Is India the next Asian hub for design?

Market set to grow by 10 times by 2015

With Texas Instruments Inc.'s (TI) decision to build a second design center in India, the country is quickly becoming a central hub for large semiconductor companies to set up shop, according to iSuppli Corp.

TI joins IBM Microelectronics Inc., Advanced Micro Devices Inc. (AMD), Intel Corp., Broadcom Corp. and Cisco Systems Inc. as companies that have declared plans to establish chip design centers in India

It is estimated that by 2015, the Indian design market will grow to be 10 times the size it is today. India's Ministry of Commerce and Industry aims to increase the market value of design industry to 1 percent of the nation's Gross Domestic Product (GDP) during the next five years.

TI's new design center will be playing an important role in the company's product portfolio, specifically in the wireless-handset area. The company was one of the first multinationals to have a presence in India when it established a research center in Bangalore 20 years ago.

Although design outsourcing began with semiconductors, it has now started diversifying into different industries, such as aerospace, automotive, semiconductor, farming equipment and power generation.

Whirlpool Corp. now is asking Indian design houses to develop new washing machines. Companies based in Bangalore are designing interior parts, such as windows for a DaimlerChrysler AG bus, and conducting computer tests for General Motors Corp.

Setting up shops
Many other companies already are locating their product design in India and this may represent the significant potential for outsourcing revenue for the country.

Companies such as Dell Computer Corp., Ford Motor Corp., Toyota Corp., Ferrari, Honda Motor Corp., Rambus Inc. and Wind River Systems Inc. are investing in new design operation in India. Others, such as Whirlpool, General Electric Co., Royal Philips Electronics N.V. and Bosch Home Appliances Corp., are establishing research and design centers in the nation.
 
India offers specialized manpower and qualified engineers who can provide design services at low costs. Due to growing competition, multinational corporations must launch innovative and high-end products rapidly. In order to promptly respond to their orders and meet their tight delivery schedules, these companies are required to offshore portions of their design work.

The magnitude of the Indian investments announced by these companies reflects their growing faith in the nation's design capabilities.

To speed up the development of the chip design laboratory in Bangalore, Cisco recently announced that it would invest more than $700 million in its Indian operations. Intel employs more than 2,000 people in its major chip designing center based in Bangalore.

Microsoft Corp. also revealed that it would invest heavily in the Indian market. HCL Technology Ltd., a company based near Delhi, will be IBM's outside contractor for developing its new power architecture chip family.

Designing a new policy
In order to stimulate market growth, the Department of Industrial Policy and Promotion announced a national design policy in January 2006. Products that meet the quality criteria will be eligible to carry the new label "Designed in India."

To ensure that standards are constantly maintained, the Indian Design Council has also been set up to contribute to the country's competitiveness and will play a major role in encouraging companies to invest here.

However, growth also needs to be encouraged by removing infrastructural bottlenecks. Considering companies' high demand, India is facing a lack of quality designers. The demand for designers is three times the number that the premier design institute in India - the National Institute of Design (NID) - can supply.

To resolve this issue, there is a need for building an enhanced infrastructure. Furthermore, long-term training programs that provide a thorough knowledge of system integration should be introduced and efforts toward this are already being made. For example, (NID) has created two new courses: one in strategic design management, and another in transportation and automobile design.

With such public and private momentum propelling the domestic industry, India clearly has designs on the future.

Karan Ahuja is an iSuppli associate analyst and a contributor to iSuppli Corp.'s recently-released report, Automotive Electronics In India: Transforming From Dormancy To Rapid Growth, from iSuppli's India service. This report provides a comprehensive analysis of the Automotive Electronics industry in India. For more information, please visit: http://www.isuppli.com/catalog/detail.asp?id=8065

Vivek Mahajan is an iSuppli associate analyst and a contributor to iSuppli Corp.'s upcoming report, Semiconductor Design Industry in India: Great Opportunities, Tough Challenges, from iSuppli's India service. This report will provide a comprehensive analysis of the semiconductor design industry in India.