What is more challenging for entrepreneurs in electronics is not just building products but building products, which they can sell. The product may not necessarily be physical; it can be a software design tool or a blueprint for making a physical product, it's the Intellectual Property (IP). The recipe for making complete semiconductor chip or parts of the chip is also sold as a product. It's basically the software code, which is fed to semiconductor fabs to fabricate the chip. The professional term for such soft product is 'semiconductor IP core' or Silcon IP'. ARM is the leading vendor of processor IP for mobile devices. Let's look at what Indian electronics industry (the new name is Electronics System Design and Manufacturing (ESDM)) is up to in this business.
Semiconductor IP development is the successful business trend now in semiconductor industry. Chipmakers got to produce the complex chip in months taking the advantage of fab technology growth, mainly further miniaturization. Since time is important in this highly competitive semiconductor chip business, chip makers look for ready solutions for some of the blocks of the chip design where they don't have the resources and expertise.
Though there are many semiconductor design services companies in India, they end up generating revenues by helping big companies in the industry to create their own IPs. Services companies make more money in this business but finally they end up not owning the product, risking a long-term growth of that company.
The situation is similar in application/business software business also. Though India boasts so much in software power. There is no anti-virus product made by any India based company and not even a proper web browser by Indian company. It is not that people have not attempted but they are not successful. The market opportunity is still wide open and is growing for daring techno entrepreneurs.
Either software or hardware, its necessary for Indian companies to innovate and create commercially valuable IP and patents. Even if they don't make end product, they should create IPs for longer growth.
There are few such companies as a ray of hope in IP domain. Two interesting companies to name in Semiconductor IP domain are Cosmic Circuits and Ittiam Systems. These companies may not be selling their product directly to gadget buyers. But their IP is embedded in many advanced mobile devices. Cosmic's IP is used in some of the Apple's products.
IP business may look very interesting but its tough game, where any shortfall in performance is not acceptable with the risk of huge loss. Semiconductor software business is not like application software. The VLSI designers need costly EDA tools and test instruments, which costs in Crores of Rupees.
This writer recently interacted with Ganapathy Subramanian, CEO of Cosmic Circuits who shared some of his thoughts on this business.
On the impact of 28nm node on the industry, Ganapathy says couple of things is happening, significant number of chip companies is becoming fablite and have moved to common foundries like TSMC. He sees the shift to 28nm is happening in bigway and the market is going to be impacted due to 28nm benefits particularly in consumer & wireless space where volumes are higher. He also sees its opportunity for 65nm designs to directly jump to 28nm bypassing 40nm. But the low volume chips where further miniaturization is expensive may prefer to stay at bigger nodes, such products include microcontrollers and any such catalog products.
Advantage for semiconductor IP companies with the node jump: Ganapathy says chip vendors to develop the chip faster they look for external sources for IP at advanced nodes, we have tested and readymade IP offering which are reliable. Mobile phones, Cameras, Tablets are important segment for Cosmic. Cosmic has MIPI interface IP for these products.
Immediate issues in India: He says the main problem for companies like Cosmic Circuits is lack of electronic companies in India. Lack of the ecosystem is a problem. I want more customers from India, says Ganapathy.
According to Ganapathy it is also difficult making government understand the importance of electronics and semiconductor product companies. He suggests product companies should not be measured by the revenue they generate, they create environment for other tech driven businesses to grow faster and bigger.
Cosmic Circuits like companies are important for the growth of Indian semiconductor industry. Government can support them with different tax structure with less tax on IP sales. There should be enough funds for startups provided with more incubation time. And the performance should be closely watched.
Now the share of indigenous Indian semiconductor product business is less than 1% of global market. Long-term, dynamic, and highly involving support from Government can change the diminishing figures of Indian chip development.
Gani suggests Government can look at consortium kind of models where different stakeholder can work as company.
Ganapathy Subramanian at his lab.