Bangalore, often dubbed India's Silicon Valley, has long been the heart of the country's semiconductor industry, attracting heavyweight corporations and pioneering startups. This vibrant hub has been integral to India's technological ascendancy for years.
However, a significant shift is now unfolding as semiconductor businesses start to explore tier 2 cities across India for new opportunities, signaling a strategic industry evolution driven by the quest for diversified talent pools, cost-effective operations, and broader market reach.
This shift is seen as crucial by industry experts. Satya Gupta, president of the VLSI Society of India, said that India's ambition to be a semiconductor industry leader requires a strategy to create a robust chip design ecosystem that spans the entire country.
Gupta emphasized the "need to establish at least 1,000 chip design companies and train 1 million electronics and chip design professionals annually." To achieve this, he proposes developing clusters in cities such as Bhubaneswar, Indore, Pune, Jaipur, Coimbatore, and Trivandrum, alongside incentivizing the inception of at least one chip start-up in each of India's 806 districts.
Workforce fostering reasons
A notable development in this strategic shift came when Synopsys announced its plans to open a new office in Bhubaneswar in Odisha state, marking its first design, research, and development unit in eastern India. This center is set to employ over 300 highly skilled very large-scale integration (VLSI) and semiconductor design engineers.
"Odisha's support fostering a strong semiconductor workforce and ecosystem, along with the active involvement of top industry leaders, academics, and researchers in the O-Chip initiative, exemplify a thriving semiconductor community in Odisha and its capital city Bhubaneswar which aligns with Synopsys' priorities of expansion in India." Rituparna Mandal, VP for customer success group and head of Synopsys India.
Mandal elaborated on the company's commitment to integrating with the local community, "Under the Synopsys Academic & Research Alliances (SARA) program, we have leveraged the advisory and mentorship of local industry leaders and researchers, and their guidance is helping to drive groundbreaking achievements and collaborations across semiconductor companies and universities."
Similarly, Signature IP, under the leadership of CEO Purna Mohanty, has strategically chosen to nurture talent and establish a presence in tier 2 cities. Since establishing its first office in Bhubaneswar over five years ago, Signature IP has expanded significantly within the state.
Mohanty attributes the early success and scaling of the company's operations in India to Bhubaneswar's role, "We've been able to build a stable workforce and tap into local engineering talent that is as skilled as those in Bangalore," he said, noting the lower attrition rates in tier 2 cities which have facilitated long-term R&D projects.
Lower competition for talent
Another company navigating the competitive landscape is Tessolve. Madhav Rao, Senior Vice President of Engineering at Tessolve, pointed out the intense competition for talent in Bangalore as a driving factor for their expansion into tier 2 cities.
"We noticed that many professionals are interested in opportunities in their hometowns, which led us to explore expansion in other cities," Rao said. "This strategy was something I observed in my past experiences with the previous organizations that I worked with as well. At Tessolve, we initially had our VLSI operations in Bangalore, Chennai, and Hyderabad, and then expanded to Coimbatore and Hubli in the last two years."
Smaller cities bring a notable economic advantage through lower operational costs. While this is not usually the primary motivation for companies to relocate, it is certainly a significant perk. The reduced expenses in these areas can help businesses allocate more resources towards innovation and development, making the move to tier 2 cities a strategic decision and a financially beneficial one.
Overcoming the challenges
Until a few years ago, the infrastructure in Tier-2 cities was a concern. But now that situation has changed. Rao pointed out that the network and overall infrastructure in Tier-II cities are quite adequate for their needs. The cost of living is lower and more reasonable compared to cities like Bangalore.
"However, we do face challenges with some clients who prefer having employees either in their own centers or in Bangalore, especially for spontaneous meetings," Rao said. "The pandemic shifted this mindset somewhat, but some clients are reverting to old preferences."
Another challenge is that smaller cities tend to have employees who hail from that place alone, or surrounding areas. This limits the pool of talent. Fortunately for India, this may not be a big challenge, given the large population.
A crucial step that companies have been taking to mitigate challenges is tying up with local universities and colleges. Mohanty pointed out that They have recruited professors from local engineering colleges in Bhubaneswar to lead their R&D efforts full-time.
These professors help identify promising interns from their colleges every year for the company's internship program. A new R&D center being set up in western Odisha is within a college campus there, indicating a close partnership with that academic institution.
