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IT hardware: thinking out of the box

While the production of IT hardware is relatively less glamorous than software, it has the potential to equal software exports, which are closing in on the $50-billion mark, writes Venkatesh Ganesh.

india Updated: Aug 13, 2007 11:27 IST
Venkatesh Ganesh

IT hardware manufacturing in India is a classic case of the chicken-and-egg situation. While it is less glamorous than software, it has the potential to equal software exports, which are closing in on the $50-billion mark. There are some bright sparks of hope on the hardware horizon. India is now poised to start semiconductor fabrication. US-based chip maker AMD and consortium SemIndia are setting up India’s first chip fabrication plant in Andhra Pradesh at a cost of $3 billion.

Hardware industry association MAIT, in a study conducted jointly with Ernst & Young, has claimed that the Indian industry has the potential to reach $62 billion by 2010. Ambitious projections have also been made for contract manufacturing, which represents a $11-billion opportunity if India succeeds in capturing only 2.2 per cent of the global pie by 2010.

There is good news from sales of personal computers, which, according to analysts, is a barometer for the state of the hardware industry in general. According to MAIT, PC sales grew 23 per cent in 2006-07 to 6.3 million units. A similar growth is expected next year.

However, industry veterans feel a lot more needs to be done. “Now that we have missed the manufacturing bus, we should develop Indian solutions to Indian needs,” says Raj Saraf, CEO of Zenith Computers.

“All these initiatives need to be backed up by the government with adequate funds,” adds Vinod Agarwal, CEO of SemIndia.

Getting hold of the growth game

Taking note of this, Indian companies are looking at moving up the value chain and companies ranging from those incubated in the dorms of IITs to Silicon Valley-funded start-ups are upbeat about areas such as embedded software and VLSI (very large-scale integration) design, used in a wide range of applications from mobile phones to washing machines.

A Nasscom-McKinsey study states that the domestic embedded systems market is geared to touch Rs 41,000 crore by 2008. This is bolstered by the fact that a number of companies have invested in new operations or have significantly expanded facilities — Agilent, Dell, Via, Rambus, Elven Technologies, Sasken, SanDisk, Intel and Cisco are among the lot.

Bear hug for competitors

Recently, Elven Technologies, a subsidiary of Aftek Infosys, acquired the Indian operations of US-based Applied Micro Circuits, a Nasdaq-listed company in the semiconductor segment. Similarly, software major Wipro has made acquisitions in the segment, such as the US-based New Logic. About 200 semiconductor companies currently operate in India, of which 120 are into chip design while the rest are into software development.

“The competitive pressure that global companies face to create new products and bring them to market faster, add new features to existing products, and keep down costs are some of the factors driving this trend,” says Shrikant Inamdar, director of Elven Micro Circuits.

Ahmedabad-based eInfochips has similar plans. “We are adding 300 engineers in the current year,” says Pratul Shroff, CEO of eInfochips. The company recently set up a Japan subsidiary and operations in Chicago.

However, it is not all a bed of roses. The supply shortage of competent professionals is a major worry for those looking to expand. Then again, that’s good news for job seekers. So, happy hunting in the hardware hub.

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