks, Prof. Rajeev Gowda, session moderator, called upon India to devise policies on e-waste, and to think about how can we convert semiconductor waste into energy.

ISA Vision Summit 2009 lacks the punch!

Yes, that's how I felt, at the end of the opening day of India Semiconductor Association's (ISA) Vision Summit 2009! Won't know much about how others felt!!

The picture here shows the ISA Vision Summit 2009 being inaugurated by the Guests of Honor, Dr. Debesh Das, Honorable Minister-in-Charge, Department of Information Technology, Government of West Bengal and Dr. Arunachalam, Chairman & Founder, Centre for Study of Science, Technology and Policy (CSTEP), Bangalore. Standing by are Jaswinder Ahuja, ISA Chairman, and Ms Poornima Shenoy, ISA President. Congrats on putting up a great show to the India Semiconductor Association, despite all the recession around us.

The opening day was largely built around sessions such as Local Products: Emerging Opportunities; Indian Design Influence: Ideas To Volumes; and Embedded Software: Its Growing Influence on the Hardware World! Yes, all of these were very interesting sessions.

However, there was no word on the Indian semicon policy, or even about India's plans to have (OR not have) a fab! There was very little about how to incubate and handhold start-ups, and help them grow bigger! And, even less about how to go about building a successful product company in India!

It is in all of these areas, I felt, that the ISA Vision Summit 2009, lacked the punch! Last year, the enthusiasm was quite evident! The Indian semicon policy had been announced in late 2007, and the fab plans looked very much in line! However, it seems, this year, no one's willing to bet on fabs, or rather, even speak about them!

One gentleman discussed my post on the possibility of an Indian investor buying Qimonda, and even cited examples of how looking at certain memory fabs in Taiwan won't be quite out of line! Yes, this is exactly the time to invest and think really big, India!

Let me also highlight a comment left on my Qimonda article on CIOL by a reader, who calls himself/herself as "The Edge". BTW, dear friend, I have not at all back-pedalled! Rather, I have been screaming hoarse, and loud enough to perhaps, land in the bad books of some industry folks :) Well, here's what "The Edge' says:

"Ed, I happened to read your blog and notice that you have already back pedalled a bit (though the outrageous comment has not provided reasons as to why he/she feels that way.) I'll provide some reasons as to why India should look to invest NOW and not two years later when the markets start to look up.

1) Fabs are shutting down or idling at the moment: In this scenario, equipment vendors will be more than happy to get rid of inventory even at huge losses so as to keep some business going.

2) Onus on product development: This is evolutionary and will come along with experience; akin to a baby crawling before it begins to walk! How about jumping into the foundry business first and playing a minor role in product development for the time being? The role and the direction of development will evolve over a period of time. Just as importantly, one has to be in total control of the full life-cycle of the product. Else, there will be that missing link/experience between optimum design and subsequent efficient manufacturing.

3) Technical know-how: Reverse brain-drain and attracting of expats to move to India is easier during the downturns, when intelligent folks might get laid off and would be available for a lot lesser (if at all) compared to the boom-times. Most importantly India has NOTHING to lose. This can be the first serious foray into the semicon manufacturing sector, if the money goes in now. NOT two years later, because by then, the set-up costs would be that much higher and personnel/partners/acquisitions would be hard and expensive to come by in a good market scenario. An early start, i.e., right away, will position the semicon manufacturing industry (along with whichever partner/acquisitions) to be ready to make full use of the next peak in the industry. That big name might well be Qimonda or maybe some other innovative company that might have been reduced to a pauper during this downturn."

This is absolutely something I agree with and am passionate about! Even though others called my post out of line, and outrageous, it does not matter. I have high hopes for the Indian semicon industry, and as I was telling an industry friend today: I will continue to write about what I think should be done!

Coming back to the ISA Vision Summit, this morning, Nandan M. Nilekani, Co-Chairman of the Board of Directors, Infosys Technologies Ltd, in his keynote, highlighted communication, healthcare and energy as the key domains for semiconductor industry to leverage for potential business. The solutions should be scalable and low cost. Quite rightly so! Indian solutions to solve Indian (and global) problems are the need of the hour. Nilekani touched on India's demographic dividend, which gives the country the rare advantage over the rest of the globe.

However, I wonder whether developing these solutions alone will be enough to pull the Indian semiconductor industry right to the top! A lot of people at the event wanted to hear my views, and as far as I am concerned: A lot more needs to be done!

Prof. Rajeev Gowda, IIM-Bangalore, the moderator for the opening session, Local Products: Emerging Opportunities, struck the nail on its head, when he said in his opening remarks that while Bangalore had become an IT center, it had yet to become a knowledge center. He stressed on the need to get people to think creatively and innovatively. If only, this was as simple as it seems!

Can the Indian semicon industry innovate? Or, will it find it hard to get out of the rut it seems to have run into, as far as fabs are concerned? Will it finally find some way of incubating, building and growing product companies? I am still awaiting a good answer, rather, any answer!

Programmable imperative: Changing semicon landscape!

This post is based on a presentation recently made by Amit Dhir, Senior Director, Business Operations, Xilinx, prior to the launch of the Xilinx Virtex-6 and Spartan-6 FPGA families. Xilinx was very kind to share this with me, and I need to thank him and Neeraj Varma, Country Manager - Sales (India/ANZ) for Xilinx.

Xilinx's next-generation FPGA families are said to enable new, targeted design platforms. Incidentally, Altera, too, decided to launch its Stratix IV GT and Arria II GX FPGAs, the same day as Xilinx.

Back to Dhir's discussion on the programmable imperative and a changing semiconductor landscape! According to him, the key market trends changing the technology landscape include the empowered consumer, hyper-connectivity and social networking. In this scenario, time-to-market and flexibility are the key attributes for success.

Customer challenges today revolve around doing more with less, and now! Companies now need to monitor their market and competitive leadership, time-to-market and profitable growth, spiraling development cost, and risk aversion and product complexity. Business constraints are now forcing customers to reduce internal R&D investments. The graph shows the IC cost by process nodes.
Time for programmables NOW!
The time for programmables is now! It is an ideal technology to help combat customer challenges. The programmable imperative is driven by factors such as market forces, financial constraints and technology drivers. Really, it all boils down to accelerating the programmable imperative!

Looking back at the logic IC landscape, business dislocation has been underway for the incumbents. From 1998 through 2004, a significant amount of IP migrated from system OEMs to ASSP vendors, particularly in the communications market.

Even ASICs present a bleak outlook and are likely going the way of gate arrays! The graph here shows the declining ASIC market share.
The increasing development costs and reduced R&D investments by OEMs has been leading to accelerated erosion of ASIC market share going forward. In fact, the long-awaited tipping point where FPGAs replace gate arrays is upon us.

ASSP vendor challenges
Looking at ASSP vendors, those vendor in tier 1 face challenges such as business model viability and poor profitability. High risk environment leads to poor customer loyalty. The large capital outlay on fabbed is moving on to fablite and fabless. Next, market and customer consolidation means fewer deals for such vendors. Chase of >1M units means few applications and customers.

What about the tier 2 ASSP vendors challenge? They have been forced into very high volumes and compete poorly against the tier 1 vendors. Hence, profitability and business models are under severe pressure. It is to be noted that out of the 115-odd companies followed by the GSA (Global Semiconductor Alliance), 29 have market caps less than their cash.

As for the tier 3 ASSPs and startups challenge, the Round-A VC funding has dried up! Incidentally, the round-A funding (dollar amount) declined 82 percent from 2000 and 2007. Through Q308, only two chip companies received round-A funding, totaling $12 million.

Programmables next business disruption
Looking at the logic IC landscape, programmables are emerging as the next business disruption. FPGAs are no longer seen as a yearly cost burden prior to ASIC release, but more as a solution that could live in products and platforms over time.

The tipping point should happen in 2009, and programmables should reach a plateau of productivity by 2016!

Where Xilinx fits in!
Today, Xilinx sees growth opportunity ahead, and it is more of a pragmatic reality now! The company understands that new attributes are required to meet the challenges of the future. It lists three attributes to bring about this change:

* Transformation: Market led, semiconductor leader.
* Ushering in the era of targeted design platforms.
* World class, thriving third-party ecosystem.

Transformation is already underway at Xilinx, which is now becoming a market led, semiconductor business leader.

It is ushering in the era of targeted design platforms, which is enabling innovation. A view at the ASIC/ASSP class applications reveals that the positioning has become more market focused. The architecture is more toward market tuned platforms. Xilinx also focuses on low power leadership. Its design methodology has now become open, scalable and hierarchical.

Targeted design platforms also enable customers to do more, and faster, and focus on their differentiation! Xilinx also boasts a world class and thriving third-party ecosystem. The software and IP is scalable, standardized, extensible and collaborative.

Xilinx is striving to accelerate the programmable experience by giving what customers need, and when they need it! Its Virtex and Spartan silicon form the programmable foundation. It offers base targeted design platforms -- devices, software, IP, boards, etc. It also offers domain specific platforms, along with domain specific IP and tools, as well as market specific platforms, which are inclusive of market specific reference designs and IP.

According to Dhir, the company is offering innovative technology to address diverse market requirements and to drive programmable logic beyond the tipping point!

Indian silicon wafer fab story seems dead and buried! Should we revive it?

Now then, this will make a very interesting read! Back in October 2007, I had discussed the timing and the need for a silicon wafer fab in India, in-depth, with Anil Gupta, managing director, India Operations, ARM.

We have come a long way since then! There was all the hype last year about SemIndia's fab, which never really did happen, and eventually, BV Naidu moved on! Then came the rush to solar fabs. Recently, when I blogged on how a Qimonda buy could be good for India, I am told that it is really outrageous. No problem, it is merely a suggestion.

At times, I have got the feeling whether the Indian semiconductor industry is losing its way! However, when I see all around, it is hale and hearty, and business as usual -- fabs or no fabs!

It was interesting to meet up again with Anil Gupta of ARM, and to find out what he thought about what I thought!

Starting with an old question, whether India has the capability to sustain or even build a product development ecosystem? Gupta said: "We need the following for this:
* Entrepreneurs committed to product development and willing to take that risk.
* Investors willing to take risk on product development companies.
* Consumption (this will happen as the economy improves any way).
* Deep enough technical/technological knowledge/know-how to put reasonably competent end products together (It exists. Examples like Sukam, Tejas and other are there).

Indian fab story dead and buried
Turning focus on fabs, is the Indian silicon wafer fab story completely dead and buried now? Gupta notes: "When TSMC says they are running at only 38 percent capacity, one can imagine what the rest of the fabs must be going through. In any case, the Indian fab story was a longer term story and the current economic climate actually makes it further and further remote. So yes, it is dead and buried now!"

Wow! India probably flattered to deceive! However, I am an optimist, and hope that one day, India will have its own silicon wafer fabs!

Gupta adds: "What worries me now is the glut of the solar/PV fabs. By the industry estimates, solar/PV is a viable option only when the price of oil is >$100 per barrel (oil is at $40 per barrel now). This means, there would be challenges for the solar cell industry too! One can only hope that the economy picks up growth soon enough and sends the price of oil higher so that solar becomes a viable option."

Again, this is a concern I have as well. The rush toward solar is good, but then, is this what the Indian semiconductor industry really needs? Where's all that talk of developing silicon and product companies? You simply cannot equate the two -- semicon and solar! You can't have a policy, and then ignore the main crux either, and simply go for the ones that are easily attainable! It does not project a good impression, or maybe, I am somehow wrong in my assessment. Hence, my feeling that the industry could be losing its way somewhere!

However, Gupta feels that's not really the case! What has been working until now, still continues to work!! "Our strengths are design and verification. We will continue to be in demand for that. The other pastures we explore, there are a lot of uncertainties," he adds.

"The challenge is to pick the right pasture where the grass remains green even in the summer. This is not easy to find and does require that we bet on some of them and learn through the experience," he advises.

How can India really buzz?
What now needs to be done to get the semiconductor industry in India really buzzing? Surely, local consumption is key. Local consumption would hopefully foster electronic product innovation just like products by two-wheeler manufacturers and the Tata Nano.

"The current initiatives in the industry for rural applications are also quite interesting. I am optimistic that some good offerings will come out of this. While these may not be specifically from a “semiconductor” perspective, at least at the “system” level these would make sense," says Gupta.

What India NOW offers to semicon world?
What does India NOW offer to the semicon world, in these times of a global recession?

The Indian economy is still mostly internal consumption oriented, as opposed to exports oriented. This is very different from the economies of island nations like Taiwan, Korea, and Japan, which are very heavily export oriented.

In a recession like the current one, these predominantly export-oriented economies experience a far greater crunch than the others. Thus, as long as products are being sold in Indian markets at the right price points, there would be consumption.

Gupta says, "This time around, the world would come out of recession mainly driven by Asian countries, India being one. People in the industry that I talk to tell me that as the worst is over in this crisis, and as things begin to pick up, India will once again be the beneficiary of a lot of work moving here. However, my personal view is somewhat different.

"I believe that the last round did witness this phenomenon mainly because it was the honeymoon period. But by now, the honeymoon period is over and the India centres of these companies are working hard to reach a level where they become “mission critical” to the businesses of their companies.

"The journey hasn’t been very easy for multiple reasons. And by now, the cost differentials also do not look as attractive as they did before. Hence, what work comes here would come only after a careful assessment and very selectively (not by leap of faith)."

I did blog about how Qimonda could be a good buy for starting a memory fab in India. You have all the facts in front of you! My question to the Indian semiconductor industry is: should we revive the call for having a silicon wafer fab in India, post SemIndia and post recession?

No semicon recovery before mid 2010: Europartners

Connecting with new friends from all over the world is one of the best things that I have experienced while writing a semicon and electronics blog. One such gentleman is Ingo Guertler from Europartners Consultants. He is based in Munich, Germany -- a city I have frequented several times.

Guertler has been part of my LinkedIn network as well. He has spent 30 years in leading positions in the electronic components market, mostly with semiconductors, at General Instrument, QT Optoelectronics and Vishay. Since 2005, he has been the senior partner at Europartners Consultants, a network of independent consultants, mostly located in Europe.

Beside individual projects, Europartners analyze the worldwide distribution market for electronic components each year and publish the results in its Worldwide Distribution Report.

Additionally, the company also organizes a two-day conference in Paris every two years, with high-level speakers out of the electronic component industry, discussing actual topics with top managers from component manufacturer and distributors.

This year, the headline will cover the world economy crisis, its effect on the electronics industry, and how companies can successful manage the crisis.

Naturally, our conversation revolved around the global semiconductor market, the memory market turmoil, and how European companies view the Indian semiconductor industry.

Semicon to decline 20 percent in 2009
Ingo Guertler expects a decrease in the global semiconductors market of approximately a minimum of 20 percent. Europartners does not see a recovery before the middle of 2010.

Guertler said: "Maybe, there can be a light recovery in the second quarter 2010 in some regions. Everything will depend on how fast the funds of the governments to the industry will draw. We have to specifically watch, the American and Chinese markets."

Regarding the memory market, he added that everybody had expected that Vista will stimulate the markets. However, that did not happen. "For the time being, the industry has no direct killer application for memories available or in the design stage. I expect a further price erosion on memories, especially on DRAMs," he cautioned.

Europe's interest in Indian semicon
Again, it was natural for me to query Ingo on how European companies view the Indian semiconductor industry.

According to him, for the time being, collaboration between the European and Indian companies is limited in the most cases, or on a one-way service base, using the excellent skills and resources of the Indian software companies and engineers that also includes EDA. "I don’t think that will change in the near future," he added.

Guertler said: "Personally, I see India as a new market challenge in the next 10 years or more for the European companies, because the local demand will grow faster in India, than we today see in China. Also, I believe and have seen it already, that a lot of companies will likely shift their production bases from China to India the next time, simply because of lower costs, availability of good, graduate engineers and a more Western orientated politics of the Indian government."

However there is one handicap for the Indian continent! That is: the current infrastructure and the political situation between India and Pakistan.

According to Guertler, India has to set up huge investment programs to invite more investors in the country. Very importantly, is there any feeling that overseas companies' interest in India is slowing down?

"Definitely not, as far as the European companies are concerned. If India meets the industry's requirements, I believe their preference will be for India in comparison to China," he said.

That indeed, is great to hear! The Indian interest is very much intact, in Europe and elsewhere. Now, it is time for India to get some work started on semiconductor product development companies.

Can the Indian semicon industry dream big? (And even buy Qimonda?)

I had ended one of my previous blog posts by saying whether the Indian semiconductor industry was hitting the right notes?

In a continuation to that specific thought, it is necessary to first examine where India stands in the global industry. We are very strong in embedded design and design services -- our traditional strengths. While these will hold good for a long time, these are probably not enough to really help India make a serious mark at the global level.

The Indian semiconductor industry, in its current state, needs a rethinking as far as strategy is concerned. Maybe, it cannot survive on chip design alone. Especially in times of downturn, the global semiconductor industry players would be looking for new markets and even customers, rather than low-cost production centers.

Consider these points: In the current economic environment, is the interest in developing new business relations with India really a top priority for overseas companies? Probably not, at this very point of time!

India is also seen more as a source of resource; and the extra resource is the last thing firms need at the moment, given the recessionary climate. What global firms are looking for are new markets and customers, and these points, along with its infrastructure, have been the areas of Indian weaknesses. Maybe, all of this will change, but definitely not overnight! And it needs some more planning.

That leads me to an interesting comment from a reader of my article on CIOL, who went on to suggest that an Indian investor could consider buying Qimonda!

Now that is some serious thought and vision as far as mid- or long-term planning is concerned. However, will there really be any takers for this? If this really happens, fabs can be built in India for memory production. If these fabs perform well, it just might turn out to be a good investment in the mid-term future of the Indian semiconductor industry. Definitely, it will make the world sit up and take notice. The other players would surely give India a look-in thereafter.

Quite a thought! This suggestion of investing in Qimonda is indeed a vision. Can the Indian semiconductor industry develop the courage to show and work toward making this kind of a vision a reality?

What should India do to develop products?
Speaking with Anil Gupta, managing director, India Operations, ARM, is always a pleasure.

I asked him: Does India have the capability to sustain or even build a product development ecosystem? What needs to be done?

He said: "We need the following for this:

* Entrepreneurs committed to product development and willing to take that risk;
* Investors willing to take risk on product development companies;
* Consumption, and this will happen as the economy improves any way, and
* Deep enough technical/technological knowledge/know-how to put reasonably competent end products together."

According to him, all of these qualities exist in India, and he cited examples of companies such as Sukam, Tejas, etc.

Well, there you have it!

We need enterprising entrepreneurs in India who are committed toward product development and willing to take that risk, especially in semiconductors. We need investors who can believe in things like even buying Qimonda, or some other company. After all, isn't this what everyone's been saying: this is the time to buy!

Dream big, India!

Top NAND suppliers of the world: DRAMeXchange

DRAMeXchange has recently released its rankings for the top NAND suppliers of the world. I am producing bits of that report here, for the benefit of those interested in NAND and the memory market.

Be aware, that this segment has been hit particularly bad. We have heard of Qimonda's problems, as well as Spansion's. They are trying to battle it out, gamefully, and best wishes to them.

The global semiconductor industry needs the flash memory segment to recover, and fast, to bring the health back in the industry, as well as the missing buzz!

Getting back to DRAMeXchange's report, NAND Flash brand companies released their total revenue of 2008. Samsung's annual revenue was $4.614 billion and it gained 40.4 percent market share, to maintain the number 1. position.

According to DRAMeXchange, the annual revenue of Toshiba was $3.25 billion, and its market share was 28.1 percent at the number 2 position. Its market share increased 3.1 percent compared to 2007.

Hynix's annual revenue was $1.727 billion, with 15.1 percent market share. Though it stayed at the number 3 position, its market share declined 4.1 percent, compared to 2007.

Micron's annual revenue was $897 million. It had a 7.9 percent market share, which enjoyed a 1.8 percent increase when compared to 2007. Micron was number 4. Intel was at number 5. Its annual revenue was $660 million with 5.8 percent market share, which increased 2.1 percent, compared to 2007.

Numonyx's (STMicro) 2008 annual revenue was $295 million. It was at number 6 position with the market share of 2.6 percent, which remained the same as 2007.

According to DRAMeXchange, the 4Q08 total revenue of worldwide NAND Flash brand companies was $2.227 billion, which dropped 19.3 percent from $2.761 billion in 3Q08. Under the continuing impact of global recession and the influence of declining worldwide consumer confidence, the 4Q08 revenue of NAND Flash brand companies showed signs of decreasing.

The overall demand and expenditure for consumer electronics declined. Although bit growth in 4Q08 increased 18 percent QoQ, the overall average selling price (ASP) dropped 32 percent QoQ, says DRAMeXchange. A big thanks to DRAMeXchange.

Global semiconductor industry could well see revival in 2010?

"Let's start from the very beginning! A very good place to start!!"

Hope you all remember this lovely song sung by Julie Andrews in The Sound of Music!! So, what's the connection?

Right! Last week, I blogged about how the global semiconductor industry is likely to drop by 28 percent in 2009, while the Indian industry should grow by 13.4 percent during the same period, and that, we should not get carried away by these statistics!

A moment to ponder: isn't this drop of 28 percent too high for the global semicon industry? Or, is the situation really that bad? So, let's start from the very beginning, and go straight to the source -- Malcolm Penn!

Revival likely by 2010?
Here's what Malcolm Penn, CEO and founder of Future Horizons, had to say: "Fraid not! It could even be lower, but remember that this is a year on year number. It is based on the following assumptions: Q4-08 down 22.5 percent vs. Q3-08; Q1-09 down 20 percent vs Q4-08; Q2 down 2 percent vs Q1; and Q3 up 12 percent vs Q2, and Q4 up 3 percent vs Q3! And, if this pattern runs true, 2010 will be up 28 percent vs 2009!"

Voila! The global semiconductor industry could well be in for a major revival next year itself! Why, even Bill McClean, president of IC Insights, took a more optimistic look at the state of the industry in light of the current global economic situation at the recently concluded SEMI ISS 2009 conference!!

Continues Penn, "The actual Q4 results (released this Sunday) were down 24.2 percent, slightly worse than our estimate."

How to get the buzz back in semicon?
It has been said that the current situation the global semiconductor industry finds itself in was fueled by greed and short-term business goals. So, who were the culprits? Weren't they warned earlier?

Adds Penn: "It was more complex that that! The woeful state-of-the-world economy was a consequence of debt, greed and irresponsibility; political self interests and short-term business goals, aided and abetted by compliant governments; ineffective regulators; imprudent institutions; incompetent management; irrational self delusion and vested self-interests! No one is blameless for this crisis! Concerns were raised, but the human nature is often irrational, and the 'easy option' always the one of choice."

So true! Perhaps, the 'easy option' factor seems to be affecting the Indian semiconductor industry as well, but more of that later!

The key issue today is: what needs to be done to get the buzz back in the global semiconductor industry? The answer probably lies in the following: in the short-term, it involves rebuilding the industry confidence, and in longer term, it involves a radical return to 'old fashioned' business and political values.

On another note, I was curious to know how the EDA segment is doing? Penn said, "No better, no worse than normal, technology marches on, new designs accelerate in a downturn."

Tricky memory!
Memory is another segment that's been hit hard. In fact, the other day, someone asked me why Qimonda's story was so important!

Another could not understand what Spansion really did, and why it had announced this January 15 that the company was exploring strategic alternatives for a sale or a merger! Doesn't matter! Memory is a very tricky business, and semiconductors is the mother of all such tricky businesses! Perhaps, isn't that why they once said in jest: "Real men have fabs!" Anyhow!

Coming back to memory, when can the industry expect some recovery in NAND? More importantly, will the various government interventions help? Qimonda also recently petitioned for the opening of the insolvency proceedings.

Penn is clear: "NAND will recover when the excess capacity abates, and that will take several more quarters. The government intervention won't help, rather the opposite, and it will exacerbate the excess capacity issue."

Fab spends to move up only by Q1-2010
Earlier, Penn predicted a recovery in 2010 with the resumption of growth in Q3 2009. What will make this happen? He says, "A recovering world GDP growth, plus a return in business confidence."

However, those keen on fabs, do not expect the fab spends to look up any time soon! In fact, Penn estimates fab spends to start moving north not until Q1-2010 at the earliest.

The Chinese impact!
Interestingly, China is set to see negative growth of 5.8 percent during 2009. It will be worth noting how much of this this impact the global semiconductor industry.

Point one, compared to a global semicon fall of 28 percent in 2009, Penn considers a fall in China's semicon fortunes of 5.8 percent to be 'darned sight better!' So, China should still be a high growth market (relatively speaking).

And India?
Like I mentioned earlier, the Indian semiconductor industry is perhaps getting affected by the 'easy option.' Design services continue to do well, hopefully, but when it comes to real semiconductor product companies, those are far and few.

And, I haven't seen any real activity in the recent past that could tell me more such initiatives are in the pipeline. Nor do I think there are many attempts to even incubate such companies. On the contrary, there's a mad rush toward solar!

No harm there! Solar is great for India and the need of the hour. However, India should not forget its semiconductor priorities as well! Indian simply cannot bank on chip design services and solar gains, and then proclaim that it has a very successful semiconductor industry! Real action is still quite far away.

I think, India needs to rethink its semiconductor strategy! It cannot survive on chip design alone.

"When you know the notes to sing, you can sing most anything," concludes the song from The Sound of Music!

So, is the Indian semiconductor industry hitting the right notes? That's going to be my next blog post, friends.

Will it take more time for semiconductor product manufacturing from India?

This is a continuation from my previous post on Dexcel. Here, I quizzed Ravi Gujral on the IP re-use, whether India possesses an ecosystem suitable for product development, and the importance of domain expertise.

Does India have product development ecosystem?
First, the all-important issue of whether India has an ecosystem that supports product development!

Well, this is a tricky one! Several folks, including yours truly, feel that India does not yet possess an ecosystem that can support the development of product companies locally! Here, Dexcel's views are worth an eyeball!

Gujral said: "So far, India has had the reputation of being an outsourcing hub for embedded software. Now, this trend is changing and many companies are focusing of innovation and product development from India. The Indian design houses are moving beyond simple labor-cost arbitrage and becoming significant contributors to product innovation space. Many multinational companies are doing their new design and product development from their India design center.

"The Indian domestic market is driving the product innovation like in the space of mobile segment. Having said that, there are many challenges in creating an ecosystem to develop product companies like process maturity, technical in-depth know how, domain expertise and availability of qualified resources."

Gujral expressed his gratitude toward the government of India and associations such as the India Semiconductor Association (ISA), both of whom are working toward creating the ecosystem for product development.

"I am quite positive that things will change pretty soon, but it will take more time for semiconductor product manufacturing from India," he quipped.

What are the benefits of IP re-use?
On IP re-use, Gujral listed its clear benefits. "Today's modular IPs have the potential to not only address complex functionality, configurability, and performance, but also provide a solution that allows for rapid and constant change of the design requirements. IPs have become the heavily sought after component in designs due to their re-usability, possibilities of customization and easy availability."

Hardware solutions are now implemented in programmable devices rather than using a host of ASICs. Every company would like to add some customization or special feature to distinguish their product from the competition. This can be achieved to some extent by the firmware and to a large extend by using IPs on programmable hardware such as FPGAs.

He added: "Everyone is benefited because of the one-time effort of IP development and its customization/implementation to specific applications. System-on-chip (SoC), ASSP (application specific standard products), are the most benefited candidates by IP. Design houses can also deliver solutions faster and cost effectively due to the design of only the "toppings" and not re-inventing the entire requirement."

Every company has limited resources and must focus those on their core competences to maximize the added value of those resources. IP re-use helps companies to launch product faster in the market as the time to market is critical for new product.

Importance of strong domain expertise
Given Dexcel's background, it is obvious to find out up to what extent do customers expect strong domain expertise.

Gujral said: "Yes, customers always expect us to be well versed with the domains we work in. The end solutions are mostly complex, multi-domain products/systems and hence the design sub-contractors are engaged for the sub-system domain in which they are the experts."

Competing in the embedded designs domain isn't easy, and to carve its niche, Dexcel possesses both the hardware and software skill sets under one roof, supplemented with in-house CAD, mechanical housing and other related expertise to churn-out a complete product or solution. The company keeps a complete control on the project and hence, could deliver the products of quality and performance beyond customer expectations.

The company's association with technology partners is another strong point in delivering the latest technology solutions due to early access programs of the partners.

Gujral added: "Since we are under NDAs with most of the companies whose product we design, we may not be in the position to divulge the information. Largely, I would say that our successes have come in the areas of networking, imaging and semiconductor characterization platform creation technologies."

Dexcel on growth drivers for Indian embedded design industry

It is my endeavor to write about semiconductors, solar/PV, EDA. FPGAs, embedded, etc., and related companies and solutions via this blog. One of the pleasures of writing a semicon blog is in being able to connect with and make a whole lot of friends from different countries, cultures, and companies, as well as bloggers.

One such gentleman is Ravinder Gujral or Ravi, as he's popularly called, Director – Business Development, Dexcel Electronics Designs Pvt. Ltd. Dexcel, based very much in Bangalore, India, is among one of the emerging companies in the embedded space in the country. Ravi contacted me, like several others, via my blog! Likewise, I was elated to find myself a new friend and reader! Later, we met during Altera's SOPC event, where Dexcel was exhibiting as well.

Dexcel is an electronics design house with capabilities in embedded systems development, firmware Designs and development, DSP processors based designs, imaging software, device drivers, Linux porting, system level designs and development, application and automation software, development of audio and video codec, telecom related stacks, board designs and FPGA based digital designs services, and providing end-to-end solutions to customers.

Dexcel has an alliance and partnership with Altera (ACAP and DSP partner), and with Analog Devices (DSP collaborator), Texas Instruments (DSP third party Network Member), Actel (solution partner), Atmel (AVR 8-Bit RISC Consultants), Montavista Linux developer, etc. Quite impressive!

Estimate of Indian embedded industry
Naturally, our discussion veered toward embedded. Providing his estimate of the embedded design industry in India, Gujral said as per the survey conducted by the India Semiconductor Association (ISA) and Frost & Sullivan, the projected Indian semiconductor and embedded design industry will grow from $3.25 billion in 2005 to $14.42 billion in 2010 and to $43.07 billion in 2015. The Indian design organizations are moving beyond simple labor-cost arbitrage to become true contributors to product innovation.

Going forward, it is important to keep an eye on the drivers for embedded design. The main growth drivers for embedded software in the coming period will be mobile communications, military applications, networking devices and providing more intelligence and connectivity to consumer devices.

Gujral said: "The explosion of embedded devices is made possible mainly due to the rapid growth of semiconductor chips each year, and semiconductor devices becoming faster, cheaper and less power hungry. As the Indian domestic market is growing rapidly, this growth trend will continue. Simultaneously, there are technical challenges to design such products and services, and the availability of technical qualified resources has become more important."

Localizing product designs and manufacturing
Given that India's strength has been in embedded, would the biggest growth factor for embedded come from the localization of product design and manufacturing from India?

Indeed, it is! Gujral noted: "The growth factor for embedded companies will come from localization of product design and manufacturing from India. However, we should be doing well in localization of product design, rather than in manufacturing. Indian design engineers are strong in product innovation and design processes, while on the other hand, our manufacturing ecosystem is not as competitive as China."

Going forward, India should be focused on fine tuning its design processes and best practices to become more efficient and productive, compared to counterpart in the US and Europe. "We have to develop strong domain technical knowledge to bring more innovation in product development," added Gujral.

Indian semiconductor market to reach $7.59bn by 2010!

Folks, here's the full report on the India Semiconductor Association - Frost & Sullivan study on the Indian semiconductor industry. I've already provided my views on the Indian semiconductor industry report in an earlier post, for those who would like to know more.

First, the findings:
• The Total Semiconductor Market (TM) revenues poised to grow from $5.9 billion in 2008 to $7.59 billion in 2010. The market is estimated to grow at a CAGR of 13.4 percent.
• The corresponding period is likely to witness a CAGR of 13.1 percent in the Total Semiconductor Available Market (TAM). TAM revenues is anticipated to climb to $3.24 billion in 2010 from $2.53 in 2008.

The following chart details how the Indian semiconductor industry is likely to shape up till 2010. All values are in US $ billion.

According to the study:
• Memory and MPU are the leaders in the TM and TAM revenues, respectively.
• IT/OA, wireless handsets and communications are the top three contributors to the TM revenues.
• IT/OA, wireless handsets and consumer are the mainstay of TAM revenue generation.
• Greater affordability of notebooks, netbooks, government IT initiatives, increased usage of memory cards to drive TM revenues from IT/OA. Ratio of desktops to notebooks reduces to 1:5
• Emphasis on rural mobile telephony and decline in handset pricesto drive demand; economically priced handsets in GSM and CDMA to witness higher growth. Mid priced handset segment, with enhanced features, to benefit.
• Rollout of 3G and WiMAX services to act as harbinger of associated infrastructure equipment TM. SDH 64 to increasingly replace SDH 4 and SDH 16. Increased manufacturing expected to favor TAM revenues.
• Evolving lifestyle expected to assist consumer electronics related semiconductor TM. DTH revolution creates demand for STB like never before. The market is expected to sustain as technology upgrades from MPEG2 to MPEG4.
• Projects like national ID cards, bank cards and kisan cards are likely to favor the semiconductor usage in emerging segment of smart cards.
• Low manufacturing index leads to opportunity loss of $3.37 billion semiconductor market revenues. This loss anticipated to increase to $4.35 billion by 2010.
• Immense, yet untapped, opportunities exist for semiconductors in STBs, LCD TVs, digital cameras and storage Flash memory markets.
• Decline in semiconductor product prices result in lower revenue realization; key semiconductor products impacted are memory, MCU and discrete. Increase in memory usage in a variety of products to offset revenue loss on accountof decline in prices.
• Increased usage of system-on-chip (SoC) leads to decline in the overall revenues. Though the decline is not proportionate to the reduction of components, the impact is significant.
• Higher penetration of notebooks to impact market for desktops and offline UPS
• Current slowdown to impact overall growth and manufacturing investment prospects for 2009; uncertainty in government decision-making adversely affects growth.

Some of the other forecasts of the report indicate that India will likely improve its share to 2.8 percent of the global semiconductor market by 2010. Also, the India market CAGR forecast is at 6.4 times the global market CAGR, over next two years !

Again, do not get carried away by these statistics!

Further, in an update to the 2007 forecast, the previous study had non-inclusion of select products segments such as digital cameras, power supplies, CFL, CCTV, PoS, Weighing Scale, etc., which have been now added. This update sees the entry of new players and an unprecedented expansion of the DTH market. Migration of select products manufacturing outside the country has also taken place.

The total TM and TAM revenue constituents (2008) are: TM revenues: $5,901.8 million; and TAM revenues: $2,531.8 million. Now, for the segment wise break-ups and segment drivers, respectively.

IT/OA semiconductor constituents (2008)
TM revenues: $2,503.4 million; TAM revenues: $1,161.3 million.
* Notebooks, desktops and servers were the key contributors to the MPU, memory and ASSP TM revenues.
* Desktops are key revenue generators for MPU TAM revenues.
* CAGR for IT/OA is TM at 13.5 percent and TAM at 7.4 percent for 2008-10.
* Key drivers for TM are government IT initiatives, low priced notebooks, netbooks and storage flash memory; while low priced desktops and LCD monitors are the drivers for TAM.

Wireless handsets semiconductor constituents (2008)
TM revenues: $1,738.3 million; TAM revenues: $791 million.
* DSP and ASSP to ride on growth of economically priced handsets in GSM and CDMA.
* Smartphones in GSM to drive growth of TM revenues for memory, DSP and ASSP.
* CAGR for wireless handsets is TM at 5.7 percent and TAM at 5.1 percent for 2008-10.
* Key drivers for TM and TAM include GSM handsets priced <$125 and between $125-250, as well as CDMA handsets priced <$125. For TM, GSM handsets priced >$250 is the key driver.

Communications semiconductor constituents (2008)
TM revenues: $754 million; TAM Revenues: $153.9 million.
* WiMAX BTS is the driver for ASIC market.
* Infrastructure equipment like WiMAX and STM were the key factors behind analog power's TM and TAM revenues.
* Logic/FPGA rode on the STM and BTS markets.
* Low manufacturing index conspicuous in this key segment.
* CAGR for communications is TM at 27.9 percent and TAM at 64.1 percent for 2008-10.
* Key drivers for TM and TAM include the rollout of 3G, WiMAX and penetration of broadband services. For TAM, BTS, STM and WiMAX are the major drivers.

Consumer semiconductor constituents (2008)
TM revenues: $432.9 million; TAM revenues: $165.6 million.
* ASSP market growth on account of penetration of LCD into CRT TVs, STBs and DVD players.
* Low manufacturing index indicates lost opportunity for semiconductor revenues.
* CAGR for consumer equipment is TM at 12.2 percent and TAM at 18.7 percent for 2008-10.
* Key drivers for TM include STBs, LCD TVs and digital cameras, while those for TAM include STBs, LCD TVs and water purifiers.

Industrial semiconductor constituents (2008)
TM revenues: $144.9 million; TAM revenues: $106.7 million.
* Energy meters, UPS and weighing scales are the contributors to the MCUs.
* Discrete and analog power are omnipresent products across applications.
* CAGR for industrial electronics segment is TM at 12.5 percent and TAM at 14.9 percent for the period 2008-10.
* Key drivers for TM include online UPS, CFL, energy meters and power supplies. Those for TAM include energy meters, CFL and power supplies.

Automotive semiconductor constituents (2008)
TM revenues: $76.5 million; TAM revenues: $50.8 million.
* The MCU market has high dependence on the EMS and body electronics markets
* The Nano car, statutory regulations on emission norms, and safety features are likely to sustain demand.
* CAGR for automotive electronics is TM at 23.1 percent and TAM at 24.8 percent.
* Key drivers include two-wheeler instrument clusters, EMS and immobilizers.

Other electronics semiconductor constituents (2008)
TM revenues: $251.7 million; TAM revenues: $102.5 million.
* Applications like smart cards, and aerospace and defence are driving the ASSP TM and TAM revenues, respectively.
* CAGR for this segment is TM at 16.8 percent and TAM at 23.8 percent.
* Smart cards and government space research programs are the key drivers.