Introduction
The semiconductor industry in India has come a long way. In the last decade, we have seen several global semiconductor companies set shop in India. Not only has this led to remarkable growth in the industry, but has also led to significant increase in product and design innovation in the domestic market. Rapid changes in technology, increasing complexity of equipment and falling prices have made innovation vital to reduce cost of production and increase return on investment (ROI). In India, most of the research and developments (R&D) labs working in the semiconductor domain are located in premier technical institutes such as the IITs, IISc and BITS Pilani. These institutes, with access to funding, quality infrastructure and a large talent pool, account for 70 per cent-75 per cent of semiconductor research activities in the country. Of all the research undertaken here, almost 43 per cent of the activities are in the area of chip design. India also ranks favourably in terms of the number of IEEE papers filed in fields related to semiconductor design.
India has a well-developed semiconductor design industry, with 120 design units. Various global integrated device manufacturers (IDMs) have established their captive design centers in the country, which ranks the second among the US, the UK, Germany, Sweden, China, Taiwan and Israel in terms of design revenues.
Market Size
Indian semiconductor industry has been witnessing tremendous growth over the past few years with rising demand for mobile handsets and PCs. On the back of prolific expansion of products and services, such as set-top boxes, wireless handsets, 3G rollout, WiMAX deployment, notebooks, and smart cards, it is expected that the market will be expanded at an accelerated rate in future. Other segments like digital camera, LCD TV, and storage flash memory products are some of the major prospective consumers to fuel further the future growth.
Electronics sales in India, which totalled US$ 40.7 billion in 2009, will touch US$ 400 billion by 2020. At present, local manufacturing accounts for about 40 per cent of consumption and it could increase to 80 per cent by 2020. Indeed, many global original equipment manufacturers (OEMs) and EMS firms, including Samsung, LG, Nokia, Toyota, Hyundai, Flextronics, Jabil, Foxconn, Sanmina, Elcoteq and Celestica, have set up manufacturing facilities in India in recent years, according to India Semiconductor Association (ISA).
The electronic system design and manufacturing (ESDM) sector of India is expected to touch US$ 94.2 billion by 2015 from US$ 64.6 billion in 2011, according to a report by the India Semiconductor Association (ISA) and Frost & Sullivan.
Investments
In India, after Bangalore, Noida has become a hub for semiconductor design industry with many major players having their offices and research and development (R&D) centres in Noida. Global MNCs such as Freescale, Mentor Graphics and Interra Systems have got their setup in Noida.
The electronics sector attracted foreign direct investment (FDI) worth Rs 5,462.94 crore (US$ 1 billion) during April 2000 to December 2012, according to the data released by the Department of Industrial Policy and Promotion (DIPP), Government of India.
Some of the major investments in Indian semiconductor industry include:
- US-based Texas Instruments (TI) has launched a centre of excellence at Netaji Subash Institute of Technology (NSIT), New Delhi. This is the first centre for embedded product development that TI is setting up in any educational institution in India
- Semiconductor company, Intersil Corporation has announced that it has opened a new design centre in Bengaluru. The centre will help develop new integrated circuits and reference designs, besides providing system-level application support for customers
- Indian start-up Lava announced its partnership with Intel at Mobile World Congress, with the launch of the first Intel-powered smartphone in India, the Xolo X900. Lava, which has so far focused on budget phones, will manufacture smartphones under the Xolo brandname
- ON Semiconductor Corporation has announced the availability of a full front-to-back process design kit for its High-Q Integrated Passive Device (IPD) processes. The product was developed for use with Agilent Technologies' Advanced Design System 2011 EDA software
Government Initiatives
The Government of India is continuously making efforts to boost Indian semiconductor industry and is attracting foreign and local players to establish semiconductor fabrication plants (fabs) in the country. For the purpose, the Government has set up an Empowered Committee that would invite a preliminary Expression of Interest (EoI) from potential technology providers and investors.
The Government has allowed 100 per cent FDI under the automatic route in fabs to promote semiconductor manufacturing in India. The FDI in Semiconductor sector in India were crucial for the development of the IT and the ITES sector in India.
India Semiconductor Association (ISA) is the premier representative of the Indian electronic system design and manufacturing (ESDM) industry since 2005. The trade body is imbibed with an objective to create global awareness for the Indian ESDM industry and support its growth by initiating focussed measures that would develop an appropriate ecosystem.
Some of the initiatives taken by the Government for boosting the semiconductor industry of India are:
- The National Electronics Policy 2012 is intended to promote manufacture of electronic goods in India. "We recognise the pivotal role of semiconductor wafer fabs in the eco-system of manufacture of electronics. I propose to provide appropriate incentives to semiconductor wafer fab manufacturing facilities, including zero customs duty for plant and machinery", said Mr P Chidambaram, Union Minister of Finance, Government of India
- Incentives to semiconductor wafer fab manufacturing facilities, including zero customs duty for plant and machinery have been provided in the Union Budget 2013-14
- The country's first fabrication facility, a silicon wafer design and chip manufacturing plant, is expected to be announced soon by the central government with a US$ 2 billion to US$ 3 billion investment range, thereby giving the industry a burst of confidence and a huge wave of growth in electronics manufacturing space
- India has set aside Rs 30,000 crore (US$ 5.52 billion) worth of incentives and subsidies to encourage firms to set up electronics manufacturing units in the country. The Government of India has also drafted a marketing plan to promote 'Made in India' electronics in the global market
- The Union Cabinet has approved a proposal to offer financial assistance for the development of Electronics Manufacturing Clusters (EMCs), to aid the growth of the Electronics Systems Design and Manufacturing (ESDM) sector in India. The scheme is expected to help flow of investment for development of the ESDM sector
Road Ahead
The Indian semiconductor sector is likely to witness a strong growth rate as a result of the expected vibrant performance of some of the related sectors such as automotive, consumer electronics and durables, IT hardware and office automation, and telecommunications.
The semiconductor sector is a knowledge-intensive sector and, thus, requires a large pool of engineering talent. Here, India has an edge over other countries owing to its large engineering skill pool.
India offers a large pool of a technically and scientifically-skilled English-speaking workforce. At the same time, the country has ample semiconductor design talent at competitive costs. For example, an employee in engineering services costs US$ 25 an hour in India, approximately one-third of the cost incurred on a similar employee of comparable skill and experience in the US. Approximately 20 per cent of the Fortune 500 companies have their R&D operations in India and recruit managerial and engineering staff locally for their Indian operations.
The initiatives taken by the Government and the industry are providing new business opportunities to existing companies to move up the value chain. The Government is working towards establishing a favourable FDI environment, reducing taxation rates, and offering fiscal and financial benefits to the semiconductor sector.
Exchange Rate Used: INR 1 = US$ 0.0184 as on March 22, 2012
References: Media reports, India Semiconductor Association, Ministry of Information Technology, CIOL, Wharton School
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