Infosys makes bold move acquiring InSemi to bring “chip design as a service” to customers

Product design leaders should take notice of Infosys’s proposed acquisition of InSemi. From generative artificial intelligence (genAI) to IoT to autonomous automobiles, custom semiconductors are expected to be a competitive differentiator. With this acquisition, Infosys positions itself to bring semiconductor design capabilities to customers and enable new functionality across its product offerings. Adding semiconductor design services allows Infosys to use its technology-based capabilities to meet the emerging need to create revenue-oriented outcomes.

Semiconductor demand is increasing to nearly $600 billion in 2024

Market demand for semiconductor design is driving advances in system-on-a-chip (SOC), embedded integrated circuits (ICs), and new silicon-based and gallium nitride (GaN) semiconductors to support emerging technologies in automotive settings, GenAI, data-centers, IoT, and mobile devices. In November, the World Semiconductor Trade Statistics (WSTS) updated its semiconductor sales market valuation for 2023 to an estimated US $520 billion for the year. Further, it projects a 13% increase in spending, driving the worldwide semiconductor market to surpass $588 billion in 2024.

Custom-designed semiconductors offer advantages across industries that need specific computing, power, and processing capabilities

Semiconductors have long been associated with the high-tech and telecommunications markets. These chips powered the growth of data centers, personal computing, and the cloud. However, today’s users and enterprises interact with hundreds of ICs daily. Chips are in everything from healthcare devices to entertainment devices, automobiles, and many everyday items.

For decades, semiconductor design services have been used for semiconductor fabrication and manufacturing processes. Companies outsource IC design as part of their supply chain and often manage these as stock items rather than critical parts of their IT and data fabric. Yet recently, the growing need for custom-built semiconductors and ICs is increasing as firms like Apple and Meta design custom silicon for their devices, artificial intelligence, and video-processing solutions. They see custom silicon as enabling a competitive advantage.

Witnessing these firms’ successes with their custom silicon efforts is inspiring other firms to mimic these efforts and build silicon-based solutions that create new revenue opportunities. But to do so, they need access to additional technology talent and solution design services.

By adding InSemi, Infosys boosts its digital operating model and core capabilities

Infosys has been developing its capabilities to drive business outcomes based on its strong technology capabilities, talent, and partnerships. With the advent of automation, AI, and analytics, what HFS has long called the Triple-A Trifecta, adding InSemi’s design semiconductor capabilities allows Infosys to expand its services to clients. Now, clients can come to the firm for hardware, software, and semiconductor design, development, implementation, and support—a complete digital operating model across cloud and hybrid architectures.

HFS can expect this new semiconductor capability to enhance customer relationships where software engineering, AI, and optimizing compute align. Infosys can now offer these customers chip design services that address a firm’s ability to build complete systems that bring competitive differentiation. InSemi’s intellectual property and design services can create new lines of services that benefit the changing technology-enabled transformations.

It will be important for Infosys to effectively integrate InSemi’s offerings across multiple verticals, making it a central element of its go-to-market strategy. Infosys will need to decide if it plans to prioritize using InSemi’s capabilities with select sectors or take a sector-agnostic approach. It will also need to ensure the integration doesn’t impact InSemi’s existing clients.

GenAI is fueling the growth of semiconductor skill and knowledge investments

The growth of GenAI and the improvements in large language models (LLMs) are driving an increasing demand for designing AI-specialized chips. Currently, a GPT model can use the same computing power to resolve a complex question or create an intricate image as it does for a basic question like, “What is the date?” NVIDIA’s domain-specific LLM, ChipNeMo, has been designed to enhance the performance of specific tasks, indicating the need for specialized semiconductors to support AI applications; it has facilitated Nvidia’s becoming valued at over $1 trillion.

As the demand for custom-built LLMs and large action models increases, companies will look at how to deploy off-the-shelf and custom-built semiconductors for internal data centers and with hyperscaler partners. Clients will benefit from custom semiconductor design services when the services partner is also acutely aware of the client’s desired business outcomes, existing technology architecture, and challenges. Thus, there is an opportunity to align customer GenAI aspirations with Infosys’ digital core capabilities.

The Bottom Line: The proposed acquisition of InSemi strengthens Infosys’ engineering research and design to provide a chip-design-as-a-service to many of its key clients while opening new doors in a rapidly emerging market opportunity.

In anticipation of this trend, Infosys’s acquisition of InSemi prepares it to capitalize on this billion-dollar market by offering high-tech and traditional firms the capabilities to design, develop, and test semiconductors and integrated circuits. By offering these services in-house to its customers, Infosys can design semiconductors needed to optimize data, workloads, and applications. By engaging Infosys, enterprise clients improve the functionality and impact of their solutions, thus creating a potential competitive advantage in the markets they compete within.

For industry, IoT, and GenAI solutions, the chip design phase is the area with significant revenue opportunities. With the acquisition of InSemi, Infosys aims to make in the chip design area, adding teeth to its “chip to cloud” strategy. The collaboration will help bring InSemi’s design skills with Infosys’ existing investments in AI and automation platforms and industry partnerships.