How local chip manufacturing can transform electronics industry

With the government approving semiconductor fabrication plants, the electronics manufacturing ecosystem and the electronics industry as a whole will feel the direct impact of local production, the Indian economy will also benefit from it. A fab is estimated to contribute 23 times the investment made to GDP. Its transformative effect on the electronics industry is tremendous, and has a stronger multiplier effect than any other industry. Hence, it is a highly strategic game changer for India that will enable the country to leapfrog ahead by several years

The Indian electronics hardware industry and the Indian economy will directly benefit from the proposal. The semiconductor wafer fabs will have a catalytic impact on the development of downstream and upstream products, including ancillaries. They will also have a sizable impact on the development of the IT/ITES sector, particularly in very large scale integration (VLSI) design software, solutions and services. Besides, these fabs will help generate employment for 28.3 million (directly and indirectly) people by 2020, across various levels of competencies.”

 

Critical for the electronics industry

The fact that India’s semiconductor market makes up 14 per cent of the country’s total electronics market indicates the magnitude of the opportunity lost due to the absence of local fabs. They are at the core of ecosystem development and this strategic move shall have a ripple effect across the ecosystem. Global analysis shows that countries like Taiwan, China and USA have been able to build a fairly strong electronics ecosystem by setting up semiconductor fabs and using them as the moot point for bringing in the other ecosystem components.

Domestic consumption of electronics is expected to reach US$ 400 billion by 2020, which translates into a chip market of around US$ 55 billion. The total semiconductor market in India was $6.03 billion in 2011 and is expected to grow to $9.7 billion by 2015. Right now, India imports over 65 per cent of its electronics products, including semiconductors.

India has already become the hub for semiconductor design. More than 20,000 engineers are engaged in various aspects of chip design and verification. India adds value by way of design, which accounts for a modest $10 billion. Ironically, chips that are manufactured outside India, mainly by the Asian countries, are based on the design work done in India. These chips eventually go into finished electronics goods that are worth more than $60 billion. The semiconductor manufacturing companies abroad generate revenue to the tune of US$ 15 billion from wafer manufacturing based on these designs. Chip packaging and testing companies also generate US$ 5 billion revenue based on the wafers manufactured from the India-designed chips.

 

Selected electronic systems	Semiconductor content (%)
Set-top box	35%
Digital camera	34%
DVD Player	30%
Multimedia PC	28%
Telecom equipment	28%
Smartphone	26%
HDTV	25%
PC	23%
LAN	15%
CD Player	13%
Car radio	8%
Video camera	8%

 

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