The Indian semiconductor industry is on a growth path driven by an upsurge in domestic sales. The main sectors driving semiconductor sales in India are telecom, automotive, industrial electronics and consumer electronics. The solar energy, renewable energy and automated healthcare services sectors too are beginning to boost demand and growth for semiconductor products.

According to Frost & Sullivan analysts, the semiconductor market growth is expected to be driven by products and services such as set-top boxes, wireless handsets, the 3G rollout, deployment of WiMAX, notebooks and smart cards. Opportunities exist for semiconductors in LCD TV, digital camera and storage flash memory markets.

According to a report released by industry research firm IDC in May 2010, global semiconductor revenues are expected to increase 16-18 per cent in 2010.

Further, the global semiconductor market is expected to grow 27 per cent to US$ 290 billion in 2010, boosted by strong recovery in personal computers (PC) and cell phone sales, according to research firm Gartner’s outlook released in June 2010.

Government Initiatives

The government’s Special Incentive Package Scheme (SIPS), aimed at galvanising investments in semiconductor fabs, ecosystem units and solar PV projects, has attracted 26 proposals, worth more than US$ 51.7 billion.

The scheme closed on March 31, 2010, three years after it was flagged off by the central government. The government has given an in-principle approval to 13 proposals. Most proposals received are to do with the production of solar PV cells and modules, while only a few applications are in the areas of wafer-fab or other eco-system units.

Under SIPS, the Centre is likely to provide incentive of 20 per cent capital expenditure during the first 10 years for the units in special economic zones (SEZs) and 25 per cent of the capital expenditure in non-SEZ units. Any unit can claim incentives in the form of capital subsidy or equity participation.

In the first week of February 2010, Karnataka announced a comprehensive semiconductor policy aimed at attracting electronics and hardware companies to the state. The policy has promised sops and financial assistance by the state government to companies in the electronics systems and semiconductor space.

As per the policy, the state has made an additional provision of US$ 5.4 million towards a 26 per cent contribution to a fund for raising money from the market to assist start-up semiconductor units engaged in design and embedded software. The state has committed to set up ‘Karnataka Fund for Semiconductor Excellence’ with a corpus of US$ 2.14 million to encourage research and development (R&D) in chip design.

Moreover, to encourage semiconductor assembly, testing, marking and packing process (ATMP) units, the state government will provide incentives to such units in the state by lowering the threshold investment for ATMPs to US$ 85.7 million from the present US$ 214.3 million.

Public-Private Partnerships

Most of the top global semiconductor companies have set up their chip design centres in India. With the introduction of SIPS, it is expected that chip manufacturing may start in the near future. This would lead to the establishment of complete manufacturing environment in this sector in the country.

Of the 26 proposals received by the Department of Information Technology under SIPS, 13 have received in-principle approval. These include Titan Energy Systems, Reliance Industries, Tata BP Solar Power, PV Technologies India (a subsidiary of Moser Baer), KSK Surya PV Ventures, Signet Solar, Indo-Solar Ltd, Solar Semiconductors, TF SolarPower, Lanco Solar Pvt Ltd, EPV Solar and Bhaskar Silicon.

In November 2009, Moser Baer Photovoltaic, the wholly-owned subsidiary of Moser Baer India, announced that over the next ten years it would invest US$ 5 billion in its manufacturing facilities in Hyderabad and Chennai.

The India Semiconductor Association (ISA) in September 2009 signed a memorandum of understanding (MoU) with UK Trade and Investment to develop and encourage business ties and technology exchange between the semiconductor industries in both countries. The agreement means that Indian and UK firms will be working together on agreed business opportunity areas, combining complementary know-how, technology, IP and other capabilities.

Furthermore, the Centre for Railway Information Systems (CRIS) is going to use the microcontroller-based chip technology developed by NXP Semiconductors to power contact-less smart cards for automatic fare collection using Automatic Ticket Vending Machines (ATVMs) across various cities.

Additionally, South Korea-based Dongbu HiTek, which ranks among the top 10 foundries in the semiconductor industry, is exploring opportunities in the Indian semiconductor market.