Role of IPR in semiconductor industry - the contribution of IPR to FDI

Abstract

The attractiveness of India as a design centre for semiconductor companies stemmed from the cheap skilled labor that it provided. However, over the years, when the semiconductor design industry expands in India, it will lead to an increase in wages. Presently, India is attractive not as a low-cost design centre but as a centre that provides a constant stream of talented and skilled employees. The cost ratio of Indian employees to their U.S. counterparts has become 0.8:1 but the design industry continues to grow. The Indian electronics industry is booming and is expected to increase to $320 billion by 2015. Also, when expansion of the semiconductor design industry takes place in India through FDI, many issues will come to the fore, including IPR protection. It is commonly assumed that FDI is promoted by IPR regimes. Strong IPR regimes, by permitting FDI, will lead to a sharp growth of the concerned industry. But China’s example shows that IPR regimes have not been a strong factor in FDI flows. US by contrast, is considered to have provided a converse example of innovations and investments being promoted by IPR regimes, particularly in the high-tech industry. The question is how India will fare in the high-tech segment such as the semi-conductor industry. Since India’s semiconductor industry is design-driven and in its nascent phase, we do not have a strong database to support empirical findings. Therefore, we need to speculate on this issue, in the light of the policy and law on IP and FDI. We try to assess the importance of IP in the semiconductor industry in India by working on how IPR is likely to account for FDI flows in the semiconductor industry. FDI inflows into a country depend on several factors, one of which could be the strength of an IPR regime. In this study, we look at the different type of linkages between FDI and IPR and try to ascertain whether an increase in strength of the IPR regime of a country would lead to an increase in FDI inflow in the semiconductor industry in the country. Thus, we try to speculate on the linkage between FDI and IP Regimes in India and how the changes in policy will affect the semiconductor industry. Finally we propose solutions for the semiconductor industry and for the policy makers that can remedy the issues discussed.