The Indian semiconductor industry offers high growth potential areas as the industries which source semiconductors as inputs are themselves witnessing high demand. The end-use industries such as mobile devices, telecommunication equipment, information technology, office automation (IT & OA), industrial machinery, automobiles and several other industries have applications for computing in some form or other and thereby necessarily have growing demand for semiconductors. Now with the concept of Internet of Things (IoT) picking up momentum, the next generation of interconnected devices would further increase the demand for intelligent computing, thereby creating sustainable demand for semiconductors.
India has a very fast growing electronics system design manufacturing (ESDM) industry. India also has a strong design base with more than 120 units. 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. The government has a strong focus in developing the ESDM ecosystem in India. Several subsidies and other incentives are on offer for setting up electronics manufacturing units in India.
According to a study by The Associated Chambers of Commerce of India (ASSOCHAM) and EY, the Indian electronics and hardware industry is expected to reach US$ 112-130 billion by 2018 as electronics and hardware manufacturers are looking to increase their manufacturing base in India to cater to the domestic market as well as the Middle East, Africa and SAARC countries.
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$ 400 billion by 2020. Consumption of semiconductors, in the meantime, has also steadily climbed. According to a report by NOVONOUS, the semiconductor industry is estimated to grow from US$ 10.02 billion in 2013 to US$ 52.58 billion in 2020 at a Compound Annual Growth Rate (CAGR) of 26.72 per cent.
The research report expects that mobile devices are expected to grow at a high CAGR of 33.4 per cent between 2013 and 2020. Consequently the share of mobile devices in semiconductor revenue is expected to grow from 35.4 per cent in 2013 to 50.7 per cent in 2020. Further, the telecommunication segment is also expected to grow at a high CAGR of 26.8 per cent between 2013 and 2020. The IT&OA segment is estimated to grow at a CAGR of 18.2 per cent over the next seven years. Although consumer electronics segment is expected to grow at a CAGR of 18.8 per cent, its contribution to the total semiconductor revenue is expected to lower to 3.5 per cent in 2020 from 5.6 per cent in 2013. Automotive electronics segment is expected to grow at a fast clip of 30.5 per cent CAGR from 2013 to 2020. Consequently, its revenue contribution is set to rise to 3.9 per cent in 2020 from 3.2 per cent in 2013.
Mr Ravi Shankar Prasad, Union Minister of Information Technology, announced that the Foreign Direct Investment (FDI) in electronic manufacturing has reached an all-time high of Rs 123,000 crore (US$ 18.34 billion) in 2016 from around Rs 11,000 crore (US$ 1.64 billion) in 2014, primarily due to government reforms and its Make in India initiative.
The Government of India expects investment proposals in electronics manufacturing to increase two times 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$ 894.7 million), while 24 are in an advanced stage.
The Government of India has allowed 100 per cent Foreign Direct Investment (FDI) under the automatic route in Electronics Systems Design & Manufacturing sector. According to the data released by the Department of Industrial Policy and Promotion (DIPP), the electronics sector attracted foreign direct investment (FDI) worth US$ 1.64billion between April 2000 and March2016.
Some of the notable developments in this sector are as follows:
Mr Ravi Shankar Prasad, Union Minister of Electronics and Information Technology, inaugurated an Electropreneur Park at University of Delhi’s South Campus, which would incubate 50 early stage start-ups and create at least five global companies over a period of five years.
The 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$ 1.5 billion) over the next two years, according to the India Electronics and Semiconductor Association (IESA), an industry body.
The Government of Telangana plans to launch T-Works in Hyderabad, which will act as a prototyping centre for electronics, semiconductors and hardware start-ups on the lines of California State’s Innovation Hub or iHub.
The Government of India has taken several steps to boost domestic production of electronic items and reduce dependence on imports. Some of these steps 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.
Gujarat government is planning to set up an electronics products manufacturing hub in the state, through its newly announced Electronics Policy 2016, which will generate about 500,000 jobs in the electronics sector in the next five years.
The government also plans to invest US$10 billion in two computer chip manufacturing facilities with a view to create an ecosystem that lays the focus on high-end innovation.
The Union Cabinet has reconstituted an empowered committee on setting up semiconductor wafer fabrication manufacturing facilities in the country.
The government, in consultation with semiconductor industry, has increased focus on the ESDM sector in last few years. Some of the initiatives outlined in the National Electronics policy and the National Telecom policy are already in the process of implementation, such as Preferential Market Access (PMS), Electronics Manufacturing Clusters (EMC) and Modified Special Incentive Package Scheme (M-SIPS). With the implementation of fabrication capabilities in India, the country could achieve a degree of self-sufficiency in electronics.
Exchange Rate Used: INR 1 = US$ 0.0149 as on September 21, 2016
References: Ministry of Finance, Press Information Bureau (PIB), Media Reports and Press Releases, Department of Industrial Policy & Promotion (DIPP), India Semiconductor Association, Ministry of Information Technology and Department of Electronics and Information Technology