Ittiam Systems Private Limited was founded on January 1, 2001, by a team of senior professionals “with outstanding track records and a cumulative experience of 134 years in the VLSI / DSP industry”. Srini Rajam, formerly the Managing Director of Texas Instruments, India, leads the company. The members of Ittiam’s Leadership Team have held key responsibilities at various units of Texas Instruments in Asia, Europe and the U.S. Ittiam is a company, singularly focused on Digital Signal Processing (DSP) Systems. This is one of the fastest growing market segments, fueled by the ever-increasing need for bandwidth, mobility and convergence. DSP System is the core of new age devices from mobile phones, digital modems, MP3 players, digital still cameras, palm tops to high end disk drives, to name a few. The list is increasing by the day and DSP system is now a pervasive technology. indiamarkets spoke to Srini Rajam on DSP market structure, revenues of smaller DSP companies, why he set up Ittiam and where Indians score over others in the DSP space.

indiamarkets: Can you brief us about the DSP market structure?
Srini Rajam: The DSP market can be categorised into three levels.  The first level is the DSP processor market, which is fairly well established. As of 2000, the market stood at about $5 billion, being heavily dominated by players like Texas Instruments (which has close to 40-50 per cent share), Lucent, Motorola and Analog Devices.

At the next level is the market for creating software applications and systems design on the DSP.

The third level is the end equipment, which gets created using DSP research and technology. These are end equipment like audio players, digital modems, network equipments, cell phones and so on.

From Ittiam’s view point, the market we are interested in is the second level market - the market for software and systems design on DSP - where we intend to become the world’s best.

indiamarkets: Before starting Ittiam Systems, you had done a survey of the DSP market. Can you throw some light on it?
Srini Rajam: We have assessed the DSP market using two approaches.  Firstly, we have used the bottoms-up approach wherein we have looked at companies which are participating in this space. We analysed various data related to these companies like their revenues. The revenues of most of the companies participating in this space tend to be smaller in size i.e., in the range of $5-20 million. We then arrived at a cumulative figure. But then you do not know all the countries in the world. So, perhaps you are taking into account 50-60 per cent of them. Add a little bit of estimate over that. Then arrive at a figure.

We have also taken another approach. We have taken a tops-down approach, where we have looked at the demand for DSP software as expressed by the end equipment companies and what kind of efforts they estimate are involved in creating that.

Having analysed the market with both the approaches, we are fairly convinced that it’s a very strong and huge market and there is a great potential to be tapped because of the diversity of applications. 

In our ongoing estimate, which we keep validating, the market size is somewhere in the range of $9 billion encompassing all the companies in the world which either provide a software application or a system design solution over DSP.  

indiamarkets: Why is it that the revenues of most of these companies are small? Is it that they have not tapped the entire DSP software spectrum?
Srini Rajam: The key issue in scalability (that is the size of growth) in the DSP sector in my view is the ability to participate in multiple applications.  Most of the companies tend to be specialists in a single application. Like having an exceptional capability in audio, exceptional capability in wireless or broadband. It is a very good model to have, but that limits the size you can attain. There is difficulty in focusing on multiple domains because you need to develop multiple competencies. It is not easy. So the best way out is to be more application-focused and attain an optimum size in that area. 

By design, Ittiam is focused on multiple domains – wireless, broadband, audio and video. But we are not limited to these four areas; we are open to new areas that emerge. But we are very clear that we must participate in the wireless area, which includes mobile wireless, wireless infrastructure and wireline (Broadband). These are promising areas. It is a challenge to develop multiple expertise. That challenge has to be overcome if you want to be a sizeable company. 

indiamarkets: How many DSP software companies are there in India? 
Srini Rajam: There may be around 20-30 around India, but that is not an exact figure.

indiamarkets: You have decided to set up Ittiam at a time when the US economy is slowing down, at a time when the semiconductor market is not doing well.  Can you comment on this?
Srini Rajam: We have started this company with a passion - to create a truly world-class technology company.  We are very clear that this passion will be accomplished over a long period of time, may be five to 10 years.  We are clear that it cannot be accomplished in two to three years. Essentially, we are looking at long-term commitments. If you look at the semiconductor industry and the high technology industry, it has been cyclical for a long time.  We all know that in 1992 there was a slowdown. Again in ’96 there was a huge slowdown in the semiconductor industry. However, it picked up in 1998. So it keeps moving through slowdowns and recovering as well. 

The semiconductor industry will, very likely, be down again in the year 2004. One should not worry about it because the goal is 5-10 years, by which time you want to establish a good world-class technology company.  We will not worry about cyclical slowdown. At any point you start, it’s anyway going to come.

In the space we have chosen, we want to be the world’s best.

indiamarkets: What is your approach to product development?
Srini Rajam: Ittiam has adopted two approaches to product development. It is engaged in both custom product development as well as development of market-driven products.

In the customer-driven product development, the customer has an overall or totally clear idea or an initial idea of what DSP solution he needs. At times, Ittiam also proposes such a thing to a customer. Then Ittiam develops the product as a custom to the individual company. Ittiam gets revenue for the product that it delivers to the customer. Typically, the customers are the OEMs (Original Equipment Manufacturer) who need DSP solutions for their products. We will select for them the appropriate DSP platform for the given application. We will try to adopt the latest platforms available in the market so that the customer gets the best performance. 

In product development for customer, Ittiam will be responsible for performance, quality, time and cost, while the customer makes the payment on product delivery.

The second is what we call the market-driven approach which means that we have a few ideas and we develop the products based on those ideas. While we are developing on those ideas, we keep the dialogue going with potential customers, keeping them abreast of what we are doing. Perhaps some customer may find an interest in the product we are developing or the customer may suggest a few improvements. However, it is not a commitment either from the customer’s side or our side to give it to them. As the product gets completed, we take it through our marketing channel and eventually make it available to multiple customers.

indiamarkets: It’s almost five months since you have set up Ittiam. What products can we expect Ittiam to launch this year?
Srini Rajam: We have been operational for the last three months. January and February we (seven of us) mostly spent in setting up Ittiam.  At the moment, we are engaged in developing three products in the first category and two products in the second category. The first phase of the first product of the first category has already been released and the customer has endorsed or expressed satisfaction over what we have delivered to him. The final phase of that is slated for July. Two others are scheduled to be released in the third and fourth quarter of this year.  In the second category, the first product will come out in December 2001 and the second product most likely in the first half of the next year.  We cannot give you exact specifications as we don’t want many people duplicating it.  But we are working in the MPEG4 area. 

indiamarkets: Is Ittiam open for collaboration? 
Srini Rajam: Yes. At present, there is a discussion going on between Ittiam and another company about collaboration. Our idea is very simple. These days, in order to deliver the total system, we need multiple partners and each partner needs to be the best in what he does. We cannot work with one company which has average competency in five areas.  We have to work with five companies, which are the best in those five areas.  In our area, I can think of at least 20 types of skills which are needed to have a peak software system.

If a customer wants a system on silicon which involves system level integration, we would not do it in Ittiam entirely. We would work with another company towards delivering the product to the customer.

Depending on the opportunity, we would like to be a partner with other companies. We would like to create a difference by which the customer sees a single ownership (may be Ittiam or any other company).  We will tie up with other companies and work together to deliver what the customer wants.

indiamarkets: Why are Indian semiconductor companies so reluctant to enter into collaboration?
Srini Rajam: I don’t know the exact reasons. The reluctance could be because of lack of confidence in companies to whom a part of the project is outsourced. Since you are undertaking responsibility to the customer and you are going to depend on 2-3 other partners to deliver that, it is likely that one may not have enough confidence. The easier approach would be: “We try to do everything ourselves”. But in that approach, we tend to lose out on the efficiency cycle time and the performance of the whole product. 

indiamarkets: How do you ensure privacy of the product? 
Srini Rajam: If two companies collaborate to develop a product, both companies can have joint ownership or joint rights.  Either one company alone markets the product or both companies market it together and share the revenue, depending on agreed terms. This model will work provided the companies share a good relationship. However, it takes time to build relationships.  From the start, you should be clear that in the future, you are not going to step into somebody else’s domain.

If there is some company which wants to enter the DSP software domain next year, we would rather not work with them and the same is true the other way round. 

indiamarkets: Why is it so essential for an industry to collaborate with academic institutions?
Srini Rajam: As you work in very advanced areas, you would like to have some competency and skill development happening in the campuses itself.  Otherwise you are looking at a lot of lead-time for people to come in and pick up those skills.  The areas we are working on are probably just one or two years old in the whole world. When you want to work in such an area, it’s better that the students from top campuses who are already nurtured, come in and join you. This gives you a tremendous cycle time advantage in terms of projects.

Secondly, innovation is going to happen everywhere in the world. However, campuses are a great place for those innovations to happen.  So we would like to have some joint collaboration going on through which some idea is prototyped in the institution and we take it from there.

We are already in dialogue with a lot of professors. We are discussing with Indian Institute of Science (IISc) as it is very good in terms of DSP; moreover, it is based in Bangalore.

indiamarkets: What extra advantage do Indian designers have over US designers? How easy is it for you to set up a team in India than the US?
Srini Rajam: If you look at most of the design tasks these days- chip design, system design, board design – we are getting very heavily software-driven. Software is playing a huge role both as an engine inside the systems as well as the tool that automates the design. Essentially these days, whether a person is a VLSI design engineer or a systems engineer, apart from having design skill, he needs to have software skills also. That I think is the biggest advantage of India. We have software abilities that will help us a lot.

As for the team, we can surely set up a team much faster in India, especially in Bangalore, specifically because of the sheer availability of talent. We have tremendous concentration of high technology engineers in one city. That is very rare. Bangalore is one of the very few places in the world, like the Santa Clara region, where talent is available. In a matter of eight weeks or so, we got a team of about 35-40, comprising professionals with the highest quality in very specific focused areas of DSP.

indiamarkets: You say there is lot of talent available. But many a time we speak about manpower shortage. Can you justify this paradox?
Srini Rajam: Ittiam’s first team of 20 people was selected from about 10,000 applications we got for a single advertisement. If the company has the ability to attract people, then I think you have a lot of talent available. But that’s not the reason not to develop talent. We definitely need to create more talent. We have to broaden the talent base. Opportunities exist in terms of collaborating with universities.

indiamarkets: What percentage of the overall design cost are we saving by getting a chip designed in India?
Srini Rajam: One thing you have to keep in mind is that chip design project involves development and product life cycle. Lets say $x is the development investment. During the life cycle of the product sales, say, it will probably get $100x. So the development cost is a small fraction of the overall lifetime value of the product (if that product is successful). Therefore, optimising the development cost is not the first objective of the design manufacturer. A business manager knows that by cutting down 20 per cent of that 1-2 per cent of the overall cost of the product value, not much cost-cutting is achieved. The overall value is many many magnitudes higher than the development cost. So what a business manager is looking for in doing design in India is whether the design can be delivered in time. Whether he can deliver it at the highest performance? If these two things can be satisfied, then by doing the design in India, I will surely cut down the development cost. But in my view, cutting down the cost is the fourth criteria and not the first one.

indiamarkets: What extra strengths does India have over other countries, especially at a time when the industry is slowing?
Srini Rajam: India’s strength has been in terms of world-class talent. The talent is growing in terms of value delivery to the customer. India has a huge advantage. If you look at everything in terms of price performance - that is the value you deliver at the cost you deliver - we are at a greater advantage.

indiamarkets: Can you compare the Indian semiconductor industry with that of China?
Srini Rajam: It is very difficult to compare the two. I do not have much information. China’s semiconductor industry has been traditionally focused very heavily on manufacturing. Indians are focused on design. However, these days China is looking toward designing as well.

indiamarkets: Do they have advantage over India as China has already has a manufacturing base?
Srini Rajam: If you look at system design and chip design, having manufacturing units close to the design is not necessarily an advantage. If there are enough tools  which can simulate manufacturing capability at the design level, then you can still have design houses at far away places. So when it comes to manufacturing chips, though China may be one of the largest manufacturers outside the US, it may not be an advantage as we in India still have the required design expertise.

The interviewer Pradeep B S, can be contacted at pradeep@indiamarkets.com