Increased digitisation of products results in enhanced demand for electronics. Implementation of advanced technologies—such as the Internet of Things (IoT), artificial intelligence (AI), augmented reality/virtual reality (AR/VR) and so on—depends on the right design of the electronic systems, products and components
The Indian electronics system design space has gathered a lot of steam in the last few years. The semiconductor design market in India is expected to grow at around 25 per cent CAGR from US$ 9.9 billion in 2012 to US$ 60 billion in 2020 (Fig. 1). While the Indian electronics system design and manufacturing (ESDM) industry as a whole is import-dependent, to plug the huge demand gap and lags in manufacturing, design services are still its key strength and are majorly domestic. This area has potential that remains untapped.
Market at a glance
As opposed to the earlier trends where Indian design companies worked on bits and parts of the overall design, they are now being asked to provide end-to-end product development, right from concept design to development and prototype testing. This augurs well for companies that can provide complete product design services from start to finish.
Growing customer base and increasing penetration in the consumer segment have provided excellent scope for growth of Indian electronics design houses. Some recent government policies, such as Make in India and Digital India, have inspired confidence and are aiding this momentum.
Advanced product development focussing on miniaturisation, the IoT, automation, LED lighting, AI and defence applications is likely to be the biggest driver of growth of the electronics design market. In addition, there are a few emerging technologies still in their nascent stage, which could emerge as key areas of focus in the near future. These include the following:
- Next-generation wireless
- AI
- Silicon photonics
India has become the hub for electronics design with nearly 2000 chips being designed per year and around 500,000 engineers working in various aspects of electronic design, starting from chip design and verification to different stages of product design. Though still lagging behind chief competitors in the far east (that is, China and Taiwan), India has significant potential as it seeks to continually raise the bar, and increase the breadth and depth of its offerings.
Within semiconductor design, there is very large-scale integration (VLSI) design, embedded software and electronic design automation (EDA). In India, VLSI and EDA hold the biggest chunk in the Indian semiconductor design industry. While VLSI is big in Bengaluru, Noida holds the biggest chunk of EDA operations in India. This analysis categorises the global EDA market into five major product segments. These are:
- Semiconductor intellectual property (SIP)
- Computer-aided engineering (CAE)
- IC physical design and verification
- Printed circuit board (PCB) and multi-chip module (MCM)
- Services
According to a study released by Technavio, the global electronics design automation market is expected to grow at a CAGR of over five per cent during the period 2017-2021. According to that report, persistent decrease in the size of semiconductor chips and increased scale of integration have compelled semiconductor manufacturing companies to use the available EDA tools.
EDA tools help reduce the overall product development time from two to three years, to two to three weeks. Continuous growth in the semiconductor industry has triggered an increase in the demand for EDA tools. The Indian electronics design market is expected to be driven by this global trend.
Greater digitisation across segments lead to increased penetration of Indian electronics design houses in such application areas as LED illumination, communications and broadband equipment, and automotive electronics. Localisation of technological changes along with global competitiveness prove that the world is considering India as the design house for the global electronics industry.
India’s strength in design systems is based on three main factors, as given below.
- Strong capabilities in embedded system design
- Large number of electronics engineering graduates (even though the useful percentage of those who can be employed is still around 10 per cent)
- Increased demand due to a sizeable number of Indian SMEs and startups focusing on the IoT
Market challenges
In recent years, however, independent design houses in India are growing in stature and are increasingly involved in developing designs for global firms. While conditions are favourable for the growth of the industry, there are a few impediments that need to be removed for the industry to live up to the expectations.
There are very few Indian companies that are capable of doing the complete product design. The reason being lack of skill-sets at various levels. For this, one needs to possess expertise to understand and define overall architecture, to translate it into hardware and software requirements, and to do the actual implementation. There are not too many Indian companies that have in-depth expertise in ASIC/FPGA design, high-speed board development and firmware development.
The Indian electronics industry is still more focussed on assembly than manufacturing. Therefore semi-finished items are imported from China and only the final assembly is done in India. For example, cellphones and smart TVs are designed in China and assembled in India. Thus, only a small percentage of design for local brands happens here.
One of the prime reasons for this is the requirement of significant investment in R&D in a sector where margins are already thin. Pressed for margins, firms prefer to shop for products that are suitable for the Indian market and arrange for imports of the semi-knocked-down kits back in India for assembly. This has had a huge impact on the design industry.
Policy boost
The government of India is taking a strong look at these issues, and is trying to develop policies and frameworks that can catalyse growth in the design sector. Developing policies such as Make in India and Digital India, and providing impetus to existing schemes like modified special incentive package scheme (M-SIPS) and electronic development fund (EDF) will likely have significant impact in driving change.
The industry has responded positively to the government’s support. One hundred and fifty nine new ESDM units were established in 2015 itself. The industry also feels, while Make in India is a vision in the right direction, the agenda could also include Make for India with a focus on Indian priorities.
Other supportive measures taken by the government include:
- Hundred per cent foreign direct investment (FDI) allowed in the electronics hardware manufacturing sector under automatic route
- Duty relaxation and schemes—such as EPCG, EHTP and SEZs—to provide tax sops; duty exemption for equipment required for setting up semiconductor plants
- National Policy on Electronics (2012) and setting up of National Electronics Mission
Moving forward
New technologies are getting adopted faster worldwide, including India. However, the Indian market is unique with respect to application areas as well as cost scenario. This, in turn, develops demand for new product development to cater to specific needs of Indian markets across application areas, including telecom, automotive, medical and industrial products.
Key trends that will transform the electronics design space for new-age applications are mobility, cloud and analytics. Emerging application areas include industrial and automotive microcontrollers, wireless infrastructure segments, consumer digital TVs, handheld devices and compute/storage infrastructure.
Moreover, special design services will be required for smart energy management, medical telemetry applications and high-end application processor development.
All these emerging trends in electronics design services indicate collaboration between manufacturing and design industries, so that Design in India can lead to Make in India.
Sudeshna Das is director at ComConnect Consulting
