Indian design firms eye chip IP model

BANGALORE, India – When Ittiam Systems, a media processing company here, said last week that more than 35 percent of its $20 million in annual revenues came from royalties, one observer called it a “landmark” for the company, adding that it was “an encouraging sign for the new generation technology companies in India.”

Ittiam is one of the few Indian companies to successfully deploy an IP licensing model, with royalties of about $7 million. That’s small by global standards, but significant here. Another Indian company, Cosmic Circuits, a provider of analog and mixed-signal IP cores, has since announced it “aims to be a major player in semiconductor IP.”

“Cosmic started with power management IP in 2005 and has over 300 IP [offerings] and also solutions at 28 nm,” said CEO Ganapathy Subramaniam. “We estimate that over 50 million ICs have been shipped with Cosmic IP. We wanted to expand our portfolio and decided to focus on the connectivity IPs. We are now developing solutions for PCI Express, USB3.0, USB2.0 and HDMI apart from MIPI DPHY and MPHY in 28 nm and 20 nm.”

The early success of Ittiam and Cosmic illustrates the shift in India from design projects for overseas chip companies to generating and retaining chip IP.

According to Ganesh Ramamoorthy, research director at Gartner: “As is the tradition in the Indian technology sphere, most Indian companies try and avoid the risks associated with a product business – low margins, high development and marketing costs, rapid technological changes, ongoing R&D investments and, last but not the least, product acceptance by consumers in a market filled with” large, established players. This aversion to risk has prompted most Indian electronics companies to pursue the safer services business.

Cosmic is targeting what Ramamoorthy called the “wired interface IP market.” During 2010, that market was worth $305 million and is estimated to grow at a compound annual rate of nearly 11 percent through 2015 to $508 million.

India has trailed the rest to the industry in IP generation due to factors like high investment costs needed to acquire the necessary tools for IP generation, the lack of qualified analog/mixed signal engineers and the absence of a local ecosystem. Even if Indian companies could generate IP, few product companies would license this IP, said Deepa Doraiswamy, an analyst with Frost & Sullivan.

“Semiconductor IP creation is a long-drawn process where the IP has to be proven before it is marketed,” added Venkat Mattela, chairman and CEO of Redpine Signals. That means several silicon tape outs, reference designs and other time-consuming steps. “This requires spending a lot of time with experts, [it] means burning cash,” Mattela added. Indian engineers “are more inclined towards doing software where the results could be obtained much sooner, hence semiconductor IP development is lagging.

Still, some industry trends offer hope for more IP development here. India accounted for less than 1 percent of global chip IP in 2005, but currently produces about 5.5 percent, Doraiswamy estimated. That makes India the second largest IP producer along with the U.K.

Doraiswamy added that growing expertise in mixed-signal IP for wireless applications could become a key niche for Indian developers.

Time-to-market pressures and shortened product life cycles may also work to the advantage of Indian IP developers. “As a result, we believe that the standards-based interface IP market offers significant growth opportunity for third-party semiconductor design IP vendors like Cosmic Circuits,” said Ramamoorthy of Gartner.

Either way, companies like Ittiam and Cosmic Circuits seem determined to make some noise in the chip IP market as others here continue to focus on traditional chip design services.