Last Updated: April 23, 2015
Dr Hector Ruiz
Chairman and CEO, Advanced Micro Devices
Updated: March, 2015
SECTORAL REPORT | November, 2009
The Indian semiconductor industry offers high growth potential as the areas where semiconductors are extensively used are themselves high growth areas. Semiconductors find applications across a wide range of industries such as Mobile Devices, Telecommunications, Information Technology & Office Automation (IT & OA), Industrial, Automotive and other industries (Aerospace, Defense and Medical industries).
According to the Department of Electronics and Information Technology (DeitY), nearly 2,000 chips are being designed every year in India and more than 20,000 engineers are working on various aspects of chip design and verification.
Over the years, the Indian semiconductor design industry has developed significant capabilities and currently works on state-of-the-art products. Growing technical competence combined with stringent IP protection environment and trend towards localisation of contents will help this segment continue to grow.
There are more than 120 companies in India focused on semiconductor design for global products. This industry has witnessed a robust growth of 17.3 per cent since 2009 and today boasts of a 5.1 percent share of the global pie. Considering the continued growth momentum, the Indian semiconductor design market is expected touch US$ 14.5 billion in 2015.
According to the India Electronics & Semiconductor Association, the Indian electronic system design and manufacturing (ESDM) market will grow from US$ 76 billion in 2013 to US$ 94 billion in 2015. The industry is expected to touch US$ 400 billion by 2020. Consumption of semiconductors, in the meantime, has also steadily climbed. It is projected to grow from US$ 7 billion in 2013 to US$10 billion in 2015.
According to the latest report by NOVONOUS, the semi conductor industry is estimated to grow from US$ 10.02 billion in 2013 to US$ 52.58 billion in 2020 at CAGR of 26.72 per cent.
The research report concludes that mobile devices are expected to grow at CAGR of 33.4 per cent from 2013 to 2020. The contribution to semiconductor revenue is expected to grow from 35.4 per cent in 2013 to 50.7 per cent in 2020. Also, the telecommunication segment is expected to grow at a CAGR of 26.8 per cent from 2013 to 2020 and its contribution to total revenue will remain the same at 19.7 per cent in 2020. The report further states that IT&OA segment will grow at CAGR of 18.2 per cent over the next seven years.
Consumer electronics segment is expected to grow at a CAGR of 18.8 per cent and the contribution to the total semiconductor revenue will come down from 5.6 per cent in 2013 to 3.5 per cent in 2020. Industrial electronics segment is expected to grow at CAGR of 19.6 per cent.
Automotive electronics segment is expected to grow faster at CAGR of 30.5 per cent from 2013 to 2020; and its revenue contribution will increase from 3.2 per cent in 2013 to 3.9 per cent in 2020.
In recent years, many original equipment manufacturers (OEMs) and integrated device manufacturers (IDMs) have invested in the Indian semiconductor industry.
The government expects investment proposals in electronics manufacturing to "more than double" in the two years to 2017-18, giving a push to the government's 'Make in India' initiative. Of the 54 proposals received, the Centre has approved 30 requests entailing investments of Rs 6,000 crore (US$ 965.49 million), while 24 are in an "advanced stage" and are likely to be cleared before the end of this financial year.
According to data released by the Department of Industrial Policy and Promotion (DIPP), the electronics sector attracted foreign direct investment (FDI) worth US$ 1,417.42 million between April 2000 and January 2015. Also, the telecommunications sector attracted FDI worth US$ 16,994.68 million during the same period.
Some of the notable investments in this sector are as follows:
The electronic system design and manufacturing (ESDM) industry will benefit from the government's “Make in India” campaign and is projected to see investment proposals worth Rs 10,000 crore (US$ 1.61 billion) over the next two years, according to the India Electronics and Semiconductor Association (IESA), an industry body.
Steps are being taken to boost domestic production of electronic items and reduce dependence on imports. These include imposition of basic customs duty on certain items falling outside the purview of IT Agreement, exemption from SAD on inputs/components for PC manufacturing, imposition of education cess on imported electronic products for parity, etc.
Some of the major initiatives taken by the Government of India to boost the Indian semiconductor industry are as follows:
It is very encouraging to see increased focus on the ESDM sector in last couple of years and a significant amount of work was done to bring out National Electronics Policy and National Telecom Policy, by the government in consultation with industry. Some of the initiatives outlined in these policies are already in the process of implementation, such as Preferential Market Access (PMS), Electronics Manufacturing Clusters (EMC) and Modified Special Incentive Package Scheme (M-SIPS). By 2020, this consumption can rise to US$ 55 billion. With the location of a fab in India, the country could achieve a degree of self-sufficiency in electronics, and partially reduce the very high supply chain risks that India is exposed to, without an alternate source for procurement.
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.
Exchange rate used: INR 1 = US$ 0.016 as on March 24, 2015
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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