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Next Steps for the Indian

Semiconductor Industry
Walden C. Rhines
Chairman and CEO
February 3, 2014

SEMICONDUCTOR INDUSTRY
STRUCTURE

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Top 50 Semiconductor Companies, 2012

13 are fabless (

Qualcomm #4
Broadcom #11
AMD #13
Nvidia #16

4 are foundries (

TSMC #3
UMC #20
GlobalFoundries #15

Headquarter locations

23 US
10 Japan
6 Taiwan
6 Europe
2 South Korea
2 China
1 Singapore
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46%
20%
12%
12%
4%
4%
2%

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Fabless Market Gaining in Overall Market


Fabless IC Sales
(% of total IC Revenue)
30%

28.5% 29.0%
24.9%

24.1%

25.0%

20.0%
18.3% 18.7%
16.7%

15%
12.0%

13.0%

14.2%

15.0%

9.0%
6.1%

6.7% 7.1%

0%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: IC Insights, 2014
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Fabless IC Revenue Continues to Grow


Fabless IC Revenue
($ Billions)

80

$78.1
$72.6
$63.5

$66.4

$49.4
$41.1

40

$43.8 $43.8

$34.5
$28.7
$21.3
$17.0 $15.1 $16.8
$9.9
$7.3 $7.3

0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: IC Insights, 2014
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Fabless Revenue Is Highly Concentrated


Revenue from Top 81 Fabless Semiconductor Companies
(Tracked by IC Insights 2013)

Fabless Revenue ($Millions)

14,000

Fabless Revenue Distribution

12,000
10,000
8,000
6,000

Top 1 Company

19%

Top 5 Companies

48%

Top 10 Companies

64%

Top 25 Companies

81%

Top 50 Companies

91%

Top 75 Companies

96%

4,000
2,000
0

21

41
Fabless Company Revenue Rank

61

Source: Gartner, Top Fabless Revenue From Shipments of Total Semiconductor, 2011
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81

Leading Fabless Companies Specialize and


Average ~22 Years since Formation
Fabless
Company

Years in Business
(Founded)

Headquarters

2012
Rev.
($M)

Technology

Qualcomm

29 (1985)

US

13,177

Wireless/CDMA

Broadcom

23 (1991)

US

7,793

Wireless/Broadband

AMD

45 (1969)

US

5,422

MPU

Nvidia

21 (1993)

US

4,229

GPU

MediaTek

17 (1997)

Taiwan

3,366

Wireless/Storage

Marvell

19 (1995)

US

3,157

MPU/DSP

LSI Corp.

33 (1981)

US

2,506

Storage/Networking

Xilinx

30 (1984)

US

2,196

FPGA

Altera

31 (1983)

US

1,783

FPGA

Avago

9 (2005)

Singapore

1,349

Wireless/Wired Infrastructure

23/10 (1991/2004)

China

1,285

Networking/Digital Media

Mstar

12 (2002)

Taiwan

1,272

Wireless/Multimedia

Novatek

17 (1997)

Taiwan

1,256

Display/Multimedia

CSR

16 (1998)

Europe

1,025

GPS/Wireless

Realtek

27 (1987)

Taiwan

836

Networking/Peripheral

Dialog

33 (1981)

Europe

774

Wireless/Power Mgmt

Himax

13 (2001)

Taiwan

738

Display/Multimedia

Spreadtrum

13 (2001)

China

725

Wireless

Cirrus Logic

30 (1984)

US

714

Broadband/Storage

HiSilicon

Source: IC Insights, March 2013 update


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Worldwide Fabless Semiconductor Companies


Venture Capital Raised by Year
$3,000

VC Funding Raised ($Million)

$2,500

Average
$2,485

$2,571

Global Recessions (IMF)

Average
$1,725

$2,399

$2,000

Average
$920

$1,987
$1,607 $1,635

$1,500

$1,832

$1,675

$1,829
$1,510

$1,000

$777

$983

$941

$981

2010

2011

2012

$500

$0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Source: Global Semiconductor Alliance (GSA) , IMF & Mentor Graphics Analysis
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Total Number of Fabless Companies


(GSA Estimate)

1,250

1,300

1,350

1,400
1,300 1,300
1,200

1,100

1,100
1,010 1,011

950
850
750

500

50

1996

1998

2000

2002

2004

2006

2008

2010

Source: GSA Portal, Industry Data 1/10/2012, http://www.gsaglobal.org/resources/industrydata/facts.asp


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2012

The Continuum

Model:

IDM

Activity

Design
Fabricate
Sell
(branded)

Fabless Definitions

Wafer

SoC

Foundry

Fabless

SIP

Design
Services

IP

Narrow
Broad

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Engineers
for Hire

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The Fabless Universe

Total Semiconductor Companies - GSA


1284 Companies
1011 Fabless
273 IDMs

IC Insights

133 Companies

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SIP Market Size and Forecast


Semiconductor IP
($ Millions)
$4,774
CAGR 10%

$4,360
$3,993

$3,666
$3,377
$3,128
$2,909
$2,723
$2,595
$2,481

CAGR 8%

$2,137
$1,699
$1,607
$1,544$1,508
$1,333

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: IBS, IP - 2013
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SIP Revenue Distribution


Revenue from Top 12 Semiconductor IP Companies
($ Millions)
1,000

IP Revenue Distribution

750

Top 1 Company

34%

Top 5 Companies

73%

Top 10 Companies

87%

11

500

250

10

Fabless Company Revenue Rank


Source: IBS, IP - 2013
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SIP Revenue Distribution


Revenue from Top 12 Semiconductor IP Companies
($ Millions)
1,000

750

500

250

10

Fabless Company Revenue Rank


Source: IBS, IP - 2013
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Leading SIP Players Specialize and Average


~22 Years in Business (Same as Fabless)
Years
in Business
(Founded)

Headquarters

2012 Rev.
($M)

Technology

ARM Holdings

23 (1990)

UK

881.7

MPU Cores

Synopsys

27 (1986)

US

403.6

Broad Portfolio of Cores

Rambus

23 (1990)

US

234.1

Memory

Tessera

23 (1990)

US

207.3

Chip Scale Packaging

Imagination
Technologies

28 (1985)

UK

182.9

Mobile Graphic/
Digital Radio

WiLAN

21 (1992)

Canada

88.0

Wired & Wireless

MIPS Technologies

29 (1984)

US

82.2

MPU Cores

Cadence

25 (1988)

US

72.0

Broad Portfolio of IP

Ceva

11 (2002)

US/Israel

53.7

DSP Cores

Silicon Image

18 (1995)

US

48.9

Wired & Wireless

Faraday Technology

20 (1993)

Taiwan

22.5

Broad Portfolio of Cores

MoSys

22 (1991)

US

6.1

Memory & I/O

Fabless
Company

Including Virage Logic

Acquired by Imagination 2013

Source: IBS, IP - 2013


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Increasing Percent of Tape-outs at Leading Edge

Tape-outs at advanced nodes are growing

16,000

Design Completions
by Line Width

By Line Width
38nm but <55nm
27nm but <38nm
<27nm
TOTAL

2009
578
19

2010
2011 2012F 2013F
845
1,130
1,235
1,309
76
330
455
596
7
61
112
204
12,799 12,958 12,727 12,354 12,136
Source: VLSI Research, October 2012

12,000

<27nm
27nm but<38nm
38nm but<55nm
55nm but<75nm

8,000

75nm but<120nm
120nm but<160nm

4,000

0
2008

160nm but<200nm
200nm but<300nm
300nm but<500nm
500nm

2009

2010

2011

2012

2013F

Source: VLSI Research, October 2012


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But Large Opportunities in Older Technologies


1,600

Wafer Starts KWPW


1,200

<27nm

32nm

800

65nm

400

90nm
130nm
180nm
250nm

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: VLSI Research, December 2012
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43% of
Production

45nm

Internet of Things Will Transform the


Semiconductor Industry
In the next 10 years, as many as 100 billion objects
could be tied together to form a
central nervous system for the planet
and support highly intelligent web-based systems...

Source: IC Insights, IC Market Drivers 2014. Chart from Cisco, The Internet of Things: How the Next Evolution
of the Internet is Changing Everything, Dave Evans 2011
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Internet of Things Will Transform the


Semiconductor Industry

Source: Cisco, April 2011


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Semiconductor Gross Margin by Category 2012


Average (Weighted Average)
Company Count
Product Revenue >20%
within specific SIA category

Gross
Margin
Average

Gross
Margin
Median

Foundry

41%

20%

Discrete

34%

32%

Memory

18%

16%

ASSP

28

48%

50%

Analog

11

51%

54%

Micro Component

57%

47%

FPGA

66%

65%

Total Database

56

48%

50%

Source: Semiconductor Companies (Largest semiconductor companies with published financial metrics available
for required reporting periods)
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Product Differentiation Alone Makes Switching


Analog/Mixed-Signal Suppliers Difficult

Product Differentiation
Process AND design differentiation
Moderate volume application niches
Higher design effort per square mm of silicon
More art than digital design
Lack of multi-sourcing of functions

Infrastructure
Application support

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Change in Strategy toward Differentiation


Gradually Raises GPM%
100%

National is acquired by
Texas Instruments

Gross Margin %

80%

Linear Technology

60%

Maxim
Analog Devices

40%

National Semiconductor
is an analog company

National Semiconductor

2004 Annual Report

20%

National acquires Microprocessor


Manufacturer Cyrix
August 1997

0%

1980

1985

1990

1995

2000

2005

2010

Source: Company financial reports


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INDIAS EVOLVING IMPORTANCE TO THE


FUTURE OF THE FABLESS
SEMICONDUCTOR INDUSTRY

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India Is in the Top 5 Semiconductor Design


Locations Worldwide

Source: India Semiconductor Association Study on semiconductor design, embedded software and services
industry April 2011
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Indias Fabless Company Sample


- GSA and IESA Members

Source: GSA Directory and IESA membership, 2014


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India Is Already a Leading Source of SIP


SIP Company Headquarters Distribution by Country
Japan, 3.1%
China, 3.9%
Taiwan, 4.1%
France, 4.1%
Canda, 4.3%
Israel, 4.7%

486 SIP Suppliers


Others, 17.3%

Germany, 4.7%

UK, 5.3%

US, 43.0%

India, 5.3%

Note: Not corrected for those companies that have a bulk of their resources in India with small headquarter operations in other regions
Source: Design & Reuse Portal Silicon IP Vendors, 2014
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Evolving from Design Services to


Fabless Powerhouse

1985 initially offered contract


R&D services

1988 company launched its


first product

1991 Qualcomm went public


and revolutionized the wireless
communications industry

First CDMA Demonstration

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India Has Built a Foundation


for a Fabless Future
Fabless
Model

SIP
Model

Design
Services

Design
Chip

Design
Chip

Design
Block

Design
Services

Manufacture
(Internal)

Foundry
(External)

~30 Logos

40+ Logos

IDM
Model

3-5 Logos

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FOUNDATION FOR FUTURE


SEMICONDUCTOR GROWTH

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Worlds Economic Center of Gravity


Has Moved East
AD 1 to 2025

Source: Urban World: Cities and the rise of the consuming class, McKinsey & Company, June 2012
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India Has a Strong Foundation

Worldwide leadership with the most influential


design teams in the world

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1,031 Multinational Corporation


R&D Centers in India

Source: Attrition, Hiring and Salary Increase Study, Zinnov, November 2013
http://www.slideshare.net/zinnov/cb-final-deck-media-nov14
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Most Attractive Outsourcing Countries

Source: SourcingLine https://www.sourcingline.com/top-outsourcing-countries


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Engineering and R&D Activity in India

18 of the top 20 U.S.


semiconductor companies
have design centers
in India

20 European corporations set


up engineering R&D centers
in India within the last year

Source: Fab opportunity, The Hindu, November 1, 2013


European MNCs Keen To Open Their R&D Centers In India, EFYTimes, May 3, 2013
NASSCOM
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India Has a Strong Foundation

Worldwide leadership with the most influential design


teams in the world

Richest pool of creative engineering resources and


educational institutions in the world

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Electronic Designers in India


Are Talented and Competitive
2013 Joint Entrance Examination (JEE) statistics

JEE Main exam: ~1.25 million candidates

JEE Advanced: only 150,000 eligible

Qualified: 21,110 students

Called for Interview: 14,336

Available Seats: 9,885 at 17 IITs

IIT Top Ten: included two women for first time

Source: http://education.oneindia.in/news/2013/06/24/iit-jee-advanced-2013-result-analysis-005513.html
Pictures from Livemint, April 28, 2013; Maths tough at IIT-JEE, The Hindu, April 12, 2010; IIT-JEE 2012
Results Declared, IBNLive, May 18, 2012
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Experience Level Increasing, But Still a Young and


Creative Workforce
Average R&D Employee Experience
4%

4%

6%

4%

14+ yrs

17%

20%

18%

22%

8-14 yrs

47%

40%

42%
50%

4-8 yrs

24%

0-4 yrs

32%

35%

2009

2010

34%

2011

2012

Source: Attrition, Hiring and Salary Increase Study, Zinnov, November 2013
http://www.slideshare.net/zinnov/cb-final-deck-media-nov14
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India Has a Strong Foundation

Worldwide leadership with the most influential design


teams in the world

Richest pool of creative engineering resources and


educational institutions in the world

Growing pool of angel investors

In India
Also in the West with strong connections to India

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Top 5 Destination for Foreign Investment


India has experienced rapid economic gains for a decade
and has a young, large and fast-growing population.
In 2012, the country saw
$25.5 Billion in FDI inflows
2013 FDI Confidence Index
with investors still anticipating United States
China
enormous potential.
Brazil

A.T Kearney

Canada

Top 25
2.09
2.02

1.97

1.86

India

1.85

Australia

1.83

Germany

1.83

UK

1.81

Mexico

1.77

Singapore

1.77

Source: ATKearney Foreign Direct Investment Confidence Index, 2013


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Key India VC Statistics


Amount Raised (US$ M)

Number of Rounds

220

$1,500

$1,000

110

$500

$0

0
2006

2007

2008

2009

2010

2011

2012

Source: Dow Jones VentureSource, 2013


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Rounds of Funding

Amount Raised (US $ Million)

$2,000

CLOSING
THE PRODUCT DEFINITION GAP

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Key Ingredients to Generate a


Thriving Infrastructure
Involvement and expertise with end equipment
Only when Indian engineers are exposed
to the full system, top down, can they see
where the opportunities to innovate lie along
the entire design chain.

EE Times Asia 1/12/2009

http://www.eetasia.com/ART_8800559411_480200_NT_2c623a76.HTM

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Superb Product Definition Requires


Elimination of Functional Barriers
Product
Development
Innovative
Product
Architecture
Corporate

bag of tricks

Product
Marketing

Customer
Management
Sales

Customer
Marketing &
Purchasing

Innovative
Product
Architecture

Wants list

True understanding

Key developers

Key developers

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of needs vs. wants

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Foreign Flagged Indian Companies


Produced Early Successes Some Examples
Companies

Focus

Highlights

Mobile
Broadband

$43.7 million revenue in 2009


22 US patents & 59 pending and 11 provisional patent applications
Acquired by Broadcom for $316 million in 2010

Wireless
Networking

100+ patents, patent filings & disclosures on OFDM/MIMO


2012 Top 100 Global Award Winner
2013 Best Application of Energy Harvesting award at the IDTechEx
Energy Harvesting & Storage Conference

RISC-only
VOIP

Acquired by Imagination Technologies for $47 million


30+ patents related to IP-based communication
Named one of Top 100 Technology Companies Silicon India in
2007
Selected as a Technology Pioneer World Economic Forum in 2007

Beceem Communications
HQ Santa Clara, CA
Design Center: Bangalore, India
Founded:
2003
Employees:
193+

Redpine Signals
HQ San Jose, CA
Design Center: Hyderabad, India
Founded:
2001
Employees:
50+

HelloSoft
HQ Sunnyvale, CA
Design Center: Hyderabad, India
Founded:
1997
Employees:
50+

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Evolution of the Beceem Model


Bridge the gap between the
system architects and the designers in India
Move operations to India

Do it virtually
system
architect

designers

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When Users and Tool Developers


Work in Close Proximity

Virtual stimulus

Test bench acceleration

Embedded SW co-development and verification

2x performance; 2x capacity

1/4 power per gate

1/3 footprint per gate

Conceived and
developed in India

system
architect

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Out-of-the-Box Architectural Innovations


Revolutionize Design Verification
Virtual
Peripherals

Test Bench
Acceleration

Simulation
Acceleration

Low Power

Assertions

Fast, Accurate
Design Compile

Functional
Coverage

Physical
Peripherals

Accelerated
SW Execution

Total Hardware
Debug Visibility

Comprehensive
Software Debug

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Lasting Differentiation Requires Infrastructure

Systems

Chips

SIP

Contract Design

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Summary

While the number of new fabless startups has declined


substantially in the West during the past decade, they are
growing in India

India has key capabilities to stimulate growth of


semiconductor companies

Design services companies


Design engineering expertise and innovation
Returning entrepreneurs
Educational system

Direct interaction with equipment/systems companies will


complete the product development process

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Original Slide

Semiconductor Frustrations Abound


[entrepreneurial business] in India has
been held down for years..[due to] big
problems with transport,
infrastructure, government
intervention at national and local
level, swarming chaos and confusion in the
streets, blatant poverty.

I recall a discussion in mid-2005 where an


industry expert mentioned that fabless was the way
forward for the Indian industry! Between then
and now, fabs were supposed to come up,
but they failed. Nevertheless, one must not
give up hope!

Pradeep Chakrabortys Blog, April 7, 2011

BBC News Business 6/26/2011


Time has come to demonstrate our
leadership position by building our
own capabilities in IC design, IC
fabrication and design & manufacturing of
electronics products

Ajay Kumar
2/21/2011 Joint Secretary,
Dept. of Information Technology

India's portion of a $250 billion


semiconductor market is marginal. It has only
two fabless startups, its innovation record as
measured by the number of patents granted is
dismal, it suffers from a dearth of Ph.Ds and high
attrition rates, what talent it does have is
undisciplined and it let China dominate completely
in systems manufacturing.

EE Times Asia 1/12/2009

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Original Slide

Semiconductor Frustrations Abound


India, where the demand for chips goes in
billions both in revenue and shipment,
needs companies [like Cosmic Circuits] to
balance its trade deficit in electronics
hardware. Its time for VLSI design
service companies in India to get into
own product development.

EE Herald, 2011
Consumption of electronics in India is
all set to cross $400 billion by 2020
threatening to cause a major balance of
payments crisis by outpacing oil import bill.
the country needs to build an
ecosystem to avert such crisis.

Approximately 95% of the software and


hardware companies in India... base their
businesses around outsourcing, while the
remaining 5% are Indian-American owned high
technology product development startups that are
similar to those of Silicon Valley.

Go4 Funding
The Changing Landscape of Indian
Entrepreneurship and Angel Investments

The proposed national policy aims to address


the huge gap between locally produced
electronics and the domestic demand for
electronics in India.
Jaswinder Ahuja, Cadence Design Systems India

The Hindu Business Line & J.A. Chowdary,


The Indus Entrepreneurs TiE, 2012

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Original Slide

Key Ingredients to Generate a Thriving Fabless


Infrastructure
1.

Involvement and expertise with end equipment

2.

Foster a culture that tolerates failure and minimizes


bureaucratic barriers

3.

Dont apologize for being dependent upon multinational


companies

Source: RealInnovation.com Outsourcing: Product Innovation from India: by Zinnov


http://www.realinnovation.com/content/c070219a.asp
68

WCR, IESA Vision Summit, February 2014

2014 Mentor Graphics Corp.

www.mentor.com

Company Confidential

Original Slide

Key Ingredients to Generate a


Thriving Fabless Infrastructure
1.

Involvement and expertise with end equipment

2.

Foster a culture that tolerates failure and minimizes bureaucratic


barriers

3.

Dont apologize for being dependent upon multinational companies

4.

Grow entrepreneurial connections between India and companies in the


U.S., Europe and Asia

2014 Mentor Graphics Corp.

69

WCR, IESA Vision Summit, February 2014

www.mentor.com

Company Confidential