India's chip design industry is a multi-billion dollar giant.
As fabless chip companies emerged as a real force in the industry,
the South Asian country captured more than its fair share of the gains.
For foreign multinationals, the country still offers amazing, high-class talents
at a reasonable cost. But is that really such a good thing?
In this follow up video, we will take a look at India's rise in the chip design world,
the current state of affairs, and the challenges the industry faces in the times ahead.
In my previous video, I offhandedly mentioned that the country's people and technical talents
were quite strong. This did not happen on accident.
The country has a long history of higher learning, especially in the engineering fields.
The country's higher education institutes are the cornerstone of this prowess.
Notable examples include the Indian Institute of Science in Bangalore,
the Birla Institute of Technology, and the seven Indian Institutes of Technology or IITs.
IIT Chennai, IIT Delhi, and IIT Bombay contributed to the Indian
government's microelectronics policy emphasis. Graduates were trained in relevant techniques,
including "Very Large Scale Integration" or VLSI - a process for creating an integrated chip.
These efforts had originally been with the intention of supporting SCL,
India's national champion in semiconductor manufacturing. But the ill-fated SCL never became
competitive in the industry. However, it left a legacy in a cadre of engineers and technicians
well trained in VLSI techniques. Those people want jobs. And where will those jobs come from?
For a long time, chip design as an industry remained pretty geographically concentrated.
Most of the big chip design centers were in the United States,
Europe and Japan. Designers worked side by side under the same roof with the manufacturers.
This was the case for decades. Then, Three Big Trends helped
take this semiconductor design work out of the United States and Europe.
The first would be the emergence of TSMC and the independent foundry model. The
Taiwanese giant's rise to prominence would essentially split the industry
apart. A new business model arose - the fabless integrated circuit firm.
Fabless companies can now contract with the independent foundries to
gain privileged access to low-cost high-speed manufacturing capacity for their chip designs.
Second, new methodologies for designing chips started to emerge.
Most importantly, designers can describe digital circuits using software.
This breakthrough led to the creation of Electronic Design Automation tools, software
that gave fabless companies a leg up on designing new chips at a relatively low human cost. Those
tools still cost a pretty penny but at least they really did help designers be more productive.
The third trend would be the most significant:
The skyrocketing cost of designing the next generation of semiconductors. Especially SOCs.
The chip industry is one of the most competitive in tech. Consumers and manufacturers are
always wanting the latest, hottest thing. That pressure has only gotten heavier over the years,
and its demands have given rise to a new design trend: The System on a Chip or SOC.
An SOC integrates a whole bunch of different, often pre-designed IP components together on
one microchip. The benefits of a SOC design are gains in performance, size, and power consumption.
A well known example would be the Apple A-series chips.
These are systems-on-chips for mobile phones that integrate a CPU
with dedicated neural network hardware, GPU, image processing, such and such.
Designing a modern-day SOC involves integrating together many preexisting
silicon IPs at a system level. Then, making sure that they work well.
For more information on this, I invite you to check out my video on chip design verification.
This design trend not only improved the chip's overall performance, but it also
contributed to increased standardization in the design process. You turn what before had
been a very "artisan-type" workflow into something much more scalable.
In other words. Before the SOC trend, chip design was like carving chairs out of wood, one by one.
After, it becomes more like putting a chair together from IKEA.
(And no, I don't care how you pronounce IKEA.)
The SOC trend helped make additional performance gains possible,
but at the same time ballooned costs. SOC chips are more sprawling and complicated
in an era where everything needs to be better and done faster. Faster, cheaper, better - choose one.
EDA tools are charged on a per-seat basis, and you cannot build anything without first paying
for pre-existing chip design IPs. So fabless companies looked to minimize their overall costs
where they can - with the human designers themselves.
The typical team size for an SOC would be about 50-60 engineers.
In the United States, each experienced designer can cost up to $250K taking into
account generous stock options. Offshoring helped blunt the cost of all those expensive engineers.
The Indian chip design industry is dominated by large foreign multinationals.
In 1986, Texas Instruments would be the first American multi-national to realize that they could
benefit from tapping India's talented workforce. Motorola, Philips and Intel soon followed.
The first design processes to be off-shored to India were very low-level things.
Taking advantage of their software background,
the tasks might be something like writing firmware or other chip microcode.
Later on however, Indian affiliates took larger and more expansive roles within
the design process. For instance, the Physical Design and Verification steps.
Physical Design is where the circuit representations of the chip (i.e. the netlist)
are turned into actual, literal chip layouts. Verification is for making sure that the chip
design meets all design parameters and does not fail after being fabricated.
It is important to note that these multinationals were not only attracted to the abundant amounts
of Indian talent, but they also felt more confident in their IP being protected.
Interviews with design team managers find that preferential IP protections
in India compared to China give the former an advantage. By the 1990s,
India hosted far more multinational design centers than China: Fourteen versus four.
Many of these are very large. Intel's 44 acre campus in Bangalore, for instance,
which has been around since 1999 and is one of the largest in the country.
In 2018, they announced a $150 million USD (Rs1,100 crore) expansion.
Unlike the nations of East Asia, the Indian government did not
explicitly intervene in favor of its now-burgeoning chip design industry.
In other words, they did not attempt to found any more state owned enterprises or the like.
Instead, they focused on furthering what they believed to be their own advantages - their
pool of human capital. Employment growth by semiconductor multinational corporations had
made VLSI courses more popular in Indian society. The government sought to continue that trend.
In the late 1990s, the Indian government launched a Special Manpower Development Program
that executed in two phases starting in 1998 and 2004. The goal was to further pump up the
supply of chip design talent with VLSI training and chip design-related R&D.
Seven institutes were given resources to acquire the latest EDA tools and build out
a team to conduct R&D in fields like chip design and verification. Updated curriculum
were developed to best position Indian graduates for a career in the industry.
In the second aspect of the plan, tens of thousands of engineering graduates
were encouraged to take courses in VLSI design and CAD.
Today, nearly 30,000 Indians are employed in the country's semiconductor design industry.
Nearly 2 million Indian college students enroll in computer science
and electrical engineering courses each year, further expanding the talent pool.
Together, they contribute to the design efforts of nearly 3,000 chips.
Encouraged by this policy support, large semiconductor multinationals like IBM,
AMD, Intel and Broadcom announced that they would invest billions of dollars in India.
But that might not be as good a thing as it might seem on the surface.
Both China and India harbor growing chip design industries.
But China’s industry features a few large, indigenous outfits like HiSilicon and UNISOC.
A few of India's large local software firms like Wipro and Tata have a substantial presence in the
space. But the majority of India's design industry is hallmarked with foreign multinationals.
For policymakers, having one of your key growth industries be run by foreigners
has some issues. I have reviewed the situation in Malaysia's semiconductor industry,
almost completely dominated by foreigners.
The potential risk is that foreign multinationals,
by setting the agenda for the country's industrial development, eventually
restrain the country's ability to develop and export domestically developed goods abroad.
This leaves the indigenous ecosystem to be stuck doing activities with little
value-add to the final product. The most critical IP remains in the home country.
For instance, work done at the leading edge node.
The indigenous Indian chip design ecosystem is trying to expand beyond just the MNCs.
Several local design service companies have emerged to develop and sell chips
like networking, analog and memory subsystems.
But Indian fabless semiconductor firms face many challenges.
Starting a chip design startup no longer requires you to fund and build your own semiconductor fab.
But it does require you to first shell out millions of dollars in EDA software fees
and pre-existing IP license fees before anything can get off the ground.
This means these firms are going to need to raise VC funding and seed capital.
VCs have put over a billion dollars into semiconductor startups in the past five years.
But that funding ecosystem is very immature in India.
Is it because there are not enough seed investors out there? Or because those investors do not see
enough opportunity in funding companies that make chips for sensors and fiber optic components?
Chicken-and-egg scenario, I reckon. I did see that the India Electronics and Semiconductor
Association and a local government launched the country's first fabless accelerator a
few years ago. But a lot more needs to be done than just one small initiative.
The other major issue that the Indian semiconductor industry needs to focus on
has to do with the organizations managing the country's formidable bank of human capital:
Its educational institutions.
While India produces a whole lot of college graduates, they fall short in certain metrics of
quality. A mere 8% of the graduates have a Masters or PhD degree. One article notes that in 2007,
the country's entire education system produced just 32 PhDs in semiconductor-related disciplines.
Furthermore, the universities and R&D labs have little in terms of industry linkages
with the working semiconductor industry. The result is a mismatch between what
students/employers want and what the education offers.
Exceptions abound of course. The top institutes offer world-class education and teach best
practices. But far more universities teach outdated curricula with inflexible content,
lack the resources or infrastructure for training,
or conduct R&D out of touch with the industry's actual problems.
An example of this can be seen in IEEE papers.
IEEE or the Institute of Electrical and Electronics Engineers is one of
the biggest professional associations for electrical and electronic engineering.
While Indian institutes submit plenty of papers to the IEEE for publication, their 2010 acceptance
rate of 4.48% lags behind the UK and US, whose rate is in the thirties, and China, with 15%.
Thailand has a similar problem for their hard drive industry.
The Multinationals preferred to train internally or abroad at their home countries.
The result is that native Thai universities get cut out of the industrial training equation.
They cannot learn from foreign industry and thus cannot contribute to the indigenous ecosystem.
And they are unable to spinoff and seed future startups.
The Indian design industry's competitive moat has been its people. The big question is whether
or not that moat will continue to hold up against attack in the foreseeable future.
Cost structures in India are still competitive compared to engineers in the US,
Europe or Japan. But the gap between India and other low-cost countries is narrowing.
Countries in Southeast Asia or Eastern Europe have sought a piece of the business for their own.
Something I have noticed when Indian writers write about their country’s prowess in chip design.
They might celebrate it, but they rarely pass up the chance to also
mention that India is weak in chip manufacturing.
Of course, the Indian government should further investigate and
invest in building out the country's semiconductor manufacturing capabilities.
Nothing wrong with continuing to hammer away at an industrial weakness.
But it should not take what it already has for granted. Encouraging the domestic industry,
strengthening human capital, and building an entrepreneurial spirit
will be critical to keeping India’s chip design industry strong in the years ahead.
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