Growth of Indian semicon market highlights urgent need for indigenous manufacturing

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By Richa Chakravarty

A report released by the India Semiconductor Association (ISA) together with Frost and Sullivan, on May 4, 2011, reports on the impressive growth registered by the Indian semiconductor market. This report, released by Dr Ajay Kumar, IAS, joint secretary, Department of Information Technology (DIT), clearly underlines the compelling need for domestic manufacturing, which will form the base for further growth, and strengthen the overall position of the semiconductor and electronics industry.

Exceeding expectations, the Indian semiconductor industry witnessed a growth of 28.3 per cent in the year 2010 and the total turnover of the semiconductor market currently stands at US$ 9.86 billion. “The semiconductor industry in India has immense potential to contribute significantly to the country’s growing economy. In addition, there are strategic reasons for a country of our size and GDP to develop a domestic electronics manufacturing ecosystem. We need local manufacturing to reduce the import bill of electronic components and we are quite optimistic about the government’s efforts to encourage local manufacturers,” says Dr Pradip K Dutta, chairman, ISA.

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The electronics industry in India has grown, yet the extent of value creation within the country is extremely limited. Thus, it is imperative to give a boost to local and indigenous manufacturing. “We are working closely with DIT (as a knowledge partner) to develop the right policies, framework, infrastructure and incentives, so that we can boost manufacturing, especially in the electronics sector. All these plans and policies, including the National Electronics Mission, Electronics Development Fund, wafer fab manufacturing, modified SIPS, some preferential procurement targets for ‘made in India’ products, etc, are efforts made by the government to encourage local manufacturing,” says Pradeep K Dutta.

Capitalising on existing strengths is what the industry needs to focus upon and here’s a quick look at those strengths/sectors that will not only bolster the semiconductor market but the electronics industry as a whole.

Opportunities uncorked

Local manufacturing of telecom equipment by OEMs and EMS companies will propel related semiconductor consumption by 50 per cent during 2010 to 2012. Mobile devices and the telecommunication segment are expected to witness explosive growth in manufacturing, which is projected to see an upspring of 77 per cent by 2012. The expanding mobile networks in remote and rural regions, combined with the proliferation of 3G and WiMAX services, is driving the demand for telecommunication infrastructure equipment. This indicates, high volume manufacturing opportunities that are yet to be tapped.

The automotive industry is another promising segment. The rapid adoption of electronics based control systems in automobiles has created immense scope for indigenous manufacturers to explore the segment. Though this field has encouraged local manufacturing, yet a stimulus is expected to increase investments in local manufacturing.

The advent of energy efficient technology has also been a key influencer in the growth of the industrial segment, which has good manufacturing opportunities. The CFL market in India has shown tremendous growth; also, the new entrant, LED technology, has emerged as a strong and competitive player.

Technological advancements are driving the transition to newer and better products by increasing the consumption of LCD TVs, digital set top boxes and digital cameras, thus pushing up the growth of the consumer electronics segment.

Call for action

Demand from all these segments will contribute to the revenues of the Indian semiconductor industry and there are ample indications that high volume manufacturing opportunities are yet to be tapped. However, the government needs to encourage local manufacturing by creating the right environment and infrastructure for growth, and the players need to grab this opportunity. Despite efforts made through policy changes and incentives, there has been a failure to create an ecosystem that nurtures electronics manufacturing within the country. Thus, local manufacturing should be the focal point at the moment and the government should take the initiative to enable this.

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