Connected, ‘Smarter’ and ‘Power Efficient’ are the three buzzwords the consumer of this generation is looking for in almost all technology products.
Devices that offer high performance, consume low power and provide connectivity through audio, video and data are flying off the shelves at a much faster pace.
While two decades ago, technologies were driven by the enterprise to build efficient organisations, over the last decade, with the opening of economies such as China and India, the end consumers have started to drive technological trends. This has created an enormous opportunity for the semiconductor industry.
GROWTH DRIVERS
The Indian semiconductor industry has witnessed a significant growth momentum led by multiple factors — such as increased consumption of electronic goods, Government’s focus on e-governance infrastructure and services, and a huge demand for networking products, especially in the telecom segment.
Proliferation of smart devices such as smartphones, tablets, smart TVs due to high disposable income, rise in the sale of automotive and consumer goods, growing healthcare network and emerging trends in personal monitoring — marking the influx in the sale of medical equipment — are other key factors driving this growth. Intelligent embedded technologies are bringing down the cost of devices, leading to enhanced consumption.
While the consumer segment is a key driver of growth for the electronic industry, the Indian Government has also played its part in impacting the industry. The Government is bullish on bringing significant transformation and is supporting adoption of next generation technologies to enable this.
An impetus has been given to broadband penetration, digitisation of cable industry, e-governance initiatives, particularly in the area of education and healthcare, and efficient smart grid solutions to address transmission and distribution issues of the power sector.
This has created a demand for intelligent networking products to build a smart and efficient infrastructure.
The advent of new technologies such as 3G and 4G is also augmenting this demand. These factors are acting as a force multiplier, contributing towards the semiconductor industry’s growth in India.
Apart from the rise in consumption, India’s prowess also lies in the R&D centres that are driving innovation. India has now moved beyond labour-cost arbitrage and truly contributes towards product innovation.
The centres here are involved in end-to-end design and are contributing in the global value chain.
Over the last decade, India has emerged as the poster boy for electronic design and apart from cost, factors such as scalability of talent, intellectual capital, evolving ecosystem are also responsible for bringing this recognition.
Electronics policy
The rapidly changing trends and growth of the electronic industry are creating a need for new improved products and solutions.
From the Indian market perspective, innovation is driving social inclusion and bringing about changes at the grass-root level and enhancing consumer’s experience with technology.
The Government has also realised the importance of innovation as an engine for growth and national prosperity and has thus termed this decade the “Decade of Innovation”.
While innovation is the driving factor to keep India’s image alive, efforts need to be made to ensure that India’s domestic production process is brought up to speed to bite into the growing market share, A recent industry report forecasts a compounded annual growth rate (CAGR) of 9.9 per cent for ESDM (electronic device/equipment designing and manufacturing) from $64.6 billion in 2011 to an estimated $94.2 billion in 2015.
The Government drafted and approved the National Electronics Policy last year to meet the projected domestic electronics demand of $400 billion by 2020.
The policy gave an impetus to some important facets, such as providing attractive fiscal incentives across the value chain of the ESDM sector through a Modified Special Incentive Package Scheme (M-SIPS) and facilitating the setting up of Semiconductor Wafer Fab facilities and its eco-system for design and fabrication of chips and chip components.
The policy also emphasised working closely with the private sector, universities and other institutions of learning and to design programmes to ensure that adequate trained and skilled manpower is available to the industry.
This will give impetus to the ESDM industry. In addition, the recent announcements of zero customs duty on import of plant and machinery, combined with the 15 per cent investment allowance for investments of over Rs 100 crore in plant and machinery, is a step that will encourage local manufacturing of semiconductors.
The focus on the development of industrial corridors and ports will further strengthen the Indian manufacturing industry.
The India market presents a huge potential owing to developments in key segments such as telecom, and burgeoning demand for advanced electronic products among the consumer segment.
GOVERNMENT’S ROLE
Yet, more gaps need to be filled. The industry report also says that high-value added manufacturing will run into a declining trend in 2015. This can be taken care of with appropriate investment in ESDM and infrastructure support.
Another question is the setting up of semiconductor wafer (or Fab) manufacturing. Fab is a capital-intensive business that will not generate short-term return, but it can add a lot of value to countries’ growth infrastructure.
While the policies might be one way to generate interest of the promoters, real value will only come when the Government becomes a lead investor and drives it. No doubt, we are running behind in chasing this dream, but a start has certainly been made.
What is needed now is that Government and industry work together to realise new horizons and opportunities in this sector.
(The author is Vice-President and Country Manager, Freescale Semiconductor India Pvt Ltd)