Semiconductor
India has become the hub for semiconductor design with nearly 2,000 chips being designed per year.

Semiconductor Industry in India

Latest update: June, 2014

Market Size

Share of Indian semiconductor sector in global semiconductor market is expected to reach 1.62 per cent in 2009, which will represent a compound annual growth rate (CAGR) of 26.7 per cent.

Market Size - Share of Indian semiconductor sector

Segment

The telecom segment is the largest application segment contributing to the semiconductor market. It registered a market share of 44 per cent in 2006 and is expected to grow to 46 per cent in 2009.

Semiconductors Market - Segmentwise Contribution

Market Size

According to an ISA 2007 report, the Indian semiconductor market has grown from approximately US$ 2.1 billion to approximately US$ 4.1 billion.

Market Size - Growth in Indian Semiconductor Market

Segment

Revenues earned by embedded software is expected to register a CAGR of 30 per cent from 2005 to 2015.

Semiconductor - Revenues Earned by Embedded Softwares

Updated: June, 2014

SECTORAL REPORT | November, 2009

Brief Introduction

The semiconductors and electronics sector is a key player in the economy and one of the most globalised industries in the world. It is a strategic enabler and a driving force for all the services, be it the Internet, telecom, precision engineering industries, aviation, energy or banking. The rapidly growing Indian electronics industry can be broadly categorised into six segments. They are consumer electronics (the largest chunk of the market), industrial electronics, strategic electronics, computers, communication and broadcasting equipment, and electronic components.

India has a well-developed semiconductor design industry and is ranked second, globally, in terms of design revenues. The government’s initiatives as well as the potential of the growing electronics goods market in the country has attracted many global original equipment manufacturers (OEMs) and Electronic Manufacturing Services (EMS) firms, including Samsung, LG, Nokia, Toyota, Hyundai, Flextronics, among others, to set up their facilities in India in recent years.

Market Size

The rapid growth of consumer electronics in India and the growing demand for smartphones and tablets are the key growth drivers of the overall electronics market. The domestic Electronic System Design and Manufacturing (ESDM) market is expected to grow at a compound annual growth rate (CAGR) of 9.9 per cent and reach US$ 94.2 billion in 2015. The government also estimates the demand for electronics to increase to US$ 400 billion by 2020.

Presently, there are more than 120 companies in India focused on semiconductor design for global products.  According to the Department of Electronics and Information Technology (DeitY), nearly 2000 chips are being designed every year in India and more than 20,000 engineers are working on various aspects of chip design and verification.

Rising demand and availability of talent is expected to see the Indian semiconductor design market to grow to US$ 14.5 billion in 2015, according to a Frost and Sullivan report titled ‘Indian ESDM Markets (2011-2015)’.

Investments

In recent years, many OEMs and Integrated Device Manufacturers (IDMs) have invested in the semiconductor industry in India. Some of the notable investments in this sector are as follows:

  • DeitY has received proposals for investments worth Rs 65,000 crore (US$ 10.9 billion) in the area of semiconductor and electronics manufacturing. Out of this, Rs 13,800 crore (US$ 2.33 billion) are under an incentive scheme and the rest for investments in two silicon wafer foundries to be built in India.
  • Intel will invest US$ 120 million in setting up a new research and development (R&D) centre in India. This facility will have a building spread over 18 acres with a built-up space of 60,000 sq m.
  • Socomec Innovative Power Solutions, France, has started production of the Delphys MP Elite UPS of 80-200 kVA range in India. The production in India will give the company a cost advantage and support business growth.
  • Indian Electrical and Electronics Manufacturers’ Association (IEEMA) has entered into a Memorandum of Understanding (MoU) with New York-based Institute of Electrical and Electronics Engineers (IEEE) to promote collaboration on various initiatives that include skill development and training in the electrical and electronics sectors, and enrichment of technical and technological knowledge among the electrical and electronics fraternity in India.
  • Philips India has entered the pain management category in consumer lifestyle division with its electronic products Infraphil and InfraCare, which focus on the aspect of an active life with less aches and pains.
  • Japan-based consumer electronics companies such as Sony, Panasonic, Hitachi, Daikin and Sharp are investing significantly in India, on the back of increasing consumer demand in India. Also, companies such as Samsung and Bosch have recently received approval for setting up their units in Noida, UP.

Government initiatives

The Government of India, over the years, has adopted several measures, including the formation of Software Technology Parks of India (STPI) in 1991 as well as 100 per cent Export oriented Units (EoUs), to upgrade the semiconductor industry in the country. Some of the initiatives take by the government in the recent past are as follows:

  • The government has announced a number of incentives for encouraging electronic manufacturing in the country known as Modified Special Incentive Package Scheme (M-SIPS), under which companies in certain electronic clusters will get about 25 per cent of cost as subsidies.
  • The government has set aside a sum of Rs 30,000 crore (US$ 5.05 billion) for setting up electronic manufacturing clusters and has been working alongside Indian Electronic and Semiconductor Association (IESA) to reduce India's dependence on imports for electronic components.
  • The Central government has also given the approval for setting up India's first ESDM brown-field cluster in Electronic City, Bengaluru at an estimated cost of Rs 85.15 crore(US$ 14.32 million).
  • DeitY has received over Rs 13,800 crore (US$ 2.32 billion) of investment proposals and has already cleared proposals worth Rs 4,000 crore (US$ 0.67 million) in the last few months.
  • The Centre has approved investment proposals worth Rs 961 crore (US$ 158.49 million) from Samsung, Bosch and Sahasra for setting up of ESDM facilities in the country. These proposals were received under Diety’s M-SIP scheme.

Road Ahead

The key drivers for the semiconductor market in India include telecom infrastructure equipment, wireless handsets, notebooks and other IT and office automation products, set-top boxes and smart cards. Growth sectors, including health care equipment, automotive, consumer goods and industrial goods—all of which increasingly use electronics—are also expected to boost semiconductor consumption in India.

India has one of the biggest domestic electronics markets that is looking to get even bigger in the coming years. There have been many important steps taken by the Government of India in this regard, such as striving for indigenous manufacture of chips.

Exchange rate used: INR 1 = US$ 0.01682 as on June 4, 2014

References: Ministry of Finance, Press Information Bureau (PIB), Media Reports and Press Releases, Department of Industrial Policy & Promotion (DIPP), Media reports, India Semiconductor Association, Ministry of Information Technology and Department of Electronics and Information Technology.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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