Experts feel that the demand for chemicals and materials used in electronics manufacturing will increase, owing to growth in the Indian electronics industry
By Sudeshna Das (with inputs from Baishakhi Dutta)
The Indian electronics market is one of the fastest growing in the world and is anticipated to reach US$ 400 billion in 2022, with domestic manufacturing climbing to over US$ 100 billion. This burgeoning market presents an attractive opportunity to the suppliers of the chemicals and materials used in electronics manufacturing.
Solid, liquid and gaseous chemical substances are used in the fabrication of semiconductors and printed circuit boards (PCBs). Considering the important linkage of the chemicals sector with the electronics manufacturing industry, we (the Electronics Bazaar editorial team) decided to take a fresh look at it to understand how it has been shaping up by interacting with some industry stakeholders. However, rather than merely presenting perspectives shared by industry insiders, we also thought of sharing industry trends through a mini survey of a sample group.
This report highlights the key demand-side and supply-side drivers and challenges faced by companies in this sector.
Methodology
The Electronics Bazaar editorial team has collated information through primary interviews. We conducted 10 survey interviews with stakeholders from across global and Indian companies. This sample group is a microcosmic representation of the Indian electronics chemical and materials industry ecosystem, comprising suppliers of chemicals and materials as well as the users like PCB manufacturers and electronics manufacturing services (EMS) providers (Figure 1). These senior professionals shared their insights on the following:
- Approximate CAGR by 2020
- Market drivers
- Demand vs supply gap
- Types of products in demand
- Primary sources of products
- Market challenges
A trend analysis was done on the basis of their inputs and the results of the analysis are presented here.
Market opportunity
The increase in demand for electronics chemicals and materials is related to the overall growth in electronics manufacturing, as well as the technological innovations that will create opportunities for the use of these materials.
According to ResearchandMarkets, a global market research and consulting company based in the US, the electronics chemicals and materials market was valued at US$ 43.51 billion in 2015 and is expected to reach US$ 64.92 billion by 2022, with a CAGR of 6.1 per cent from 2016 to 2022. The wafer fabrication segment accounted for the major share of revenue in 2015 and is expected to maintain its lead throughout the analysis period. Silicon is the most common type of wafer fabrication material used globally, and accounts for about 17 per cent of market share.
The same report states that the demand for electronics chemicals and materials has increased owing to technological advancements as well as an increase in demand from applications like photovoltaics, integrated circuits, LED bulbs, and PCBs for electronic gadgets such as mobiles, laptops, computers, tablets, etc. There is a shift towards advanced technology nodes, which is driving the market for wafer fabrication chemicals and materials. Other factors that are driving this market’s growth include environmental regulations, an increase in the consumption of IC process chemicals, technological innovations, increasing demand for electronics, and rapid economic growth in emerging economies.
Sixty per cent of the survey participants forecast that the Indian market for chemicals and materials used in the electronics manufacturing industry will grow at a rate of up to 20 per cent. However, 20 per cent of the survey participants predict a growth rate of between 20-25 per cent. Another 20 per cent expect an even more accelerated growth – closer to 25 per cent.
Market mix
The materials used in electronics manufacturing are well-known high-purity chemicals such as photoresists, wet chemicals, acids, gases and solvents, and electronic materials such as wafers and laminates.
Based on the types of products used, the electronics materials and chemicals market can be classified into eight segments—silicon wafers, PCB laminates, photoresists, speciality gases, CMP slurries, wet chemicals, low-K dielectrics, and others (Table 1).
Market drivers
- Increased investment in electronics manufacturing by foreign OEMs
- Increased thrust on manufacturing in the electronics sector through the ‘Make in India’ drive
- The government’s new focus on the chemicals industry
- The demand for quality materials
Demand side
Silicon wafers constitute the major share of the global electronics chemicals and materials market and are widely used as the base for the manufacture of semiconductors. PCB laminates are widely used for manufacturing PCBs. Low-K dielectrics are a relatively recent application of semiconductors and integrated circuits (IC) and, therefore, are expected to grow aggressively in the next five years. However, the Indian market may be slightly different from the global market, with respect to demand.
The Indian market for electronics chemicals and materials does not, typically, follow global trends. Here, it is primarily driven by silicon wafers, PCB laminates, specialty gases and wet chemicals. Environmentally-safe products will continue to be in demand. Survey participants unanimously predict a huge demand for wet chemicals. According to them, the future growth will mainly come from the following three demand-generating categories (Figure 3):
1. Wet chemicals
2. PCB laminates
3. Silicon wafers
Supply side
The Indian market for electronics chemicals and materials has been growing at a fast pace, primarily driven by imports, as local production is insignificant in the country. Eighty per cent of survey participants report a demand-supply gap with respect to local production (Figure 4). The value addition through local manufacturers in India is quite limited, as a majority of high value and critical category chemicals are still imported.
Seventy per cent participants mentioned that imports are the main source of electronics chemicals and materials. However, 20 per cent of survey participants depend on local production and the remaining 10 per cent explore both the sources (Figure 5).
The local production ecosystem of electronics chemicals and materials is still not mature. Therefore, currently, the local sourcing is primarily limited to:
- Adhesives
- Basic level PCB cleaning and coating solutions
- Solder pastes
Market challenges
- Inadequate production infrastructure for low cost/cost-effective products
- Pressure from cost-sensitive markets
- Limited availability of high quality products
- Limited scale of electronics manufacturing in the country
- High import costs
- Unfavourable tax and duty structures
Silicon resins are imported in bulk. Advanced conformal coatings are also sourced mainly through imports. According to survey participants, a huge demand-supply gap exists in this category and cost-effectiveness plays a big role in the market. Â Chinese and Korean products have captured a major share of the market. PCB chemicals and fluxes are also imported, as no manufacturing is done in the country.
Moving forward
The Indian electronics chemicals and materials market is highly fragmented owing to the presence of many vendors. The market is characterised by the presence of several well-established global, regional and local suppliers. The competition in the market is expected to intensify due to the growth of the electronics industry and technological advances. Considering the growingimportance of this market, a few foreign companies plan to set up production units in India. This could help to bridge the demand-supply gap in this sector. Given that there is immense domestic demand for electronic products, the development of the electronics chemicals and materials industry will also help the entire electronics manufacturing ecosystem to achieve long-term sustainable growth in line with the Make in India initiative.
Major contributors
1. Chetan Uchil, partner, Aalpha Conformal Coating
2. Ronak Sonthalia, director, Silizon Technologies
3. Cibi Mathew, marketing manager, Hybrid Metals
4. Biju Thomas, proprietor, Superior Flux & Mfg Co
5. Suresh M., Â director, Syscotech India
6. Biju Philip, managing partner, EMT India
7. Manish Agarwal, Partner, Mectronics
8. Praveen Kumar M.S., marketing and BDM, SCH Coating Solutions
9. P. Gujral, director, Drive Technology
10. Arun Gupta, sales engineer, Saru Melting Ltd
