First Software, Now Hardware Development Moves to India
Indian companies have established themselves as key providers for offshore software development, and are now beginning to make their presence known in hardware development.

Indian corporations have established themselves as the key provider for offshore software development, and are beginning to make their presence known in hardware development as well, including integrated circuit (IC) design and board design (Fig 1).
The trend by equipment manufacturers to outsource core development decisions to Indian firms, including the division between functions implemented in software and those implemented in hardware, was begun several years ago by US vendors. In the last year or two, however, the Europeans have picked up the practice, and now Japanese companies are following suit.
Japanese manufacturers have been leaving some equipment development tasks such as board design up to Indian firms for some time now, but only after making in-house decisions about dividing functionality between hardware and software. Recently, however, there has been a rising trend towards entrusting high-value development processes to Indian vendors, and the dependence on Indian industry is likely to continue to rise in the future (Fig 2, p30). According to the Japan office of Wipro Ltd of India, the largest outsourced design services provider in India, "Japanese mobile phone manufacturers are considering just finalizing the specs, and outsourcing the whole equipment design process. We are planning on starting design from the second half of 2006, for products to ship in 2007 or 2008."

IC Development
Equipment manufacturers are not the only Japanese firms outsourcing design work to India, though: more and more control of IC development is also shifting to the subcontinent. As with equipment design, most semiconductor manufacturers outsourced verification processes to Indian firms for selected chip circuits. The scope of the outsourced work, however, is beginning to expand into sectors with higher value-added content, such as circuit design and overall chip development (Fig 3).
NEC Electronics Corp of Japan, for example, certified Wipro and major outsourced design services provider Tata Consultancy Services Ltd (TCS) of India as design services partners for its instant silicon solution platform (ISSP) structured application-specific IC (ASIC) in May 2006. When equipment manufacturers want to use the ISSP in a product, they can outsource high-level design (logic design, etc) to Wipro, TCS or other firms.

Cost, Personnel
As a source at a Japanese mobile phone manufacturer explained, the driving force behind recent outsourcing of core development processes to India by equipment, semiconductor and other manufacturers is recognition that, "If the present development stance is maintained, it will become impossible to meet customer requirements, for both cost and development personnel reasons."
The underlying cause is intensifying competition in the world market. Manufacturers incapable of developing products that are superior in function and performance, and which are faster and cheaper than products from their competitors, are being driven out of the global marketplace. One solution attracting considerable attention is outsourcing development to Indian companies.
By outsourcing work to Indian design houses, it becomes possible to utilize far more designers, and at lower cost, than those available to Japanese firms in-house or at cooperating domestic firms, which have to handle every development process. A comparison of monthly cost per designer, according to the Japan office of Wipro, is "About  1 million for a major Japanese manufacturer, about maybe Y700,000 to Y800,000 for a Japanese design service. Our developers, handling development offshore, get by on only Y400,000 to Y500,000."
There is no difficulty in finding development engineers in India, either. Not only does India have a large population, at about a billion people, but it also enjoys a growing number of engineers specializing in software - and more recently, hardware - design. Wipro had about 400 hardware designers in around 2000, but today boasts about 1,500. Of these, 700 or more are IC designers handling ASICs, ASSPs and other chips. An engineer at one Japanese IC manufacturer, one of the "top ten" worldwide in revenues, said, "I hate to admit it, but that's a lot more than we have." And Wipro is not the only firm. HCL Technologies Ltd of India, another major design services supplier, has about 1,000 designers, while TCS has about 500 hardware engineers and Sasken Communication Technologies Ltd of India has 400 to 450.
All of these major outsourced design firms are working to boost the number of hardware designers they employ. For example, TCS plans to increase employed hardware designers by 60% annually, reaching about 3,300 people in 2010. Wipro also plans to increase its hardware design workforce by 20 to 30% a year.

Indian Firms Mature
With the appearance of the Indians, the flow of hardware development by Japanese manufacturers is likely to change considerably. Until now, hardware manufacturers and semiconductor manufacturers have independently subcontracted work to Indian firms, but now those Indian suppliers are showing the front-end development capabilities needed to make decisions about implementing functionality in hardware vs software for equipment development, about system and logic design in semiconductor development, and verifying it all.
In the future, these Indian companies will handle the entire spectrum of development, from equipment to ICs (Fig 4), and may even end up raising questions as to just why existing equipment and semiconductor manufacturers are needed any longer.
For example, the Indian engineers will begin to make their own semiconductor, component and other selections, replacing the equipment manufacturers who make those decisions now. This situation is already beginning to emerge in some equipment design projects. "When we handle the equipment architecture design, we are actively involved in making key decisions like whether it would be better to use ASICs, ASSPs or FPGAs," explained a source at Wipro in Japan.
The fact that this structural change cannot be ignored is evident in recent tie-ups between semiconductor manufacturers and Indian companies. For example, NEC Electronics, which has entered into agreements with Wipro and TCS, revealed that one of its objectives is to get Indian design firms, which are rapidly controlling more and more of the semiconductor selection process, to choose the ISSP. NEC Electronics plans to expand the agreements in the future, covering cell-based ICs and other items.
At the end of 2005, Tensilica Inc of the US certified Tata Elxsi Ltd of India, a design services supplier, as a recommended designer for its Xtensa configurable processor, almost certainly for the same reason.

Development Shop
The changes in the design flow will have a major impact on development by Japanese manufacturers. If dependence on Indian firms increases, for example, there are likely to be more cases of Indian engineers coming to development sites in Japan. This is because the more a manufacturer outsources high value-added work to India, the more it treasures not only the low cost and labor supply advantages, but also the technical strengths of the Indian engineers.
This trend is already becoming evident. One Japanese manufacturer has outsourced the development of the signal processing IC for a digital camera featuring 10 million or more pixels, slated to ship in a few years, to Wipro. The IC is directly related to the value-added content of the camera, and as a source at Wipro in Japan said, "Given the value of the industrial secrets inherent in the design data, the client was against offshore development in India." In response, Wipro brought Indian engineers to Japan, and has them working at the client's facility.
Part of the reason for this trend is the fact that the chip design expertise of Indian firms is rapidly approaching the level of leading semiconductor manufacturers in Japan, the US or elsewhere. Wipro, for example, has already designed a chip with 23 million or more gates, and is now working on designing chips using 65nm process technology.

Building Up from Spec
As the transfer of design work to Indian firms picks up speed, manufacturers that can get along well with them will find it easier to boost competitiveness. This is where Japanese firms are lagging behind firms in Europe or the US, though. One design services provider in India explained why: "Compared to European or American manufacturers, the Japanese often don't draw up tight specs. They still haven't made the shift from how they've always handled development in-house, or with domestic suppliers." Japanese manufacturers need to learn how to clearly define which development processes they will handle and which are the responsibility of the Indian supplier, and how to draw up specifications to international standards to ensure that Indian engineers can understand them immediately.
The move is also effective in the construction of an industry-standard development platform, because Indian design resources can be leveraged to boost platform competitiveness. The Open Multimedia Application Platform (OMAP) application processor from Texas Instruments Inc (TI) of the US is an excellent example. Of the 1,500 hardware engineers employed by Wipro, about 300 are working only on TI jobs. As Wipro explained, "That is the largest single-client engineer allocation we have made. The team handles design for a wide range of peripheral circuits in OMAP, such as drivers." The company has also allocated about 300 software engineers exclusively to TI projects.

by Motoyuki Ooishi

Websites:
AMD: www.amd.com
Cadence: www.cadence.com
Elpida Memory: www.elpida.com
GDA Technologies: www.gdatech.com
HCL Technologies: www.hcltech.com
NEC Electronics: www.necel.com
Rambus: www.rambus.com
Sasken: www.sasken.com
SemIndia: www.sem-india.com
STMicroelectronics: www.st.com
Tata Elxsi: www.tataelxsi.com
TCS: www.tcs.com
Tensilica: www.tensilica.com
Texas Instruments: www.ti.com
Wipro: www.wipro.com