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.