Semiconductors

India has today become a player to reckon within the international semiconductor market. It is already a preferred destination for chip designing and embedded software and is now taking up manufacturing of semiconductors for the domestic as well as the global markets. According to the India Semiconductor Association (ISA)—the premier body of semiconductor companies and chip design firms in the country— the semiconductor market in India will touch US$ 36 billion in sales by 2015, growing 29.9 per cent every year as design, development and consumption of electronic devices grow. In 2009, the Indian semiconductor market is expected to be US$ 5.5 billion, up from US$ 2.7 billion in 2007.

The ISA-Ernst and Young in their benchmarking study, 'India in the Global Semiconductor Design Ecosystem', rates India as the best on availability and scalability of talent among different destinations, including Silicon Valley, Taiwan, UK, Israel, Canada and the Czech Republic.

India Advantage

India has certain natural advantages that have attracted many global companies to set up their Indian operations.

• The Indian consumer market is expanding rapidly and is expected to see a ten-fold rise in middle class population and four-fold rise in household income by 2025 from 2005.
• India has one of the largest cost-competitive technical workforces in the world.
• The country has immense manufacturing capability which spans almost all areas of manufacturing activity.
• The Indian information technology industry is burgeoning, throwing up great opportunities.
• The country provides well-developed R&D, infrastructure, and technical and marketing services.
• The Indian banking system is well developed comprising a commercial banking network of over 64,000 branches, supported by a number of national and state level financial institutions.

Broad-based Growth Potential

India has huge potential across different segments of the semiconductor value chain, from board, chip and systems design to finished electronic products. According to a report by ISA Frost and Sullivan, while the total available market (TAM) revenues are estimated to increase at a compound annual growth rate (CAGR) of 35.8 per cent to US$ 3.18 billion in 2009 from US$ 1.26 billion in 2006, total market revenues are estimated to grow at a CAGR of 26.7 per cent from US$ 2.69 billion in 2006 to US$ 5.49 billion in 2009.

The top five end-user products that are expected to drive growth over the period 2007–09 would be: mobile handsets, desktops and notebooks, GSM base stations, set top box and energy meters. Over the long term, the growth is likely to be sustained with robust growth of the electronics industry. India's electronic consumption which was US$ 28 billion in 2005 is estimated to grow at a 29.8 per cent to US$ 363 billion by 2015. Simultaneously, India's share in the world market is likely to grow from 1.8 per cent in 2005 to 11 per cent in 2015.

Significantly, the semiconductor content in the estimated electronic consumption in 2015 is expected to be US$ 36.3 billion accounting for 6.5 per cent of the global semiconductor revenues. Also, the estimated electronics production potential of US$ 155 billion in 2015 is expected to create an opportunity of US$ 15.52 billion for semiconductor companies and also for Electronic Manufacturing Services (EMS) companies.

Chip Design Sector

India has almost 130 chip design companies, with almost all global design semiconductor companies setting up design operations in India. The Indian semiconductor design industry consists of very large scale integration (VLSI) design, board design and embedded software companies. The Indian semiconductor design services industry is estimated to grow at a compounded annual growth rate (CAGR) of 21.7 per cent to US$ 10.96 billion in 2010, from the current level of US$ 6 billion and clock revenues worth US$ 7.3 billion by 2008-end.