Tablets and smartphones will drive semiconductor market
India has occupied a unique position in the global Electronics industry with a number of MNCs and Independent Design Houses now doing entire system designs in India. Indian engineers have also gone through a significant transformation over the years. Somshubhro Pal Choudhury, Managing Director, Analog Devices India explains to CXOtoday how a traditional how the country, initially treated as a low cost center primarily for software and IT – has expanded over the years to include embedded software, PCB Layout, system re-engineering, module or sub-system engineering to complete system design to both domestic and global clientile, thanks to the mobile revolution.
Can you explain how the current consumer trends are affecting traditional semiconductor cycle and reducing it consequently?
Today’s high volume semiconductor market is being driven by tablets and smartphones. In fact, the average replacement rate of smartphones in developed countries stands between 1.5 to 2 years. The traditional semiconductor cycle resulted because of an over-correction on supply and demand. These days with better supply chain management and information flow, the manufacturers are in a better position to meet market demands and might delay or adjust at least a part of the expenditure. Multiple factors with better information flow and faster replacement cycles have condensed the traditional semiconductor cycle and made it less volatile.Let me give you an example from my previous job in a consumer electronics company on how information flows. During the 2008 downturn, we frantically called our ODMs to cut down production, reduce our forward looking forecasts and notify our semiconductor suppliers. The whole chain of events took a few weeks to materialize. Even a decade back, this information flow would have taken several months to percolate down the value chain. However, having real time inventory updates today, daily and weekly demand perspective, sales through data and co-relation of demand and supply for planning purposes have improved efficiencies.At the end of the day there are two things to watch out for: macroeconomic trends and user patterns that dictate demand and the capital investments and efficiencies of the foundries and Electronic Manufacturing Services that control supply. Better information flow increases the speed of decision making and makes it more efficient.
In what ways are the Indian design houses and regional centers of MNCs are providing opportunities for growth to other sectors such as communications infrastructure and healthcare?
The engineering talent in India has evolved in the last few years. While MNC arms of India started with primarily providing IT services, then moving on to embedded software support before supportingand implementing work on systems, the talent has matured over the years and now takes ownership of entire products and sub-systems. While defense and energy electronics led the way from an indigenous design and manufacturing standpoint for local consumption, today you find several captive centers of MNCs and Indian design houses working on pretty complex systems in India across communication, healthcare, industrial and automotive electronics. In many cases the design charter started as a product design “For India or Emerging markets in India” but eventually morphed into global designs from India. In few cases, the indigenous players have been acquired by MNCs primarily in the energy metering and UPS/Inverter markets.
Can we expect to see Indian companies coming into manufacturing or will they still prefer ‘design’?
Today the focus for India centers of MNCs and design houses is primarily design. This accelerated in the last few years in terms of complexity and ownership primarily due to three reasons:
- MNCs keen on developing ground-up products for emerging markets in the country
- Indian engineering talent maturing over the years
- Need for reducing R&D costs post the recession
There is a growing emphasis by the Indian government to rein in imports and balance the trade deficit as electronics imports have crossed a staggering $32Billion annually. As part of the Electronic Design and Manufacturing (ESDM) initiatives, the government has initiated the new electronic policy, created electronic clusters and introduced Modified Special Incentive Package Scheme (M-SIPS) to promote electronic manufacturing in India. Given that manufacturing is all about scale, what will help promote electronic manufacturing in India encourage the industry are government initiatives to fixlop sided tariff structure incentivizing more trading, tax incentives for R&D, improving power infrastructure, gaining efficiencies in customs clearance and freight for logistics and having clusters around EMS companies with testing labs and component suppliers in close proximity.
Do you think India can compete with China in manufacturing and with the U.S. in design and innovation?
While focused manufacturing of certain products is definitely happening in India and will accelerate with the new government policies, large scale manufacturing is still all about the scale. It is a classic Catch-22 situation in the sense that you will not get the cost if you do not get the scale and vice versa. Incentives need to break this dilemma focusing on those industries where consumption is relatively high but also there is some amount of local customization or complexity involved. A classic case study for the electronics industry could be how the auto ancillary industry developed in India.From the design and innovation standpoint, India is proceeding on the right path but this needs to accelerate. With more than a decade of experience in MNCs, Indian OEMs and design houses, Indian engineering talent has matured and is now capable of more complex and innovative work. A growing startup eco-system has also emerged. While working for an MNC was the mantra few years back, working in or having your own startup is the newest trend these days. Even though most of the startups today are in the e-commerce, mobile or big-data sector, it is impressive to see four indigenous startups in the Unmanned Aerial Vehicles (UAV) category where engineering is a real challenge.
Do you think there is improvement needed in the electronic engineering education in India?
Yes, the electronics engineering education in India indeed needs a revamp in terms of focusing more towards practical and hands-on approach to electronic design. We have several courses in theory but with lab time limited to few hours and in groups, means only the most motivated student usually gets hands-on experience. This essentially leads to extensive and thorough trainings for new hires before they are ready to take on industry projects. Analog Devices is focused on bringing together the industry and academia to bring a strong systems design expertise and more practical design knowledge among the graduating students. We recently completed Anveshan – a fellowship program to nurture the system design skillset and expertise among the student community. Early this year we launched our university program to provide engineering students a unique hands-on learning opportunity with the launch of a portable, affordable and personal lab kits to help them continue their experiments outside the traditional lab.
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