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Fast maturing local semicon industry India and the local semiconductor industry are seen to be maturing very fast. The semiconductor policy announced by the Indian government in February 2007 also gives a strong impetus to global semicon and hi-tech companies to make India their destination of choice. The conclusive proof is the amount of foreign direct investments (FDIs) that have been taking place in this sector. Analysts have rated India as good destination for large MNCs to set up their operations from a legal and intellectual property (IP) security point of view. Though the laws for IPR and patents are improving, the Indian government is amending the IPR laws step by step to have a positive impact for the investing community and MNCs.
At the same time, it is interesting to analyse why captives are not scaling up to reach economies of scale, but rather work is moving to third-party Indian vendors. For one, global corporations have been establishing new captive design centers or expanding the capacity of existing design centers in India of late.
However, with Indian mid sized, and large design service providers now offering outsourcing with robust offshoring capabilities, the semicon majors are more inclined to work with service providers with these capabilities rather setting up/scaling up there own captives. This reduces their time, effort and cost while setting up their operations. Also the ROI of scaling up vs. outsourcing is favoring outsourcing.
Additionally, India's own design companies are moving up the value chain when it comes to cutting edge technologies and turn key designs. While captive design centers increasingly are engaged in high-end R&D projects intended to serve the needs of the global parent company, the role of Indian services sector pertaining to VLSI and embedded design services is rapidly growing, and these companies provide flexible business models for design engagement for sustenance and maintenance of products.
A few Indian companies like KPIT Cummins are actively involved in end-to-end design activities, ranging from specification to tape outs. Third-party companies like ours are in the best position to bring in operational efficiencies and best practices to co-innovate with the hi-tech industry, thus helping them in bringing their products faster to the market –- especially the low cost/high volume emerging markets, design process amd architecture optimization, improved design efficiencies and co-innovation through development of shared and contract intellectual properties. On the operational front, the trend is driven by "lower costs, a good talent pool and growing global recognition of the ability to take up complex and end-to-end product designs."
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