CHIP DESIGN: DESTINATION INDIA

Vinita Gupta
Express Computer

The recent ISA-IDC report found that the total chip design market is expected to surpass $7.37 billion in 2008, with a huge chunk of revenues coming from embedded software, followed by VLSI design and hardware/board design.

Gartner states that the market for third-party chip design services in India is estimated at about $400 million. Ganesh Ramamoorthy, Principal Research Analyst, Gartner, said, “Gartner estimates that the market will grow by 26 percent in 2008, year-on-year. Between 2007 and 2012, we expect third-party chip design services market in India to grow at a CAGR of about 22.3 percent, to reach nearly $830 million by 2012.”

Why India?

Traditionally Taiwan has been the favorite destination for chip designing, but during the last few years, India has also seen the market grow. The availability of a large engineering talent pool and cost advantages as compared to other countries has been one of the key growth drivers for this industry in India.

Dasaradha Gude, MD, AMD India, mentioned that some of the other influencing factors include a strong technical education system, reduced entry barriers, government support in the form of STPI and EOU schemes and a strong IPR framework.

He added, “India is at the forefront of VLSI design owing to the leading, cutting-edge chip design activities taking place in multinational design companies that have large scale engineering operations here. These captive units take advantage of the availability of skilled and low-cost workforce to develop products for global markets. If the same is to be done in their respective countries, the development cost will be at least 300 percent compared to India.”

The main factor is the large availability of talent in the country. “Also, the cost of engineers may have been the reason for companies to move their design operations to India in the past. However, that may not be true in the coming years as salary levels continue to rise for Indian chip engineers,” pointed out Ramamoorthy.

Global slowdown, rising consumption at home

Globally, the semiconductor industry and the worldwide market for semiconductors has matured and appears headed for single digit growth in coming years, compared to the double digit growth of yesteryears. However, the scene in the Indian semiconductor industry is quite different. Rising middle class income levels have created a huge market for semiconductor intensive products and we may see this trend to continue for some more years.

Over the years, most global chip companies have set up their development centers in the country to take advantage of market proximity and the talent pool. India as an emerging semiconductor hub has clearly gone beyond the cost advantage to innovating and creating Intellectual Property (IPs) that is resulting in complete product development.

Kasthuri Jagadeesan, Research Analyst, A&E Practice, Technical Insights, Frost & Sullivan, said, “One of the recent trends seen in this space is that of embedded systems development.”

Moving to 45nm

In a couple of years, lot of designs will shift from the present 90- and 65-nanometer to 45-nanometers.

[Globally companies are contemplating 22-nanometer designs. While 32-nanometer designs are the next step after 45nm, Big Blue is trying to leapfrog the rest of the pack by getting a head start on 22nm. - Editor]

Ganesh said, “The transition to 65nm and 45nm has begun. Indian design service companies are gaining an increasing share of designs in advanced process nodes. Designs in new process nodes bring their own set of challenges with them, but at the same time, as they are cutting-edge, they also result in fatter margins for vendors.”

Jagadeesan believed that the semiconductor integrated circuits (IC) industry is driven by the need for small, low-cost, high performance devices. Increasing demand from the consumer electronics industry and the telecommunications sector and Moore’s Law are all fueling the need for miniaturization and the move towards ever-shrinking form factors. Different types of materials and device configurations are investigated to reduce the size of a chip without compromising on a device’s functionalities.

Mobile vs. desktop processors

Most mobile processors are based on the same design as their desktop counterparts but will have thermal and power properties customized for notebook use, as battery life is one of the primary features that any user looks for before making a purchase decision on a notebook.

Another difference between mobile and desktop processors is with regard to the number of cores. The evolution of multi-core technology has made computing much easier and allows a user to run several applications at the same time without the system malfunctioning or performance issues cropping up. At present, desktop processors have up to four cores, while laptops have two and are just as fast as those found in desktop PCs. Although, laptops have just two cores, these cores are used for advanced multi-tasking, serious gaming and rendering digital media and entertainment.

 

IT'S WAIT AND WATCH

Vishwanath Kulkarni, October 27, 2008
The Hindu Business Line

The sub-prime crisis in the US that sparked off the first signs of uncertainty in the Indian IT industry has now snowballed into a full-blown economic slowdown across the globe, threatening to thwart growth for the sector.

Though industry players are cautious on the near-term outlook, analysts say a slow recovery could possibly be seen towards the second half of 2009, when the dust would begin to settle and a pick-up in technology spending is predicted.

“It could take at least another five quarters for things to return to normalcy from an IT perspective and potentially beyond that, largely due to the restructuring happening in the financial services industry. It also really depends on whether things worsen from here on not,” says David Furlonger, vice-president and analyst, Gartner.

Despite the economic downturn, research firms such as Forrester and Gartner expect a growth in technology spending for 2009. Gartner recently said though customers would reduce their IT budgets, the cut would not be as dramatic as the one seen during the dotcom bust. Gartner expects technology spending to increase by 2.3 percent in 2009, down from its earlier estimates of 5.8 percent.

Furlonger says most financial institutions have an IT spend in the range of 12-14 percent. “It is extremely difficult to say how this ratio will change in the short-term. Cost cutting means that IT spend may decrease — but if revenues fall faster as a result of the current economic crisis, then the ratio could actually increase,” he adds.

Though the US and Western Europe will be worst affected among the developed economies, the emerging nations will not be immune, says Gartner.

IT budgets will not see more severe reductions because IT is embedded in running all aspects of the business.

Avinash Vashistha chief executive of Tholons Inc, an advisory firm, says the long-term prospects for outsourcing are intact. “We expect to see a pick-up in spending from second half of calendar 2009,” he adds.

“I believe the US economy will recover by mid 2009. The emerging economies will bounce back quickly and the company is gearing up for growth by investing in non-linear initiatives,” says Suresh Senapaty, chief financial officer, Wipro Ltd.

The US crisis has already slowed down the growth momentum for the Indian IT services companies over the past few quarters as customers delay their spending on deployment of new technology applications amidst worsening economic conditions.

The turmoil that intensified in the past four to five weeks had claimed victims of some of the large financial institutions such as Bear Stearns, Lehman Brothers, Merrill Lynch, Washington Mutual and Wachovia, which incidentally happen to be large customers of the Indian IT firms. The liquidation of some of these entities has shrunk the business for Indian IT vendors to that extent, while the shotgun mergers would change the outsourcing landscape, with some vendors gaining new business and others losing it.

Some of the vendors see opportunities in post-merger integration and compliance-related work arising from stringent regulatory processes. However, the impact of the meltdown is yet to be fully seen on these firms as yet.

“The real impact of the downturn is some 60 to 90 days away as companies affected by the turmoil need time to take stock of the situation,” says Sudin Apte, analyst and head of Forrester Research in India.

 

IT IN FOR SLOWER GROWTH OVER NEXT FEW QUARTERS

K. Raghu, Bangalore, October 27, 2008
Mint

Indian IT service firms will witness slower growth over the next few quarters according to experts and analysts because of continuing recession in the US, the largest market for their services.

The trend is evident in results declared by the five largest Indian IT firms for the quarter ended September. Together, the five firms—Infosys Technologies Ltd, Wipro Ltd, HCL Technologies Ltd, Satyam Computer Services Ltd and Tata Consultancy Services Ltd (TCS)—increased revenue by 34.5% over the same quarter last year and 9.2% over the quarter ended June.

With the slowdown spreading to Europe—the other main market for Indian IT services firms—revenue and earnings are likely to be muted for the next two quarters at least, according to one analyst.

According to the results of the five firms, the US accounted for 60% of their business in the quarter ended September and Europe, 27%.

The July-September results of most firms except TCS were broadly in line with the street expectations, mainly aided by a weaker Indian currency during the quarter. But the slash in forecast in dollar earnings—the currency Indian firms bill most customers—by sector bellwether Infosys and smaller rival Satyam, and a flat third quarter guidance by Wipro reflect the uncertainty in business environment. TCS, India's largest software services firm, actually delivered results below market expectations because of forex losses of Rs 261 crore.

"The downturn will continue to affect service providers until the bottom of the cycle is actually reached," said Siddharth Pai, managing director of the Inc. "I expect that there India unit of technology sourcing advisory firm TPI will be weakness at least for another two-three quarters". The uncertainty for Indian IT firms has increased due to the bankruptcy of financial institutions in the US and Europe.

"No one knows what is happening. Customers can come out for renegotiations (on existing contracts), (and) the shortlisted firms (for new contracts) may be asked to submit new bids," said Nimesh Mistry, equity analyst with Man Financials Ltd, a Mumbai brokerage.

Banking, financial services and insurance companies account for between 26% and 44% of the revenue of the five biggest Indian IT firms.

On 13 October, technology researcher Gartner Inc. said IT spending in 2009 would grow by just 2.3%, more than halving its earlier projection of 5.8%. Nasscom, has said that it may revise downwards, in December, its July growth estimates of 21-24% growth for the current fiscal.

In its latest quarterly audit of September for global outsourcing contracts, TPI has said only 128 deals were signed for a total consideration of €11.5 billion (Rs 73,255 crore) —the weakest quarter for total contract value of outsourcing deals in the past six years.

"The issue is that we have thought the bottom of the cycle was near quite often in the past few months, only to realize it is not really in sight just yet! We really are in uncharted waters," said Pai in an email.

 

SMALL AND MID-TIER ITES IN BIG TROUBLE

P P Thimmaya, Bangalore
The Economic Times

The gloomy global economic outlook and reduced demand for technology services in the US and Europe is likely to result in an increased ITES in trouble pace of consolidation among small and mid-tier IT services companies in India, analysts say.

Export-oriented small and mid-tier IT companies were able to weather the storm of rapid appreciation in the rupee against the US dollar in 2007 and early 2008, but now they are faced with the stark reality of dwindling orders.

Sudin Apte of Forrester Research says that consolidation in the Indian IT industry was on the way anyway, but the pace may pick up in the next 18 months. He is of the view that a large number of smaller firms are in “denial mode,” thinking they will be able to ride out the bad times, but reality will sink in after they start seeing negative cash flows.

It is estimated that around 60-70% of the country’s IT services exports are contributed by the top 20 players, with the rest coming in from small and mid-tier entities. T R Madan Mohan of Browne & Mohan, a consultancy firm, says that the pace of consolidation will be high because of pressure from private equity investors. PE firms, which invested in software companies expecting an IPO in 2009, are either encouraging the companies to merge or bring in a strategic partner to reduce risk.

Analysts said this kind of consolidation is already happening for firms with a topline of around Rs 50 crore, but the major worry would be for entities, which have annual revenues of less than Rs 5 crore and servicing the BFSI market in the US or the UK.

For example, of the around 1,550 units registered with STPI Bangalore, only 28% of them have gross revenue of more than Rs 100 crore. The expectation is that through consolidation and mergers, a fifth of them will exit the system. Avinash Vashistha, CEO of offshore advisory Tholons, agrees that it would be a tough road ahead for the small and medium-sized firms. However, he also thinks that there is considerable interest among investors in these firms as their valuations are particularly low and there is greater interest in outsourcing and offshoring.

“The worry is that if there is a recession and downward trend till the last quarter of 2008, which is what seems to be imminent, then many of them have to look at drastically different business models,” says Mohan of Browne & Mohan.

 

IBM INITIATIVE HELPS SMALL COS MAKE IT BIG IN EMERGING MARKETS

Ashish Rukhaiyar, Danang, Vietnam
The Economic Times

Mai Vsan Quang started his shipping company — Asiatrans Vietnam — in 2003, a firm which is into handling logistics and port operations for many foreign and domestic shipping majors. Quang, however, had a problem. His firm was just one of the many small and medium enterprises (SMEs) operating in Danang. He wanted to bring his company on the national map and needed guidance for it.

Help, luckily, was not far away. His firm’s membership with Vietnam Chamber of Commerce and Industry (VCCI) proved helpful. VCCI is the local partner of global technology major IBM that is working with various SMEs in Vietnam, giving them recommendations on efficient use of resources. “Through VCCI I got in touch with Pradeep Setlur of IBM who worked with my staff for four weeks and suggested some important changes,” said Quang.

Setlur is one of the many IBM volunteers who are part of the Corporate Services Corp (CSC) initiative of IBM. These volunteers are full-time IBM employees and are selected through an in-house screening process. Once trained, they are sent to different countries, mostly emerging markets, to work with local companies.

“CSC is IBM’s response to globalisation,” said IBM’s senior program manager (corporate citizenship) Kevin Thomson. With this program, IBM helps in creating leaders, he added. CSC volunteers are currently working in many emerging countries including Ghana and Philippines.

IBM, said Thomson, has a very competitive online application procedure with baseline eligibility conditions. “Only the top-25 percent employees are eligible to apply,” he said. There were around 55,000 applications for 100 volunteer positions. While the first batch has already started work, the next batch would be out in 2009. Over the next three years, IBM intends to send 600 professionals to emerging countries.

 

GARTNER SAYS IT SPENDING TO SLOW IN 2009, BUT GROWTH TO CONTINUE

Mumbai
Business Standard | The Economic Times | The Hindu Business Line | 

Global economic problems are impacting IT budgets, however, the IT industry will not see the dramatic reductions that were seen during the dot.com bust, says Gartner.

At that time, budgets were slashed from mid double-digit growth to low single-digit growth.

“In a worst case scenario, our research indicates an IT spending increase of 2.3 per cent in 2009, down from our earlier projection of 5.8 per cent,” said Peter Sondergaard, senior vice president at Gartner and global head of Research.

“Developed economies, especially the United States and Western Europe, will be the worst affected, but emerging regions will not be immune. Europe will experience negative growth in 2009, the United States and Japan will be flat,” he further added.

Gartner said the events of the past two weeks will have an impact on IT budgets in the fourth quarter, but it will not change 2008 substantially.

The IT industry went through more dramatic reductions during, and after, the recession of 2001.

Gartner also mentions that in such situation the role of the management also under goes change.

“We learned that in tumultuous times, CEOs want their executives and managers to be advisors and counsellors, not just great implementers of directions given to them. What they want now most of all is agile leadership. Leadership that can guide us through simultaneous cost control and expansion at the same time.”

Organisations now view IT as a way to transform their businesses and adopt operating models that are much leaner.

IT will also not see severe reductions this time as it is embedded in running all aspects of the business and a shift to multi-year IT programs aligned with business, which is difficult to cut immediately.

 

IT TAKES THE CAKE IN EDUCATION FRAUDS

Bangalore, October 10, 2008
The Economic Times (Delhi edition)

Education-related discrepancies among the employees in the Indian IT industry increased during the second quarter of the current calendar year when compared to the first quarter, according to report by First Advantage.

The IT industry has experienced the highest increase (almost 3.5 times) in education-related discrepancies compared to Q1 of 2008, First Advantage said in its second quarterly report ‘Background screening trends-India.’

First Advantage managing director (West Asia) Ashish Dehade said, “Background screening acts as a first line of defence against potential fraud and security breaches. More sectors taking it up actively would employ fewer candidates misrepresenting information and thus, concurrently, fewer likely to engage in frauds or security breaches.”

However, this is not limited to just the IT sector alone as educational qualification-related discrepancies in the banking and financial services (BFSI) sector was the highest in the last quarters. First Advantage said all the key industries tracked have shown an increase in education-related discrepancies. The report said that maximum discrepancies in educational qualifications were related to institutions in Northern India at 34%, followed by Southern India at 30%. Almost half (48%) of all fake university cases came from Northern India; followed closely by Western India (43%). Pune topped the city list for education-related discrepancies, followed by Mumbai and Delhi.

 

53% WORKING WOMEN IN INDIA FEAR FOR THEIR SAFETY: ASSOCHAM

New Delhi,October 10, 2008
Mint

About 53% working women feel insecure, especially during night shifts in all major hubs of economic activity across the country. Most of them are employed in the BPO/ITeS, hospitality, civil aviation, medical and textile space. Their concern is that safety norms set up by their respective establishments are not adequate and given the increase in crime, their insecurities and fears are only going up.

According to the Assocham Social Development Foundation (ASDF), an assessment was carried out revealing that 48% of women who are engaged in the small-scale sector are extremely worried about their safety and nearly 26% in the medium sector and 23% in the large-scale establishments are scared to step out after the sun sets. .

Key Findings

- 34% women in the low skilled category are worried about their well being; 29% in the moderately skilled section and 8% among high skilled workforce

- The fast growing BPO/ ITeS, hospitality, civil aviation industry has generated parallel employment for cab drivers who have often been responsible for rash driving, accidents, eve teasing, rape and even murder

- 86% women on night shifts face commuting problems because of lack of adequate transport arrangements by employers. Those working in Kolkata, Mumbai and Pune face maximum commuting hurdles while those in Delhi, Hyderabad and Ludhiana the least

- In Bangalore, 75,000-95,000 women work in night shifts. There are around 2,200 IT firms in Bangalore, of which 1,600 are registered with the Department. In Bangalore, around 56% women respondents in a survey carried out amongst women working in night shifts in the IT, aviation, hospitals and BPO sector feel unsafe. Delhi topped the list with 65% of women followed by 35% in Hyderabad, 28% in Chennai and 26 % in Mumbai

- BPO/ITeS is not the only sector with post-sunset shifts. Women nurses have been doing night rounds as also those working in media, airlines, hotels and other service industries

Recommendations

- Companies to have an internal code to ensure security of women employees and to take measures to ensure they discharge their job in a secure atmosphere

- Governments to make it mandatory for companies to install Global Positioning System (GPS) in cabs, not only in call centres and BPO’s but all industries which engage women in night shifts

- Other measures that can be taken include providing self defense training to women; installing safety devices at the work place; undertaking police verification of cab drivers, security guards and peons who are deputed on night shifts and setting up efficient complaint redressal systems

 

DELHI MOST UNSAFE FOR WOMEN WORKING AT NIGHT: SURVEY

New Delhi, October 10, 2008
The Economic Times  The Tribune  The Times of India  

The national capital, infamous for crime against women, has been polled in an industry survey as the most unsafe city for the fair sex working in night shifts with companies in IT and ITeS, aviation and media sectors and hospitals.

A majority of 65 percent of women in Delhi interviewed said they felt insecure working in night shifts, while the figure was the least for Mumbai at 26 percent, according to a survey by industry chamber Assocham.

The study comes nearly 10 days after, Soumya Vishwanathan, a scribe working with a television news channel, was murdered while driving home from office in the wee hours of September 30. Police investigating the case have so far drawn a blank in the case.

Bangalore is the second most unsafe place for working women with 56 percent of those polled expressing a sense of insecurity, the survey said. In Hyderabad and Chennai as many as 35 percent and 28 percent respectively shared similar feelings, it added.

The survey-covered women working in companies engaged in business process outsourcing, IT firms, airlines, hospitals and media. It said the safety concern related to the movement outside their office premises and most of the women expect their employers to make security arrangements.

The chamber has suggested strong measures to improve security for women, especially those who move at night.

"Government should make it mandatory installation of the Global Positioning System (GPS) in cabs used not only by BPOs but also other industries employing women at night shifts," Assocham Secretary General D S Rawat said.

Female employees in the small scale sector are more vulnerable to security risks than their peers in bigger units, the survey said. As much as 48 percent of them in small firms were found "extremely worried" while the number was smaller at 23 percent for those employed in big companies.

It also showed that women employees are the most vulnerable and prone to both physical and non-physical attacks.

Due to inadequate transport arrangements by employers, 86 percent of women face commuting problems at night. In Kolkata, Mumbai and Pune, women face the maximum commuting problems compared with those in Delhi, Hyderabad and Ludhiana who face the least, the chamber said.