There have been signs of revival in the Indian semiconductor industry in 2009 and optimism for the semiconductor players—domestic as well as multinational—is rising, driven by an upsurge in the domestic sales. Gartner also forecast in its outlook that semiconductor revenues in 2010 would return to 2008 levels at US$ 255 billion. The main sectors driving semiconductor sales in India are telecom, automotive, industrial electronics and consumer electronics. The solar energy, renewable energy, automated healthcare services sectors too are beginning to boost demand and growth for semiconductor products.

The utilisation of fabrication units, which was less than 50 per cent just a few months ago, has picked up. The wireless handset market—one of the biggest consumers of semiconductor chips—is witnessing growth. The automotive sector too is showing an increased use of chips.

Semiconductor companies are getting ready for new growth opportunities owing to economic revival. Firstly, the government's step to modernise its armed forces by investing huge sums of money in the latest armoury, could gather revenues for the semiconductor industry. Also, WiMax, 3G, DTH, medical electronics, photovoltaic and nanotechnology are some of the areas likely to witness scaling up in coming years.

Prices have reduced owing to smarter semiconductor components, coupled with efficient manufacturing techniques. Currently, the opportunity for the semiconductor industry's investment in urbanising India stands at around US$ 500 billion.

The India Semiconductor Market Update for 2008-10 by India Semiconductor Association (ISA) and Frost & Sullivan reveals that the total market for semiconductor revenues is expected to grow at a compound annual growth rate of 13.4 per cent to US$ 7.59 billion in 2010 from US$ 5.9 billion in 2008. The Total Market Available (TAM) for semiconductor revenue is expected to grow at a compound annual growth rate of 13.1 per cent during the period.

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.

Semiconductor capital equipment spending worldwide will grow 47.3 per cent in the second half of 2009, according to IT research and advisory firm Gartner Inc. The spending on worldwide semiconductor capital equipment will rebound in 2010 and revenue is forecast to increase 34.3 per cent.

Setting up of Unique Identification Authority of India (UIDAI) and investments in SMART infrastructure offer major opportunities for the semiconductor industry to introduce new solutions and generate entrepreneurs, according to market analysts.

Government Initiatives

According to the Communications and IT Minister, Mr A Raja, the semiconductor policy announced by the government is attracting more investments into the sector. The Government, which has received 17 proposals worth US$ 32.78 billion under the Special Incentive Package Scheme (SIPS), has given in-principle approval to 12 proposals.

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.

The government has also extended the Software Technology Parks of India (STPI) tax holiday for technology export firms from March 2010 to March 2011.