The document discusses the emergence of the chip design industry in Asia. It notes that some of the largest producers of chips are the United States, South Korea, Japan, and China, while some of the largest consumers are India and China. It then examines several factors that have contributed to the movement of the chip design industry to Asian countries, including lower costs of labor, growing demand, supportive government policies, and push factors in developed countries like outsourcing and changing skills requirements. The document analyzes which international trade theory best explains this shift, concluding that the international product life cycle theory provides the strongest rationale as production has moved to developing Asian nations as chips have matured.

1. Emergence of Chip Design
Industry in Asia
Group Members
Neha Gupta 67
Sandhya Shrivastava 58
Nikita Jain 70
Ankita Singh 83
Krishna Rana 79
Jay gandhi 66
Manisha Bharadwaj 35

2. Presented by:
 Neha Gupta – 67
 Sandhya Shrivastava – 58

3. 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.

4. Biggest producers and Consumers of Chip
 Producers
 United states
 South Korea
 Japan
 China
 France/Italy
 Consumers
 India
 China

5. Factors responsible for moving of chip Industry
to Asian Countries
 Pull Factor
 Cost
 Demand
 Policies

6. 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

7. 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

8. 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 manufacturer
 A European ‘silicon intellectual property’ firm
 Design houses from the US and Taiwan Province of China
 Foundries from Taiwan Province of China, Singapore, and
China
 Chip packaging companies from China
 Tool vendors of design automation and testing from the
US and India
 Design support service providers from various Asian
locations

9. Continue….
 Enabling Factor
 New ICTs – help vertical networks communicate
 Spread of transnational knowledge communities

10.  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.

12. Firm strategy,
structure &
rivalry
Factor Demand
conditions conditions
Related &
supporting
industries

13. Factor conditions
 Skilled labour – Talent pool
Demand conditions
 Market size
 China: world’s largest market for telecom equipment
(wired & wireless) & critical test bed for 3G
 sophistication

14. 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 manufacturer
 A European ‘silicon intellectual property’ firm
 Design houses from the US and Taiwan Province of China
 Foundries from Taiwan Province of China, Singapore, and
China
 Chip packaging companies from China
 Tool vendors of design automation and testing from the
US and India
 Design support service providers from various Asian
locations

15. Firm strategy, structure & rivalry
 Progress in manufacturing technology
 Convergence of digital computing, communication,
and consumer devices
 Product life cycles have been reduced
 Vertical specialization: Disintegration in the design
value chain & dispersing it geographically

16. Government
A powerful
tool in driving
innovation
Legal
Tax rebates
framework
Education Regulations
Infrastructure IPR

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

18. INTERNATIONAL TRADE THEORIES
Theory of Factor Country International
comparative endowment similarity product life
advantage theory theory cycle theory

19. 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.

20. 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.

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

22. International product life cycle theory
 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

23. Recommendations
 Training & Education
 Incentives
 Infrastructure

24. Thank You!!