Print

Comment

Email

Digg

Del.icio.us

Reddit

With the electronics market witnessing a huge demand and consequently semiconductor consumption burgeoning in India with its 1.2 bn population, the Indian semiconductor industry has been witnessing a steady growth and will hopefully continue to grow exponentially.

As per the ISA-Frost & Sullivan study conducted recently, the Total Available Semiconductor market (TAM) in India is estimated at Rs 12,659.21 crore ($2.53 bn) in 2008, and is expected to grow at CAGR of 13.1% to Rs 16,211.79 crore ($3.24 bn) in 2010. According to the report, the total revenue of the Indian semiconductor market is poised to grow from Rs 29,521.47 crore ($5.9 bn) in 2008 to Rs 37,977.62 crore ($7.59 bn) in 2010 at a CAGR of 13.4%. The same group in its 2007 study reported a 26.7% CAGR growth. The decline to 13.4% in the current report is on account of revised investment and manufacturing scenario seen in the second half of FY 2007-08.

According to market research firm In-Stat, worldwide semiconductor revenue will decline by nearly 20% in 2009 to, from previous year's $199.2 bn. The industry will not recover to 2007 levels until at least by 2012. According to other market research agencies, worldwide semiconductor revenue totalled $255 bn in 2008, down 5.4%, or a decrease of $14.5 bn from 2007 revenue, and worldwide semiconductor revenue is forecast to reach $194.5 bn in 2009, a 24.1% decline from 2008 revenue.

Concerns
Though the design services market in India is faring better, the main concern of the industry is the poor manufacturing index with an underdeveloped hardware manufacturing ecosystem and product development expertise. Most of the products get designed overseas and import of CBU is still very common. This restricts the local sales of semiconductors.

Although India consumes a lot of electronics in various verticals, a very small portion is actually built in India. We need to put special emphasis on growing local product companies, while regulating participation of global companies in the Indian market by making them contribute significantly in the design, development as well as manufacturing of the products locally.

Players' Strategies
Semiconductor companies have adopted different strategies to weather the global recession and its impact on Indian industry. A semiconductor major, NXP will focus on providing chipsets and system solutions for set-top boxes, DTH, CRT, microcontrollers, discrete devices and smart card ICs to provide applications for e-governance, e-passports, financial inclusion and automatic fare collection in terms of offering solutions.

Xilinx, a major player in the digital programmable logic device (PLD) market, strongly believes that its 40 nm and 45 nm product line up, which will be rolled out in phases through this year, will help the company drive the programmable imperative. This will in general help it in the time of recession when there will be a move from ASIC or ASSP based products to FPGA based products due to the fact that it is no longer affordable to move to next node for a large number of ASIC and ASSP vendors.

Xilinx registered $1.9 bn revenue worldwide at the end of 2008. Its Asia Pacific operations; excluding Japan, contributed more than 30% of its worldwide revenue. In India, its main revenue came from communications infrastructure equipment, especially the optical transport equipments like the SONET/SDH add drop multiplexers, MSPPs and other allied telecom products.

Another major in semiconductor space, Freescale, plans to apply Intoto technology and talent to create high-performance applications and software components optimized to improve system performance, streamline development and enhance software support for its QorIQ multicore communications platforms.

Trends
There will be a shift from services to products in electronics and semiconductor spaces in the coming years, and, solar/PV sector will grow in India. The solar power offers new innovation opportunity as the energy shortage in India calls for major breakthrough in alternative energy sources. The DTH-S and cable STB story will continue to increase in India and there would be significant consolidation among the cable operators.

And on green front, there will be a need for energy conservation and the quest for preserving our environment for future generations. On market front, as Xilinx views, India has been a place for many semiconductor companies to do R&D, but increasingly it is also becoming an attractive market. This will make a shift from'made-in India' to 'made-for-India' for either products or solutions geared towards this market.

The Road Ahead
No doubt, India is a growth market. Overall infrastructure build for telecom, or for the country is still in its early days. 3G and WiMax deployments are imminent and there is a growing middle class with huge consumption potential, which all add up to a market that will witness growth over the next several years. Mobile handsets and other communications segments, IT, and office automation will drive the market growth. Products and services including STBs, mobile handsets, notebooks and smart cards are going to drive the market growth. LCD TV/HDTV, digital camera, and storage flash memory markets are expected to provide huge opportunity.

According to ISA, India is a story of growth and this is important in such times though growth may be below past projections. The currentslowdown will impact manufacturing investment prospects. A low manufacturing index for electronic products leads to higher imports, and thus, lowers the local potential for semiconductors and their key component.

However, India is relatively insulated from the global developments in the semiconductor industry, and it is expected to grow faster than the global semiconductor market. Opportunities exist and it is important to identify opportunities and innovate. For instance networking and telecom is set to grow. In India, we see opportunities in medical electronics, automotive especially in the two-wheeler segment, and alternative energy segment.

The global and Indian semiconductor industry foresees an impending revolution in the area of energy generation and consumption. Solar energy is going to be a major area that will address the energy requirements of the nation. We need to integrate solar into India's growth story and capitalize on the potential of turning India into a solar hub for the world. The outlook is positive and policy measures are being put in place. In addition, the need to ramp up and bring in economies of scale is essential.

Kannan K
kannan@cybermedia.co.in