1 Introduction
This article tries to throw some light to the board design industry in India. Board design
industry represents a small sector in the semiconductor industry. we see a general structure of the industry, hardware design flow, typical business models, challenges, opportunities etc. This is prepared by referring various research reports and articles on this topic.
2 Industry
Any industry has different players. Electronic design
industry is also not an exception for this fact. According to one Article in
“Electronics For You {EFY}” on its May 2009 issue, India is slowly becoming the
design capital of the world. Design service is a supply side activity. We can
classify the entire semiconductor industry to different heads namely
- Very large scale integration (VLSI) design segment
- Embedded software design segment
- Board/hardware design segment
Hardware board design industry is the smallest contributor
to the semiconductor industry in India. The majority of the board designs are
less than 10 layer boards. There are two categories in this sector. One is
analog design and second one is digital design. India performs very well in the digital design segment but India is not at its best in analog design. Hardware board design can be the development of reference boards
for the ICs or board design as part of new product developments or as a hobby or... India has the ability to design complex multi-layer boards. The growth of this segment is aided by
- Increased outsourcing by service providers.
- Re-engineering opportunities
- Captives partnering third-party service providers and bringing in increased business.
But hindrances are also there like
- Compliance-related challenges.
- Lack of support from government and
- lack of semiconductor ecosystem
- Product customization due to localization and legislative requirements
- Lower entry barriers
- Adaption to open-source platforms
- Platforms are evolving constantly. This puts lots of pressure on the companies in this sector
- Varying skill set availability of the high end programmers
- The increasing maturity of the Indian design ecosystem
- The rising demand for electronics products globally, which is driving VLSI industry.
- Lack of scale at the leading node
- Lack of R&D funding in universities.
We need to understand two key terms to describe the market. One is Total Market
[TM]. TM represents all electronics products produced in India as well as the
imported ones. So TM represents all the semiconductors that we use in
India irrespective of whether we manufacture them here or import to India. The second term is Total available market [TAM]. TAM represents the
semiconductors which are used inside electronic items made in India,
i.e., local semiconductor consumption. Then let us see some facts about the performance of
Indian semiconductor design industry in year 2010.
- India’s semiconductor market grew by a phenomenal 28.3% in 2010; Global semiconductor market’s cyclical trends has minimal impact on India
- Mobile Devices, Telecommunication and IT/ OA contributed 82% to Semiconductor TM in 2010
- Local manufacturing of telecom equipment by OEMs and EMS companies to propel related semiconductor consumption by a massive 50% during 2010 to 2012
- Influenced by regulatory norms and sharpening competition, automotive segment to account for the highest growth in semiconductor demand at 31% from 2010 to 2012
- Sustained gulf between semiconductor TM and TAM from 2010-2012 highlight the urgency to promote local manufacturing to drive higher growth in TAM
The semiconductor design industry in India was estimated to
be US$ 6.5 billion in 2009 and is expected to reach US$ 10.6 billion in 2012.
The major contributor to revenue is embedded software development,
followed by VLSI and board design.
3 Business Models
A business
model describes the value that an organization offers to various users, it portrays the capabilities.it represents the efforts required for creating, marketing, and
delivering this value. It reveals relationship of capital and the goal of generating
profitable and sustainable revenue streams. The core capabilities and value
proposition vary across the organizations in the industry.
An indicative list of various services in electronics
hardware design industry may list
- Board design/ R&D services
- CAD services
- Simulation services
- Board compliance testing services
- PCB manufacturing services
- Board assembly services
- Component distribution services
- Design for testing and manufacturability (DFM/DFT)
- Board testing services
- System integration services
- Test equipment leasing services etc.
Service
delivery in these segments happens in different ways. We will see some traditional models in billing of the projects.
Time and material model
- It indicates that the total project cost is determined by the amount of time and resources expended and the actual time on the project.
- One variant of this model also exists i.e. the basic model with “not to exceed clause”, which means the price paid will not exceed a certain amount.
Fixed price model
- In this model, companies need to ensure that the quality delivery of the service in a prescheduled time frame. We fix the deliverables, platform, tools required for the design, project duration, resources etc. The companies agree for a mutually acceptable price. Most of the time the calculations are based on the man hours required to complete the projects. Companies usually add a clause for change request.
Joint go to market models
- Indian companies use two models under this category. The models differ at the point at which the service is delivered to the client. So the client may enter in different phases of the project
- The companies may enter in the design phase itself. The design companies may be paid in the form of royalty from sales of the product.
- The companies offer services at sales phase, in addition to the design phase, through three channels – sell-to, sell- through and sell-with.
4 Design Flow in Hardware design Industry
The following figure is not an exact depiction of design flow but it gives a fair idea. This knowledge will equip us for better understanding of the challenges and opportunities of the industry
Figure 1 : Hardware design flow
From
the business model section we understood that the companies in the hardware
design sector concentrates on different stages of the process. Some companies
give end to end service. The companies working in small scope can think of a
vertical integration to provide a wider service range or they can continue in their
niche.
5 Challenges
- One major concern is import policies. The procedures are time consuming. If the requirement is immediate, it will be difficult for the companies to meet in short time. It will take considerable amount of time to get the clearance for the imported items.
- Another challenge is the transport of components within India due to different policies adopted by central and state governments. There are different policies in SEZ and nonSEZ areas. These factors create challenges to the hardware design industry.
- Adoption of protective policies by foreign countries is also a problem to the companies in this sector.
- India is no more a very low cost provider of services. Competition in this sector is so stiff. This will force the companies to offer competitive prices to the client.
- Longer warranty period is an example for such a strategy
- We have seen a new business model adopted by some companies, Joint ownership model. The joint ownership model increases the burden of third party design companies. They have to ensure the successful launch of the product. If a product fails, partial loss will be shared by the design company. This will reduce the risk of the client company but risk of the third party design company will increase.
- Many of the countries like China, Taiwan etc have better semiconductor ecosystem compared to India. The companies in those nations get strong support from the government. The eco system in such countries has been in existence for at least last 30 years. So the hardware design companies have easy access to the talent pool, component manufacturing companies etc. So the companies who are planning to give project will prefer the companies in those nations than Indian design companies.
- Fresh talent supply in India lacks quality expected by the Industry. This might be due to the lack of industry interaction of students, delayed changes in the curriculum etc.
- Lack of knowledge of experienced people is another challenge. People in available talent pool lack the knowledge of entire design process. And also we can see that the in-depth knowledge of the domain is also not at par in the case of many.
- India has strong talent in digital technology design but expertise of Indian engineers in analog design is not commendable.
- Lack of product know-how is another challenge. In India, we have only just design process happening. Even today the product conceptualization happens at other countries in the case of MNCs in India. Though the design is the strength of Indians.
- Lack of good managerial talent is another issue faced by the companies in India.
- Lack of growth opportunities provided to technically oriented people in companies. In India the management professionals get better remuneration compared to technical person with similar years of experience.
- Attrition. We cannot neglect this challenge faced by any company.
- Lack of component eco system. This is a major problem faced by the design companies in India. India doesn’t have many electronics components manufacturing companies. So companies have to purchase components from outside India. This will increase the cost of procuring the components. This will result in increased lead time of the components. This will increase the time to market of the products.
- The lack of local ODM/ OEM companies that cater to the huge demand generated in the country has hindered the rapid growth of the Indian ecosystem.
- Even though few Government testing labs and some private firms offer testing services to the design companies, which are not enough to satisfy the needs of the Industry. Some issues are
- Potential delay in products reaching the market due to the time required for certification
- Timely availability of testing slots
- Companies may not be able to setup their own test facilities since the requirement by different companies may vary with respect to projects. Companies have to set up large number of testing equipments to have their own test set up in house.
- Another challenge is the absence of standardized frameworks for pre-qualification testing to save time and to reduce the number of design iterations.
- There is also the absence of a testing equipment ecosystem for rent, unlike the situation in Taiwan and China
- High investment cost of R&D is a disadvantage
6 Opportunities
Consumer market in India is Growing- According to market research reports, India consumer market is growing. Indians slowly pick up a spending habit. The steady growth of the market gives more dispensable income to the people, so the spending of people also increases. People will spend more on electronics products also. The rising discretionary spending of consumers has an impact in consumer electronics and automobile segments. It creates new opportunities in India, as is the trend seen in more mature markets.
- With the efforts of Indian government to give quality education to the young generation of India, India is producing large number of engineers.
- As result of India’s booming economy, lot of Indians working outside India may come back to India. Some people come back to India and start new ventures.
- Hardware design companies in India are getting an increased amount of design work due to the fact that the country is closer in terms of distance and time zone difference for Asia-Pacific customers.
- Companies are exploring various possibilities of partnering with third-party service providers. Some of these include the following:
- The introduction of early access programs to design reference boards and verification platforms in parallel with chip design to reduce time-to-market
- Chip usage promotion during board/ hardware design
- Setting up design labs in campuses of third-party service providers to increase marketability of captive products, thereby bringing in more work to the segment
- The hardware design companies can tap the large market of reengineering works. The companies will get works from the companies which are planning to replace their existing hardware infrastructure with latest design. The design opportunities can arise due the requirement of adding new features to the existing hardware system. Another opportunity comes from the increasing requirement of energy saving and green systems. So companies will get projects for making the hardware systems compliant to the new environmental standards.
- Different nations have different compliance standards. So in order to sell products at different nations we need to have product localization. Indian companies are getting such projects. Number of companies are re-engineering their products to suit domestic market requirements to lower costs, to enhance functionality and to provide a competitive advantage over other products, especially in the market for mobile telephony, consumer products, automotives, indigenized defense and avionics.
- Although the cost of operation in India is increasing on an absolute level, India has overall cost advantage over many other nations like Japan, England, Germany etc.
7 Reference
- “Destination India For electronics Design” an article in Electronics for you magazine on May 2009 issue retrieved on 02 December 2011
- “Embedded Systems” an article in Electronics for you magazine on April 2009 issue retrieved on 20 December 2011
- “Study on semiconductor design, embedded software and services industry” executive summary retrieved on 01 December 2011 from http://www.mit.gov.in/content/electronic-hardware
- ISA annual report 2010-2011 retrieved on 20 December 2011
- ISA - FROST & SULLIVAN 2010 – 12 India Semiconductor Market Update retrieved on 20 December 2011
- "Study on semiconductor design,embedded software and services industry" a study report published in the department of information technology Govt of India website dated April 2011, accessed in December 2011.
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