The Hindu Business Line : Local market is the key

THE global semiconductor industry is by nature cyclical wherein there is excess manufacturing capacity followed by shortage. By the time new capacity gets created, capacity outstrips demand.

Significantly, this industry, which has grown at an average rate of about 17 per cent, will not see that kind of growth at least in the near term.

Growth is likely to slow down to 10 per cent, says Willem P. Roelandts, Chief Executive Officer, Xilinx Inc, a fabless semiconductor designer.

(Semiconductor manufacturers generally design and then make their own chips. Or design their chips themselves but contract out the actual production to semiconductor fabrication (fab) plants. Xilinx is a `fabless' player. It designs its chips but outsources the production.)

Roelandts, with over 40 years of experience in the technology sector, including about 30 years with Hewlett-Packard Co, believes that setting up a semiconductor fabrication plant in India spending billions of dollars does not make sense unless the domestic industry has the potential to actually consume what is produced.

He cites Taiwan and China as instances where local consumption has boosted the semiconductor sector.

eWorld caught up with Roelandts recently when he visited India to look up the company's India development centre in Hyderabad. Moore's Law continues to hold its way, says Roelandts. But what is happening is that products with higher capacities are getting cheaper, bringing in greater processing speeds and functionalities.

He cites Xilinx' Spartan series as an example.

Over 100 million units have been shipped with estimated cumulative revenues of about $1 billion.

Thus, Xilinx has driven mainstream adoption of low-cost programmable logic solutions in high-volume applications such as the electronics and entertainment industry, he says.

How is Xilinx different from other American companies? "We don't sack people when the industry is in crisis as many other major corporations tend to do so.

As the technology sector fights attrition, Xilinx sits pretty with just about 3 per cent, which is perhaps amongst the lowest in the industry. Bay Area, where we are based, is known for attrition. We have bucked that trend and have been chosen as best employer."

"We are open to their suggestions, and allow them to be creative in their work environment. That is when innovation happens.

This is one thing that drives researchers at Xilinx even though this may sometimes mean that the research does not yield results, leading to some wasteful expenditure."

A paradigm shift

There has been a gradual but certain shift in the way semiconductors are designed.

The traditional model is referred to as Application Specific Integrated Circuit (ASIC), wherein chips are designed to perform certain functions. As opposed to this, there is the programmable multi-function chip, which is cheaper and faster to develop.

More designers are taking to this mode, as this provides the flexibility to upgrade and change software and thereby functionalities in areas such as cell-phone applications, automotive and car control systems and a host of electronics, music systems, among others, says Roelandts.

While the traditional ASIC design leads to investment of anywhere between $5-10 million, the programmable chip is about 50 times cheaper, anywhere around $100,000.

As against two-three years of design work for ASIC, programmable ones can be developed in about six-eight months, he says.

"The Indian R&D centre is extremely strategic for the company.

Its contribution can be gauged from the fact that out of about 200 IP cores, 12 are designed in India, in just about a year of operations.

IP cores are pre-designed modules that customers can use and take their products faster to the market. Therefore, we continue to invest in people here," he says.

Roelandts says India has emerged as a major developer of designs and this is where research work will continue to happen as demonstrated by the likes of Intel, Cisco and Lucent. Acquisitions have been one way to grow and expand scope of work. Over the last 15 years, Xilinx had made about 10 acquisitions.

"We don't acquire companies for market share but to expand technology capabilities," he says.

On design capabilities, he says, "If you look at the increasing design capabilities and processing speeds, it is amazing how prices have come down with innovation.

For instance, a chip with 200,000 logic capability, which would cost about $3000 four or five years ago, is now available at about $10. This is one advantage programmable chips bring users across the world.

Over time, these are likely to become mainstream but will not totally replace ASIC, which will have its own advantages in some applications," he says.

On setting up semiconductor fabrication plants in India, he saysthere are issues to be addressed from the Government policy perspective.

Typically, a 12-inch fab would cost anywhere around $3 billion. Surely financing such a project is no issue, but the main criterion that decides such a project is local demand, which is missing here, he says.

On the global scene, he says "There has been no killer application from the semiconductor industry's perspective.

This means, the industry will grow at a steady pace of about 8-10 per cent. Interestingly, a good amount of this will be driven by consumer electronic devices."

He feels India is at an inflection point — where Ireland was 10 years ago.

While a lot of innovation is happening, it will take some more time for India to really be in the league where other Asian countries are in terms of semiconductors," says Roelandts.

vrishi@thehindu.co.in

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