Automotive electronics: Regulations that stipulate installation of immobilizers, engine management system (EMS), and engine control unit (ECU) have worked to the advantage of electronics and semiconductor industry. Pollution and global warming have led to the mandatory implementation of EMS and ECU. Environment friendly vehicle engines and greater use of electronics clusters are expected to boost TAM revenues in 2009. Several companies are expected to commence production of these automotive electronic products in India, which is expected to encourage the semiconductor industry.

Industrial electronics: High volume products like energy meters, UPS, and inverters are expected to continue their contribution to the TAM revenues. Technology shifts toward automatic energy reading, compact UPS, and digital controls are anticipated to favor DSP TAM revenues.

Others: End-use products of smart cards and point of sale (PoS) equipment are expected to be driven by government projects and the retail sector, respectively. Investments by government agencies and companies like DRDO, ISRO, and BEL into modernizing their communication systems and weapon delivery systems and improving their space research initiatives are anticipated to augment the semiconductor TAM revenue opportunities.

Current industry scenario

The Indian semiconductor design industry consists of very large-scale integration (VLSI) design, board design and embedded software companies. These are spread across the country and constitute both multinationals and domestic companies. The industry turnover is estimated at USD 4.6 billion at present, with an engineering workforce of around 102, 1200. It is estimated to reach USD 43 billion by the year 2015 and provide jobs to 780,000 professionals with a CAGR of 30 percent for this period.

Captive companies or subsidiaries of multinationals have scaled up to carrying out end-to-end design and development activities. Another promising statistic is that design starts in India are set to rise from 710 in 2006 to 3248 in 2015. Nine out of the top 10 fabless companies have India operations-with the exception of Avago Technologies.

Twenty-two of the top 25 semiconductor companies have India operations. The three companies not present are NEC Electronics, Qimonda and Matsushita Electric.

India’s chip manufacturing has been restricted to captive centers for defense and aerospace to date. However, announcement of the Semiconductor Policy 2007 will open doors to global investors in both chip manufacturing and its ecosystem. It has financial subsidies and it is necessary that due diligence take place before these benefits are sanctioned. The appointment of the Appraisal Committee and setting up of guidelines to evaluate investments are key factors to be considered for the long term effectiveness of the Policy.

Courtesy: ISA and Frost & Sullivan