Philips bets big on Bangalore chip design unit

Dutch electronics group Philips has big plans for its Bangalore centre in the chip design area, which it has quietly resurrected over the last two months. Sources in Philips say, while the team will start small, its work will yield chips that could go not only into Philips' products but also those of others.

"In the foreseeable future, you can expect the team to go to the 90 nanometre and 65 nanometre level," sources said. At that level, the chip will be designed to have millions of circuits with pathways that are a billionth of a metre in dimension.

Philips Semiconductors, a division of the parent, has some 600 engineers at Philips India's software centre here, but "they are not really doing chip design" industry sources said. Now a core team of some 15 top-notch engineers has been put together who will start the effort.

"We hope to have at least three tape outs this year," a senior Philips official told Business Standards.

A "tape-out" is an archaic name to mean that a design team has finalised the design of a semiconductor chip, which in olden days used to be stored on a tape cartridge to be shipped to the fabrication plant. Today "it is more appropriate to call it email-out."

Tape out or mail-out, "Philips is extremely methodical in what it does. They have all the processes they need in Eindehoven, Netherlands, and the resources. Our feeling is that they will ramp up this work and build a full fledged chip design centre here," industry sources said.

They also pointed out Philips has gone after the best in putting together this team. In at least a few cases recruits have been poached from rivals.

A veteran has been brought in from Philips Semiconductors in Singapore and at least some of the other key players on the team have "been around from before the time Philips bought VLSI Technologies in the US four years ago to get an entry into that market," sources said.

At that time, India was not on Philips's map for chip design though a year later they tried to set up a team here. "But the timing was wrong as we got hit by the global down turn in 2001 which was acute in the semiconductor industry," the Philips official said.

Since then the sector has bounced back, growing 1.4 per cent in 2002 (by revenue), 14.1 per cent in 2003 and 27.4 per cent in 2004. This year industry watchers such as Gartner expect anything between flat and 9 per cent growth.

For the year to December 2004, the Philips group did sales of a little over euro 30 billion with income from operations of euro 1.6 billion.

The semiconductors division did worldwide sales of euro 5.5 billion with income from operations of euro 450 million. In its review of 2004, Philips said order books were shortened due to rising US interest rates and concerns about recovery.

If indeed the cyclical semiconductor market was nearing another flat growth period, more cost efficient locations in China, where Philips has some 15 R&D centres including those of its other large businesses such as medical electronics, and India, where the 1,500 strong Philips software centre is its second largest such facility, may see further investment.