Chip design industry may grow 17% to touch $10.2 b in 2012

The Indian chip design industry is expected to touch $10.2 billion by 2012, a 17.3 per cent growth from $7.5 billion in 2010. But issues such as quality and maturity of talent, absence of semiconductor ecosystem, and lack of policies as well as ?implementable incentives' continue to be a drag on growth prospects, according to a report on Semiconductor Design released by the India Semiconductor Association (ISA) on Monday.

The semiconductor design industry employed around 1.60 lakh workers in 2010, nearly 82 per cent of them in the area of embedded software, the report said. This report comes at a time when the Government is finalising a new revamped policy for semiconductor manufacturing to give the much-needed push to the industry.

Outlining the incentives being proposed for semiconductor manufacturing in India, the Minister for IT and Communications, Mr Kapil Sibal said, "We were trying to set up fabrication platform in 2007. We are trying to restructure it. We need to manufacture chips in India. We have the capability of creating software, but the processor has to be indigenous." The Minister was speaking at the inauguration of IT exposition ELITEX in the Capital.

Investment threshold

The proposed policy being worked out is a revised version of the 2007 Special Incentive Package Scheme (SIPS), which did not yield the desired results for manufacturing. Sources said that one of the areas being looked at, this time, is a substantially lower investment threshold.

"SIPS had stipulated Rs 1,000 crore investment threshold for ecosystem units (that is manufacturing of LCD, OLED and storage devices). That was perceived as being too high, especially since the threshold investment was a pre-requisite even to be in the reckoning for Government incentives. This had proved to be a dampener," the source said.

While aspiration to become a semiconductor manufacturing hub has, so far, eluded India, the country is on a stronger footing in semiconductor design, given its large talent pool and demand-side drivers such as growing consumer electronics, telecom and networking market, and increasing demand for wireless products.

Semiconductor design industry entails embedded software design (software 'built in' to the electronics in cars, telephones and appliances); Very Large Scale Integration design (designing of integrated circuits by combining thousands of transistors into a single chip); and hardware or board design.

Suggestions

The latest ISA report, however, points out that despite the general availability of talent, lack of product conceptualisation and management as well as analogue design skills posed a challenge.

It has recommended setting up of specialised institutes for semiconductor design, with an aim to bridge the gap between fundamental research in Universities and technology development in the industry.

Another issue highlighted by the report is the absence of a start up and SME ecosystem. The report has suggested a slew of measures such as earmarking a share of indigenous products for sectors of strategic importance, new tax sops and identifying new avenues for venture capital funding, besides setting up of incubation centres.

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