India is strong in semiconductor design. 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.
The Electronics Systems Design and Manufacturing (ESDM) sector ranks high among the various segments that have contributed to creating this bulwark.
The ESDM industry is expected to grow at a compound annual growth rate (CAGR) of 9.9 per cent between 2011 and 2015, resulting in an industry size of US$ 94.2 billion by 2015.
The market for electronic products comprises of domestic demand and products manufactured for exports. This market is expected to grow from US$ 52.4 billion in 2011 to US$ 74.6 billion in 2015.
The electronic components industry comprises of semiconductors and passive components. The overall consumption of semiconductors is expected to grow from US$ 6.1 billion in 2011 to US$ 9.66 billion in 2015.
In recent years, many original equipment manufacturers (OEMs) and integrated device manufacturers (IDMs) have invested in the Indian semiconductor industry.
According to data released by the Department of Industrial Policy and Promotion (DIPP), the electronics sector attracted foreign direct investment (FDI) worth Rs 6,337.12 crore (US$ 1.03 billion) between April 2000 and July 2014.
Some of the notable investments in this sector are as follows:
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$ 0.0163 as on September 25, 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.