Group MembersNeha Gupta 67Sandhya Shrivastava 58Nikita Jain 70Ankita Singh 83Krishna Rana 79Jay gandhi 66Manisha Bharadwaj 35

Emergence of Chip Design Industry in Asia

Presented by:

Neha Gupta – 67Sandhya Shrivastava – 58

What is a chip?

Chip: A small piece of semiconducting material on which an integrated circuit is embedded. It contains millions of electronic components

Integrated circuit design involves the creation of electronic components, such as transistors, resistors capacitors and the metallic interconnect of these components onto a piece of semiconductor, typically silicon.

Biggest producers and Consumers of Chip

Producers United states South Korea Japan China France/Italy

Consumers India China

Factors responsible for moving of chip Industry to Asian Countries

Pull Factor

Cost

Demand

Policies

Annual cost of employing a chip design engg.

Location Annual cost

US 300000

Canada 150000

Ireland 75000

Republic of Korea <65000

Taiwan Province of China <60000

India 30000

China – Shanghai 28000

China - Suzhou 24000

Continue……

Push Factors- A number of factors in developed countries are also greatly contributing to pushing firms to expand chip design in Asia, these are:

Changes in Design methodology and organization (miniaturization, PLC, convergence)

More outsourcing and multiple design interfaces (Table)

Changing skills requirements

Network comprising of following players:

A Chinese system co. for the definition of the system architecture

An electronic manufacturing supplier from the Taiwan Province of China

A US integrated device manufacturerA European ‘silicon intellectual property’ firmDesign houses from the US and Taiwan Province of ChinaFoundries from Taiwan Province of China, Singapore, and

ChinaChip packaging companies from ChinaTool vendors of design automation and testing from the

US and IndiaDesign support service providers from various Asian

locations

Continue….

Enabling Factor

New ICTs – help vertical networks communicate

Spread of transnational knowledge communities

Q. In your opinion which of the trade theory is most appropriate to explain the shift of chip designing to India and other Asian countries? Give reasons to justify your answer.

Porter’s Diamond Theory

Firm strategy,

structure & rivalry

Demand conditio

ns

Related & supporting industries

Factor conditio

ns

Government

Chance

Factor conditions

Skilled labour – Talent pool

Demand conditions

Market sizeChina: world’s largest market for telecom

equipment (wired & wireless) & critical test bed for 3G

sophistication

Related & supporting industries

A Chinese system co. for the definition of the system architecture

An electronic manufacturing supplier from the Taiwan Province of China

A US integrated device manufacturerA European ‘silicon intellectual property’ firmDesign houses from the US and Taiwan Province of ChinaFoundries from Taiwan Province of China, Singapore, and

ChinaChip packaging companies from ChinaTool vendors of design automation and testing from the

US and IndiaDesign support service providers from various Asian

locations

Firm strategy, structure & rivalry

Progress in manufacturing technologyConvergence of digital computing,

communication, and consumer devicesProduct life cycles have been reducedVertical specialization: Disintegration in the

design value chain & dispersing it geographically

Government

A powerful tool in driving

innovation

Tax rebates

Regulations

IPRInfrastructure

Education

Legal framework

QUESTION

Evaluating the Emergence of the Chip design Industry to Indian and other Asian Countries on the basis of the following theories ?

INTERNATIONAL TRADE THEORIES

Theory of comparativ

e advantage

Factor endowment

theory

Country similarity

theory

International product life cycle theory

Theory of comparative advantage

David Ricardo: Principles of Political Economy, 1817.

Country should specialize in the production of those goods in which it is relatively more productive... even if it has absolute advantage in all goods it produces.

As per case :

The production of chip design products were relatively good in US , Europe and Japan.

Factor endowment theory

A country’s relative endowments of land, labor, and capital will determine the relative costs of these factors

Factor costs will determine which goods the country can produce most efficiently.

As per case: Since Asia was the fastest growing market for electronic design automation tools.Diverse range of functions From routine work to highly strategic tasks.

Country similarity theory

Most trade today occurs among high-income countries because they share similar market segments and because they produce and consume so much more than emerging economies

As per case,India and chinaAs per World Investment report 2005 – Annual cost of employing a chip design engineer, 2002. was comparatively low in these two Asian countries

Companies will manufacture products first in the countries in which they were researched and developed, almost always developed countries

Over the product’s life cycle, production will shift to foreign locations, especially to developing economies as the product reaches the stages of maturity and decline through FDI.

As per case, Chip Design industry moved from US Europe and Japan towards the developing countries ( East Asia).Developed nation is now importing more from Chinese as it has become third

International product life cycle theory

Recommendations

Training & Education

Incentives

Infrastructure

Thank You!!