Report: Skills Shortage, Labor Costs Challenge India Design

BANGALORE, India — An inadequate number of skilled engineers due to lack of specialized institutes and advanced technical courses poses a big barrier to the growth of India's VLSI design business for the next two years, according to a study by the India Semiconductor Association (ISA).

The rising cost of compensation for India's engineering workforce could deter companies from setting up more design centers in the country over the next two years, forcing them to look elsewhere, the study found. But this situation should be resolved in three years, as India's engineering workforce grows, the study concluded.

But India, which currently faces a relatively low level of competition from other IC design destinations such as China, Israel, Eastern Europe and West Asia, could face stiffer competition from the same places in three years, the study warned.

Over the next two years, India's design business will face stiff challenges posed by problems rising from multi-vendor and multi-location interactions, as well as the cyclical nature of the IC business, the study said. Growth will be very highly dependent on increased levels of knowledge of outsourcing, the study said.

Other lower-level challenges facing India's design activity over the next two years include: continuous pressure on timelines and shortening of planning horizons pushing design firms to develop faster and from customers preferring clients to provide complete designs. The pressure on firms here to succeed despite the skill shortage will be high during this period and even more challenging two years from now, the study said.

On the bright side, the study predicts that Indian design firms will see more business outsourced to them as high"growth segments such as telecom and consumer electronics will have even shorter market windows. Indian firms developing their own IP will encourage more design outsourcing, the study found.