India’s semiconductor consumption to double by 2009 on high cellphone demand

India’s semiconductor consumption to double by 2009 on high cellphone demand

New Delhi: India’s consumption of semiconductors will more than double to around $5.5 billion (Rs22,550 crore) by 2009 from $2.69 billion last year, riding on local manufacturing of mobile handsets, a trade body had said.

India is already the world’s fastest growing market for mobile phone services, and global vendors have set up production here in the last two years.

Nokia Oyj, the world biggest handset vendor, makes about five million phones a month, equivalent to 60 million a year, with others, including Motorola Inc. and LG Electronics contributing small numbers. The production of mobile phones in India is expected to reach 100 million units by 2011, according to research firm Gartner Inc.

The India Semiconductor Association or ISA said the country’s share of the $338 billion global semiconductor market will reach around 1.6% in 2009 from almost 1% of $247 billion in 2006, “as domestic demand for telecom products and desktops grows," said Sanjeev Keskar, member of the executive council of ISA and national sales head for Freescale Semiconductor Inc., a chip design company headquartered in Austin, Texas.

Semiconductor consumption is expected to reach $36 billion by 2015, according to a joint study by ISA and research firm Frost & Sullivan.

By 2009, the Indian desktop computer market will grow from five million in 2006 to around 7.3 million, “fuelled largely by around 23% growth in consumption of desktops priced at less than Rs20,000," said the ISA.

Mobile handsets, wireless equipment, set top boxes and smart card terminals will drive the Indian semiconductor market, “as Indian electronics equipment production has the opportunity to touch $155 billion in 2015," ISA said.

While the semiconductor market continues to grow, Indian hubs of Bangalore, capital New Delhi and the region surrounding it, Hyderabad and Chennai will increase the export of semiconductor design services from $4.6 billion at present to $43 billion by 2015, employing more than 780,000 professionals. The industry employs more than 121,000 today.

Apart from these captives and subsidiaries of multinational corporations, the number of semiconductor design start-ups in the country is expected to ramp up from 710 in 2006 to nearly 3,250 by 2015, ISA said in a note.

According to industry estimates, designing a cutting-edge chip built on a silicon wafer as thin as 65 nanometre can cost anywhere $30-$40 million, and it is this cost that many companies are looking to mitigate by outsourcing work to destinations such as India and Eastern Europe.

One nanometre is one-thousandth of a micrometre.

Already, the total value of such work done from India by the likes of Nokia-Siemens Networks, Nortel Networks Corp., Motorola and Telefon AB LM Ericsson is estimated to be in the range of $4 billion, of which half are projects for application development and system design outsourced to India-based vendors such as Wipro Ltd, MindTree Consulting Ltd, Infosys Technologies Ltd and Tata Consulting Services Ltd among others.