The race to make indigenous chips gathers pace
Cosmic Circuits Co-founder & CEO Ganapathy Subramaniam
RBR Layout is a world apart from glitzy Whitefield or Electronic City where most of Bangalore's globally-renowned technology companies have their offices. Yet it is in this smelly, rundown neighbourhood that Saankhya Labs, one of just a handful of Indian companies that makes chips - the vital brain inside every electronic device - used to be located. The company's interior was as unimpressive as its surroundings - a drab double-storey building with no air conditioning, paint peeling off the walls, desks reminiscent of a government office. Strapped for funds, Saankhya Labs could not afford anything better. Two years ago, a prospective Singaporean client who visited the office was so shocked he could not take his eyes off the ugly-looking walls.
"Don't look at the walls, look at our technology," Parag Naik, Co-founder and Chief Technology Officer of Saankhya Labs, remembers telling him. And indeed, the PowerPoint presentation Naik made transformed the visitor's initial impression. Saankhya was then making a state-of-theart chip with 15 functionalities, whose uniqueness the presentation described step by step - the same chip could be used in televisions, set top boxes, personal computers and even mobile phones. Called a communication receiver, it could support multiple communication standards.
Though India has acquired a global reputation for information technology services and semiconductor design work, its contribution to hardware so far has been nothing to crow about. But that is changing with companies like Saankhya Labs, Cosmic Circuits, Ineda Systems, Aura Semiconductor, Signalchip and a few others leading the way. They are all making high-quality chips using what is called the 'fabless model' - they design and develop chips, and later market them, but outsource the actual fabrication to companies in Taiwan, China and Singapore, the world's premier hardware manufacturing hubs. It is a model followed by numerous other companies across the globe, including the United States, since setting up 'fab' units is extremely expensive. Intel's new plant in Arizona, called Fab 42, for instance, cost $5 billion (Rs 26,000 crore). One of the most successful fabless chip manufacturers, whose example inspired a number of the nascent Indian efforts, hails from Taiwan - MediaTek, which makes chips for wireless communication and digital multimedia.
Of the indigenous chipmakers, Cosmic Circuits is by far the most successful. Cofounded by current CEO Ganapathy Subramaniam and three others, it sells around two to three million chips a month, which are used either in touch sensors or in the power management processors employed by devices like tablets and smartphones.
Subramaniam spent 15 years at Texas Instruments, one of the world's biggest chipmakers, before starting his own company. "Most of our customers are in China," says Subramaniam, sitting in his laboratory, located near Whitefield. He has spent a million dollars on the lab, which he has fully equipped to conduct quality checks on the chips. One of the tests even involves putting them in a 'burning chamber' at a temperature as high as 150 degrees Centigrade to test their reliability. He notes that he has sold around 20 million units since his company began making chips in 2009, competing successfully against reputed, multinational chipmakers such as Maxim and Linear Technology.
Aura Semiconductor, two years old, again based in Bangalore, makes chips for TVs and mobile phones. Signalchip makes chips for use in communications. Hyderabad-based Ineda Systems is building a new kind of chip that will make tablets and smartphones much more energy- efficient. "Customers are open to entertaining Indian firms if they see a good team with experience, and as long as they understand what makes us different," says Balaji Kanigicherla, founder and CEO of Ineda Systems.
Why did India take so long to get into products? It has been providing semiconductor design services for over two decades now - Texas Instruments has had a Bangalore-based Indian subsidiary since 1985. But the transition from design to product is not easy, and it is only now, after nearly three decades of design services that India has a sizeable number of people capable of making it. "Fabless chipmaking is very complex unlike the Internet business, which is about business model innovation," says Naik of Saankhya Labs.
Not surprisingly, the founders of semiconductor start-ups are usually older - and thus more experienced - than their counterparts in the online business. When Sachin Bansal and Binny Bansal started retailing site Flipkart, for instance, in 2007, they were 26 and 25, respectively. In comparison, the Co-founder and CEO of Saankhya Labs Vishwa Kayargadde is 49, while Naik is 42.
The rise of mobile device s is now also helping Indian chipmakers, since they have increased the demand for chips. While products such as desktops may need only one processor and a memory chip, smartphones require at least four chips to work.
There is also the all important matter of funding. Indian venture capitalists are largely reluctant to fund semiconductor companies where developing the product can take as long as four years. Many of the present chipmakers have thus had to find ingenious ways to subsidise their early efforts.
Cosmic Circuits, for instance, began in 2005 as a semiconductor intellectual property company, licensing its technology to other chipmakers and used some of this income to fund its research. Aura Semiconductor started with design services. "When we looked around in 2008, there was no VC funding in the semiconductor space in India," says Kishore Ganti, its Cofounder.
Ravi
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