Local semiconductor production yet to reach potential

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With digital age nearby, the demand for electronics circuits is expected to touch the sky. But the local market continues to meet its demand with imports as big semiconductor manufacturers are reluctant to set up fabrication units (fabs) citing poor infrastructure and small market size.

Monday, November 19, 2012: According to research firm, Gartner, the total addressable market (TAM) for semiconductors in India at the end of 2012, is expected to be about $8 billion and this figure is projected to grow to $13.3 billion by 2016, a compounded annual growth rate (CAGR) of 12.4 per cent. The total addressable market refers to the revenue opportunity available for a product or service, which underlines the potential.

Experts suggest that setting up fab costs about $3 billion, which should run on full throttle, once installed. Ajay Kumar, joint secretary, Department of electronics and information technology (DeITy) said, “Quality of the inputs like power and water has to be assured. You have to create systems that the quality of infrastructure delivered is top-notch and this needs to be worked out and the onus of providing infrastructure lies on state governments.”

In reality, the Indian semiconductor market remains small, which is unattractive for potential investors. One of the reasons why the local market was small in India was because the government had chosen to look at the end product rather than components, referring to the ITA agreement that push import duties on electronic goods down to almost zero, which makes companies think over about producing in India.

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The government has been making an all out effort to encourage companies to set up fabs in India, after it had appointed Accenture, to review fabs processing and according to the government the response received has been good and that it was progressing well.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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