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June, 2011

The Indian semiconductor industry is on a growth path driven by an upsurge in domestic sales. The main sectors driving semiconductor sales in India are telecom, automotive, industrial electronics and consumer electronics. The solar energy, renewable energy and automated healthcare services sectors too are beginning to boost demand and growth for semiconductor products.

The industry clocked a growth rate of 15.6 per cent last year – in comparison, the global market has shrunk by 11 per cent since 2008 – aided by the growth in demand for wireless handsets, low-priced notebooks and smart cards.

The semiconductor industry in India is expected to get a boost due to the increase in the domestic consumption of electronics hardware. The demand for electronics hardware in India is set to grow from $45 billion in 2009 to US$ 400 billion by 2020, according to industry estimates. Further, by 2013, the market size for nanotechnology-enabled products will be around US$ 1.6 trillion. Nanodevices and subsystems would make up 10 per cent of the industry by then.

According to Department of Information Technology, over US$ 2 billion worth of chip designs are being exported from India which is developed by nearly 20,000 Indian professionals.

According to Frost & Sullivan analysts, the semiconductor market growth is expected to be driven by products and services such as set-top boxes, wireless handsets, the 3G rollout, deployment of WiMAX, notebooks and smart cards. Opportunities exist for semiconductors in LCD TV, digital camera and storage flash memory markets. The market is expected to reach to US$ 8.04 billion by 2011.

As per the latest report by Gartner, Inc. the worldwide semiconductor revenue is predicted to touch US$ 300 billion in 2010, registering a growth of 31.5 per cent, as compared to US$ 228 billion in 2009. Analysts also expect that the worldwide semiconductor revenue would reach US$ 314 in 2011, growing at a rate 4.6 per cent from 2010. Further, the semiconductor capital equipment spending globally is expected to reach US$ 36.9 billion in 2010, a 122.1 per cent increase from 2009 spending of US$ 16.6 billion, according to Gartner.

Government Initiatives

The government’s Special Incentive Package Scheme (SIPS), aimed at galvanising investments in semiconductor fabs, ecosystem units and solar PV projects, has attracted 26 proposals, worth more than US$ 51.7 billion.

The scheme closed on March 31, 2010, three years after it was flagged off by the central government. The government has given an in-principle approval to 13 proposals. Most proposals received are to do with the production of solar PV cells and modules, while only a few applications are in the areas of wafer-fab or other eco-system units.

Under SIPS, the Centre is likely to provide incentive of 20 per cent capital expenditure during the first 10 years for the units in special economic zones (SEZs) and 25 per cent of the capital expenditure in non-SEZ units. Any unit can claim incentives in the form of capital subsidy or equity participation.

In the first week of February 2010, Karnataka announced a comprehensive semiconductor policy aimed at attracting electronics and hardware companies to the state. The policy has promised sops and financial assistance by the state government to companies in the electronics systems and semiconductor space.