India’s fabless start-ups putting together a supply chain

At a time when semiconductor giants such as Micron are making the headlines in India, India’s fabless start-ups are quietly building a resilient supply chain system for the country’s growing domestic automobile and electronics industry’s chip demand.

At the bottom of the supply chain system, there are companies which build in-house intellectual properties (IPs) like Incore Semiconductors, a Chennai based start-up. At the next level are companies that aggregate the IPs into what is called a SoCs (Systems on Chip).

SoC companies generally source IPs from various players, connect them into a combination that addresses a particular feature or a problem or a particular application, said Neel Gala, CTO, Incore. He added that there are physical design teams that enable the designs to be taken to the fabs for manufacturing chips, the next stage of the supply chain.

But the semiconductor industry has a very highly complex supply chain network, said T R Shashwath, cofounder and CEO, Mindgrove Technologies. “Today, chips are designed across geographies like US, Europe, China, Israel and India. Foundries on the other hand are mostly located in Taiwan, Korea, Germany, US, Japan, Singapore and China.”

While it is still far-fetched to imagine a large fab in India, start-ups on the other hand have been consolidating on what they can – designing of chips. Mindgrove is designing SoCs that offers high performance with low power. The company’s designed chips are expected to become commercially available in a couple of months.

The start-up will outsource the manufacturing to a foundry partner outside India. After production, once the chips are brought back to India, Mindgrove will begin selling them to clients in India and abroad, Shashwath said.

Deepak Shapeti, cofounder and CEO, Morphing Machines, said, “In the semiconductor industry, the work by fabless companies constitutes a significant value in the total supply chain system.” The owners of the chips are basically the ones who design the chips.

The other side of the supply chain value belong to foundries and the ATMPs – Assembly, Testing, Marking and Packaging.”

The booming domestic automobile and electronics industry is also providing a massive tailwind for these fabless start-ups. Shapeti explained, “Ten years ago, a Rs 10 lakh car would have 19% of electric components in it. Today, the electronic components’ costs within that car would be about Rs 4.8 lakh. Starting from power window to cruise control and many other features, are today powered by processors.”

Fabless start-ups are primarily looking at very high volume but low margin industry that includes IOTs, energy meters, toy controllers, embedded systems, and others.

Gala added, “With modern workloads, like Generative AI, speech, safety , etc disrupting the market, the computational requirements would not only increase and vary rapidly on cloud but also for phone, laptops, and other edge devices. Your design today needs to be robust enough to catch up to the computational demand of the industry not only of today, but of the future as well”
Shapeti said, “Moore’s law say that the number of transistors in IC would double every two years which would increase speed and capability of computer every two years and their prices would drop.” But today we have reached the limits and can’t reduce the size of transistors further.

That is where accelerators like Morphing Machines help. He added, “We help companies to accelerate the power of transistors at a time when their size can’t be reduced.”

Gala added, “Legacy wise, India always had always been known as body shop for chip making. We have the brains, but most of which is deployed for design services. The actual idea or the conceptualisation of the design happens in the west. We were going to the world and asking them what do they want?”

That is changing now. “Today we are able to change it to “this is what the world wants and how do you achieve this? We have identified necessary target problems, local and global, and are saying that this is the design that will solve it. The owners of the chips are basically the ones who design the chips. Today Indians are not only demanding a solution but creating one as well, at the global level.” added Gala.

Shapeti added that today the VCs have also risen to the occasion and many Indian deep tech start-ups are getting funded. “Fabless start-ups have generally a long gestation period, and it is nice to see many VCs investing showing and investing in such start-ups.”

Shashwath said that the government has been granting funds and support to Fabless start-ups, to make the country more self reliant on chips. Mindgrove’s first product is self-funded with support from its incubators. For Chip 2, they plan to apply for government funds.

The Design Linked Incentive (DLI) Scheme under the India Semiconductor Mission of Indian government offers financial incentives, design infrastructure support across various stages of development and deployment of semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems and IP Cores and semiconductor linked design.

The scheme provides “Product Design Linked Incentive” of up to 50% of the eligible expenditure subject to a ceiling of Rs 15 crore per application and “Deployment Linked Incentive” of 6% to 4% of net sales turnover over 5 years subject to a ceiling of Rs 30 crore per application.

However some industry observers say that this is just the beginning and more needs to be done by the corporates, governments and even the VCs.

Aditya Joshi, CEO, OpalForce, that provides staffing services to Semiconductor companies, said, “Attracting skilled talent could pose a challenge, given the shortage of such professionals. Start-ups entering this arena must be ready to address obstacles such as securing funding and assembling teams with the required expertise. This becomes more intricate as prominent semiconductor giants often outbid start-ups, offering attractive compensation packages that can be hard for start-ups to compete with.” Financial Express