Indian semicon industry has to rise to meet challenges from other Asian countries

Here are excerpts from the speech delivered by Dr. M M Pallam Raju, Honorable Minister of State for Defense, Government of India, while releasing the ISA-Frost & Sullivan 2009-11 India Semiconductor Market Update.

NEW DELHI, INDIA: ISA chairman Dr. Bobby Mitra, ISA president Mrs. Poornima Shenoy, industry leaders and friends from the media, it is my pleasure to release the update of the ISA F&S report. As one who had started his career in this industry I am aware of its significance and the importance of the electronics industry. However, a few words about the immense potential this industry holds are necessary to truly appreciate its value for our growing economy.

The year 2010 is being hailed as the comeback year for the global semiconductor industry. It is expected to register a growth rate in excess of 22 percent. Despite such growth, the global industry is expected to only reach its pre-2008 levels of around $279 billion representing a meager 2.7 percent increase over its 2007 level.

Considering that the 2008-09 market conditions were caused by macroeconomic factors and not end user market fluctuations unlike the dot com burst of 2001, the anticipated growth of the global semiconductor industry in 2010 is not significant in real terms. On the contrary, the Indian semiconductor industry is expected to traverse on the growth tide, registering a CAGR of 20 percent in the next two years.

The global electronics industry is 4.4 times the oil, petrol and minerals industry. It is more than twice the size of the food, beverages and tobacco industry and even the burgeoning transport industry. It was estimated to be $1.75 trillion in 2009. The annual growth rate of this industry was 3 percent per year for the period 2004-09. It includes both electronic systems and semiconductor design and manufacturing. It has strong implications on the performance of several other industries such as telecom, IT and consumer electronics.

The electronics industry has the potential to take India to the next generation of technology. Electronics can usher an era of change in India. It can play a vital role in providing products and solutions for other industry verticals in the country. It can provide for inclusive growth and leadership in energy efficiency. It can assist the government in critical developmental initiatives.

A decisive advantage that the industry brings is the means to ensure accountability, through effective technological mechanisms for monitoring and audit. It can enable inclusive growth in sectors such as healthcare and education. It has the potential to influence 700 million BPL/BOP lives.

A few among several such inspiring examples are:

* In the field of energy: We can move from energy shortage to LED lighting. With the specter of power shortages looming large, the industry will help provide much needed relief.

* In medical electronics and healthcare: We can overcome issues of accessibility and cost to provide affordable devices/ telemedicine. The poor will benefit immensely from such developments and healthcare systems will longer be held hostage by geographical distances and high costs of medical care.

* In the automotive industry : We can effectively and efficiently transition from high cost and high emission cars to low cost and zero emission cars. This will be a critical component in the efforts to deal with climate change and growing concerns about the environment.

Semiconductors drive the electronics industry. Chips drive every energy efficiency solution in every market segment. India has a large and growing market for electronic products and semiconductors form a key component of such products.

The ISA has played an important role initially in driving India’s semiconductor industry. Today, its focus includes electronic system design and manufacturing. ISA believes that electronics can become a national level agenda and help drive the economy as in other countries. For this, we need to stimulate innovation in both design and manufacturing.

The report has yielded some interesting data.

Growth has been the highest in the following segments: wireless handsets, telecom, and IT and office automation.

To face tomorrow, the Indian semiconductor industry has to rise to meet the challenges from other Asian countries and aid in developing the ecosystem. China and Vietnam are emerging as strong competitors in this industry. The Indian industry will have to address certain vital links in its ecosystem, such as systems engineering, venture capital and IP protection, to become more robust. It will also have to take measures to build up a skilled and technically trained, design-aware workforce for the future.

I am certain that the Indian semiconductor industry will live up to the promise it holds and continue to carve a niche for itself in the growing economy. Going forward, domestic electronic manufacturing companies have the capability to contribute up to 20 percent of the GDP by 2020.

That is a powerful note on which I would like to conclude.