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 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.
According to the government of India Task Force report (DietY), the ESDM market in India expects the imports to come down to 50 per cent by the year 2016 as compared to 65 per cent in 2014-15 leading to creation of around 27 million job opportunities.
Over the past several years, many original equipment manufacturers (OEMs) and integrated device manufacturers (IDMs) have invested in the Indian semiconductor space.
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$ 900 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$ 1.53 billion between April 2000 and September 2015.
Some of the notable developments in this sector are as follows:
The electronic system design and manufacturing (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 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.
Some of the major initiatives taken by the Government of India to boost the Indian semiconductor industry are as follows:
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$ 0.015 as on December 17, 2015
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
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