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Semiconductors
(SoC) technology, microelectromechanical systems (MEMS), and electronic design automation
(EDA), in addition to less complex system in package (SIP) chips, application-specific integrated
circuits (ASICs), and assembly-test-mark-pack (ATMP) services. Indian designers have kept pace,
earning a reputation for quality, productivity and time-to-market, at about 20% of the cost.
Multinationals have also felt comfortable, in terms of IP protection, turning over portions of
complex design solutions to Indian engineers.
Top Indian universities have been turning out an expanding talent pool of engineers qualified in
chip design—a relatively recent phenomenon, due in part to collaborations with multinationals.
But the semiconductor segment still has a low profile in India relative to IT and software, leading
to an engineer shortage: only an estimated 60% of engineering school graduates in India have the
specialized qualifications to work in the chip industry.
The VLSI Society of India estimates that the semiconductor sector will require 10,000 engineers
trained in very large scale integration (VLSI) by 2010 to do advanced system-on-chip work and
achieve end-to-end design at the 65-nanometer level; at the beginning of 2006 there were
perhaps 2,000.
The extent to which the absence of a chip manufacturing base has held back India’s semiconductor
industry is a subject of debate. At minimum, chip design work that might otherwise have
stayed in India is said to have gravitated to China, Germany, Israel, and elsewhere because of the
close links between designers and manufacturers that allow validation of designs for production.
To date, no semiconductor wafer fabrication (or “fab”) facility has been built in India, for several
reasons. Infrastructure is one problem—in particular, reliable water and power supplies, as well
as efficient road and airfreight logistics to ship the physical product. “In contrast, for software
and IT services, there is no requirement for well functioning logistics systems to move goods.
The data packages move from servers to wired or wireless carriers to their destination, and
those transmission services are well developed in India,” Semiconductor Industry Association
president George Scalise points out.
“A great deal of the semiconductor opportunity involves manufacturing,” Scalise explains. “In
India there is in place now very little infrastructure and there are minimal investment policies and
incentives to facilitate manufacturing investment, and this situation is not likely to improve anytime
soon. India has a very bureaucratic system for dealing with new investment. The existing
industrial parks in India are well designed, built, and maintained with policies and infrastructure
that allow investors to function effectively. Most areas outside the parks lack the infrastructure
that would make it easy to build and operate a design or manufacturing facility.”
Additionally, India has been slow in forging the government-academic-NRI investor-entrepreneur
links seen in China’s innovation clusters. Finally, whereas the Chinese government provided
incentives to the Semiconductor Manufacturing International Corp. (SMIC) equivalent to
50–100% of project cost, policy differences between the Indian Information Technology
Ministry and the Finance Ministry have both delayed adoption of a clear semiconductor policy
and reduced the development incentives first proposed.
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