‘For India, Focus Must Be Developing IPs Not Manufacturing Semiconductors’
The global semiconductor shortage has put significant stress on supply chains globally. A Goldman Sachs report says that the supply chain disruptions in the semiconductor space has affected more than 169 industries. But there have been signs of this shortage easing in the recent weeks as demand for PCs and mobiles have weakened. Meanwhile, supply seems to have picked up significantly in the last few months.
During a visit to Bengaluru, Michael Hurlston (CEO at Synaptics) spoke to BW Businessworld’s Rohit Chintapali on current state of semiconductor industry. Hurlston also shed light on Synaptics’ plan for India and more.
Edited Excerpts:
Do you feel that the semiconductor shortage globally has eased up?
Yes, definitely. Our ability to supply has increased dramatically since March. From March to September, we have seen an easing in the supply chain because there has been weakness in demand from a couple of sectors, including PC and mobile handsets that go into the Chinese marketplace. This has created the effect of supply freeing up. But we have observed many pockets that are still short on supply.
Despite the present scenario, the number of electronic devices is not going to go down. So, how can organisations address the shortage while not compromising with delivering the devices?
The issue that you're touching on is absolutely correct. The semiconductor industry has not solved the capacity constraint. For the most part, the capital expenditures in the semiconductor world are directed towards very advanced processes including computer processors, mobile phone processors and various infrastructures. But most of the shortages are actually on trailing nodes that include analog circuits, Wi-Fi circuits and more. That's where the shortages existed during this supply crunch. And what’s happened in the economics of this is that the fabs are incentivised to build on advanced nodes. They are not building capacity on trailing edge.
And to your point, the tailwinds in the semiconductor market are absolutely there. There's more of semiconductor going into more things than ever before. So, the tailwinds for the businesses are huge. The fundamental problem in terms of the demand or the supply constraint have not been solved. This has given rise to inventory problems where businesses were hoarding pieces because they were missing components to deliver the final product due to the semiconductor shortage. The inventory problem will ease up over the course of next two quarters. But my concern is that we will then be back in the situation we found ourselves in during the tail end of 2020 and beginning of 2021.
Bigger economies like the US are now looking at manufacturing domestically seriously. While it has the resources to pursue this, how can a relatively smaller economy like India address the gap? Manufacturing domestically seems like the answer?
We have a contrarian view on this. I feel that the manufacturing ship has sailed because of the sheer amount of time it would take the US to catch up to the scale of TSMC’s capabilities. To address the current gap, the quickest way is to help the existing foundries and manufacturers build up their capacity. But this effort is not needed at advanced modes. The trailing edge is where the problem exists.
Today, everybody has realised that semiconductors are fundamentally important but my view is that the important piece to control is the IP. The US actually has a lead in this area and investment is needed to keep that lead to keep the pipeline full.
India is increasingly focused on manufacturing domestically but what is truly untapped for the country is the huge opportunity to take a lead in IP. India has a great education system and ability to generate IP because of the vast amount of talent available in the country. But for the most part, Indian electrical engineers are actually working for multinational companies. It would be in the best interest of India to create companies here (whether through VC or PE) to develop IP in the country. The talent is available locally. In fact, the best engineers in the world actually sit in India. The government should think about it.
Could you tell us about Synaptics’ plans for India?
We are still early in our journey here. Synaptics has over 1,700 employees globally and more than 200 of them are based in India. By the end of next year, India will be our largest site and we will have somewhere between 300-400 employees in Bengaluru. Our mission will be to try to create end-to-end products where there is full ownership in Bengaluru, as opposed to the idea of slicing and sourcing the design from various locations. There is an endless pipeline of tremendous engineering talent in India and we intend to tap into this potential to build our engineering capability.
Also Read: Semicon Company Lam Research Opens Brand New R&D Facility In B’luru
