The Hindu Business Line : The road leads to India

ST Microelectronics, Europe's largest chipmaker, is in consolidation mode, having undertaken recent restructuring efforts and ST Micro India, which has about 1,600 people, is looking to generate greater value from its offshoring activity.

Vivek Sharma, Director, India Product Design Factory, (IPDF) ST Micro, says the company is looking to increase the competence and contribution from its mature team by assigning fuller products and higher value work, while also outsourcing about 20 per cent of its work to Indian third-party providers.

The company, which started operations in India, in its earlier avatar, had four people in a liaison set-up.

The India factor has grown significantly since then, with a 1,600-people offshoring centre accounting for 20 per cent of ST Micro's total engineering population and the largest such centre outside Europe.

About 60 per cent of ST Micro's work in the IPDF is VLSI (very large-scale integration) design while embedded software accounts for about 30 per cent. With focus groups and teams working on the `home/personal/consumer space', a strongly growing automotive products group, etc, IPDF is doing full chips, set-top boxes camera, and automotive chips, says Sharma.

ST Micro's IPDF will make embedded software for ST's chips as well as develop software for multimedia application processors.

ST Micro is seeing demand for chips used in wireless and automotive products.

Sharma says ST India specialises in developing high-value Intellectual Property (IP), System-on-Chip (SoC) embedded software for end applications, and IT infrastructure.

ST India filed 165 patent applications between 1993 (when it filed its first patent application) and the end of 2004. India has become one of ST's major centres to develop technology for applications such as set-top box, DVD, wireless-telecom, multimedia, imaging, and automotive.

Teams in India also play a key role in ST's worldwide R&D activities.

In R&D, the achievements of the India site include a substantial contribution to the development of the industry's first design platform on the latest `90 nanometer deep sub-micron CMOS technology'.

This work is now being extended to the 65-nanometre platform, says Sharma.

Sharma says the India operation is also a major contributor to the development of the Nomadik chip family, which enables portable terminals to play music, take pictures, record video, and host two-way visual communication in real time.

In addition to its design and development activities, the India sites support the growing base of Indian manufacturers that use ST products.

ST is among the top three suppliers of semiconductors in India and has maintained a CAGR (compounded annual growth rate) of over 23 per cent over the last five years, he says.

The nature of relationship with Indian companies is set to change significantly with the company's increased consolidation efforts, says Sharma.

IPDF is now looking to mine its people for value. Fuller responsibility for products will increasingly come from the teams at Noida and Bangalore.

ST Micro is also planning to grow its team in Bangalore to about 200 people from 50 now but the real fast growth will come after the consolidation phase, says Sharma.

For now, one approach to get better value from the offshore operations, without adding too many people, is to outsource some of the work.

Pure-play service providers such as Wipro, Sasken, L&T ITL, etc, already are working in the space and even have had relationships with the company previously.

"We are evaluating the vendors and they are keen on working with us." The company might outsource about 20 per cent of its work eventually, feels Sharma.

Such an outsourcing relationship will necessarily be long term. ST Micro is going through the vendor evaluation process carefully as the association will be important and needs to be sustained, he says.

For instance, embedded software will have to be on ST Micro's chips and the company will have to give its boards and work with the vendor in increasing the latter's expertise and ability to meet ST Micro's requirements, says Sharma.

priya@thehindu.co.in

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