[Engineering Feature]
Chip Design Services Set Sail Offshore
Despite the time-to-market crunch, questions still loom on whether tech regions like India, China, and Eastern Europe can handle leading-edge designs.
After years of working for tech companies like California Micro Devices and Motorola, Gerald Smith wanted to spend the rest of his analog engineering career involved in independent, hands-on tinkering. He found a cause in the growing need for analog chip design services and set up a small design services company—Analog Design Consortium—in San Jose, Calif., with three other analog engineers last year.
"We just don't have the number of analog engineers we need [here in the U.S.]," Smith said as he designed away on a pipeline analog-to-digital converter (ADC) for one of his clients (Fig. 1).
He knows the need for analog chip design will continue to rise, since most engineers tend to gravitate toward its ever-pervasive counterpart—the digital side. Its growth is evidenced in his client base, he said, which has expanded from small companies to mid- and large-sized ones.
His booming business is simply keeping pace with the rest of the IC design services industry, which continues to flourish as companies struggle to meet quicker time-to-market pressures. But even when domestic firms offer up the skills in both the analog and digital realms, the temptation of cheaper labor is too good for some companies to pass up.
"I just lost a contract to India," Smith admits, cognizant of a long-standing offshore outsourcing movement that slashes companies' production costs.
Offshore technology services, such as IT assistance or software production, are by no means a new trend, especially not in technology hotspots like India and, more recently, China. Now, design services are following in those footsteps, with U.S. design houses opening offices in these locations—as well as in emerging engineering regions like Eastern Europe. And large, broad-service tech companies like India-based Wipro have added design services to their list of offerings.
There's much to consider, however, before a U.S. company decides to offshore a design. For instance, not all countries have the resources to work in the leading-edge technology space. And as overseas workers become savvier about job opportunities, production costs could balloon.
MARKET RECOVERY The web of design-service providers is sprawling. There are "pure" design houses; EDA vendors with field-application engineers and consultants; distributors that pair up clients and design teams; and small startup design-service shops. While big companies like Cadence and Synopsys focus on consultation and assistance, others like Open-Silicon or eSilicon will create GDSII files and ultimately deliver chips.
Ostensibly, design outsourcing is largely due to increasing chip complexity. Transistors can number into the billions, and components are squeezed in exponentially, requiring ever-evolving expertise.
The surge in design for manufacturing (DFM) has pushed the design-services market, too. Designers who create their designs for specific foundries need the expertise of the foundry's manufacturing engineers, and semiconductor companies like IBM have met demand with a broad range of offerings.
Nonetheless, the design services segment in general has struggled to climb out of the hole it sunk into after the dotcom bust. When the electronics industry had its worst year in 2001, design-services engineers were the first to be let go, according to Christian Heidarson, an IC design-services analyst with Gartner Research.
That shakeup changed the industry, causing electronics companies to focus on cost like never before, says Heidarson. So, when it came time to more or less reinvent design capabilities, operation managers looked to cost-conscious solutions like offshore outsourcing.
That's partially why most design-services projects today are low-cost projects done offshore, says Heidarson. Granted, the market stands at about $1 billion, or about half of what it was at its height in 2000. Yet offshore outsourcing plays a big role in the market's success: compound annual growth rate (CAGR) is expected to climb 11% from 2006 to 2011, according to Gartner estimates.
"Only in 2006 have we arrived at the point where the growth in low-cost projects is finally offsetting the decline in high-cost projects, and we are seeing revenue growth again in the industry," says Heidarson.
Analysts say India will continue to be a major player in the offshore chip design-services market. China follows close behind, as its technological capabilities catch up, and design centers are emerging in Eastern European nations like Romania, Bulgaria, and Armenia.
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