The enhanced market demand for semiconductors and integrated circuits (chips) has kept in pace with the pervasiveness of electronic hardware in the environment. Design and Electronic Design Automation (EDA) are essential (and inherent) processes in chip manufacture. The cost of infrastructure required for the manufacture of chips however, is huge. Big companies like Intel and Texas Instruments outsource the design of the chips they use to other foreign countries. Various manufacturers operating in the domains of communications, computing, consumer and industrial electronics, have also adopted the methodology of outsourcing the design of chips. The outsourcing of chip design has thus emerged as a distinct link in the value chain of chip delivery. India, because of its strengths has emerged as a natural choice for this outsourcing. This article attempts to examine the specific features vis-à-vis the process of chip design. It also discusses the steps to be taken to enhance India's brand equity in the global chip design market.

Outsourcing of services has evolved from an ad hoc initiative into a globally accepted methodology. It offers the optimal option in the manufacturing and delivery of almost all categories of goods and services to enable strategic advantage. It has become the preferred choice for manufacturing enterprises that want to introduce new products faster with lesser risk. This is particularly relevant and applicable to companies that manufacture semiconductors and integrated circuits (chips); as electronic hardware becomes increasingly pervasive, cost effectiveness through economies of scale may be accrued. Outsourcing the design of the chips that support electronic hardware goods leads to benefits arising from the enhanced economies of scale by amortizing a fixed methodology over multiple projects. Outsourcing companies can focus on their core competencies while simultaneously deriving the benefits of the synergic exposure to the best practices of the outsourced company.

For the past decade, the focus of the Indian outsourcing industry has been on BPO-based and software-based Information Technology Enabled Services (ITES) companies. Product development and hardware design have taken a back seat. However, the market for the design of integrated circuits (chips) in India, though a slow starter, is gradually coming into its own. By 2004, India's share of the global Electronic Design Automation (EDA) market of $4 bn was worth a mere $100 mn. It is estimated that it has risen to $ 500 mn in the current fiscal. In May 2005, the Indian Semiconductor Association (ISA) has commissioned a comprehensive survey of the Indian chip industry. The study will seek to provide a clearer picture of growth area in chip consumption, including chip design in India.

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