Will chip design go beyond captive outsourcing?

BANGALORE SEPT. 6. Today, very little of all chip designs come from India, and even those are mostly products of captive outsourcing. But, in the next two years, that share is bound to go up, says Anand Anandkumar, Managing Director, Magma India, the U.S. company's wholly owned Indian subsidiary in Bangalore.

Magma's flagship product, Blast Fusion, an electronic design automation software which completely automates the process of chip design, has been used by HCL to make a chip for an unnamed telecom major in the U.S.

In the next five years, Mr. Anand says, Bangalore may well become the "nerve centre of Asia Pacific operations of every big name in the industry". For example, critical work done at Texas Instruments here will go on chips for seven new cell phones that Nokia is releasing this year, industry sources say. Intel, is bringing more and more top notch microprocessor people down to its Bangalore centre. So, "hard core next generation intellectual property is being created here," Mr. Anand says.

The robust eco-system that is driving the trend here, may soon not be enough. The smaller players say the "irrational exhuberence" of the 90s are back. "If a move from the U.S. to Bangalore is cost savings of 50 per cent, salaries here have also doubled or in some cases quadrupled," says Uma Mahesh, Insilica's Director.

Prospective core team engineers want upwards of Rs. 18 to 20 lakhs. Even then, they may not stay. Yet, New Path Ventures, Insilica's U.S. based parent company, sees enough advantages here.

"Why not go to Hyderabad, take fewer people at lower salaries, and groom them for a couple of years," Mr. Mahesh wonders. One reason is these companies are making chip designs for final `systems' poised for explosive sales in less than a year's time. "I can always do architecture here, and layout in Hyderabad," or "Even though we just started here, Chennai is definitely on my mind". Many agree that Hyderabad would be ideal for `expansions', and not Mysore or Hubli-Dharwad, where they would have to start from scratch, which even a TI may not want today.

While real estate rates are declining with about five lakh sq. ft. waiting to be occupied, space is not really a problem. So, despite relatively cheaper rent in the U.S., for the chip design industry, the cost of hiring and keeping talent is at the heart of the matter and Bangalore still offers an edge.

To an extent, the same may be said for Hyderabad, but the point is, India is far from becoming critical to operations of the big chip makers, who will always set the norms.

The best case scenario for India will still mean contending with the TIs and the Intels hedging their bets. So, as the U.S. markets pick up, unless Bangalore, or Hyderabad, offers more than what can be had for only slightly more in Texas, chip design here will stay an outsourcing experiment.

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