Choking the Fab Process

Best Time is Now

The best time to set up fabrication units in the country is now. A number of studies and experts favor the presence of fabs in the country despite challenges involved in setting them up.

India's semiconductor consumption reached $8 bn in 2012, a 7.4% increase from 2011, according to a Gartner study. This was in contrast to the global trend as worldwide semiconductor revenue declined 2.6% to reach $299.9 bn in 2012.

These statistics put India at the forefront of making it a destination for electronics manufacturing, if the opportunity is adequately tapped.

The figures are favoring India's steps to invest in two capital intensive fab manufacturing facilities estimated to cost `25,000 crore or more.

"It is the time when we should not squander time by debating fabs. Rather it is time when we should look at the bulk consumption of wafers.

In my opinion, this is the best time to take steps and to attract investors," opines Jaswinder Ahuja, managing director, Cadence Design Systems, India.

According to another study conducted by IESA in association with Frost & Sullivan, the Indian ESDM industry is on a growth trajectory of 9.9% CAGR-from $64.6 bn in 2011 to likely $94.2 bn in 2015. This figure encourages the industry to look at India as a destination to investment, to expand, and to innovate. All of this is sure to happen, when the manufacturing ecosystem gets a boost.

"Consumer electronics need semiconductors. If these are imported, India will not be able to go up the value chain. Once fabs become a reality, the first step will be taken. Critical mass of local demand for chips produced in these fabs will give wings to India's manufacturing story. Not all the chips manufactured in these fabs will be consumed locally. We'll be able to cater to markets like Middle-East and Africa," says Keskar.

The objective is also to compete with China and Asia Pacific counterparts such as Thailand, South Korea, Taiwan, etc, from where a lot of electronics import demand is met.

Opportunity

The electronic components industry comprises of semiconductors and passive components. As most electronic products are enabled by semiconductor components, it is important to analyze the overall consumption of semiconductors, expected to grow, according to IESA, from $6.1 bn in 2011 to $9.66 bn in 2015.

Local demand and sourcing of semiconductors is limited ($2.94 bn in 2011 and increasing to $3.69 bn in 2015) due to import of electronic products and low domestic manufacturing. The IESA reports underlines, "Since currently there is no semiconductor manufacturing in the country, the entire consumption is met through imports. Continued innovation of semiconductors devices coupled with their enhanced processing capability has led to the increased consumption in mobile devices, IT/ OA , telecom, automotive, and industrial sectors."

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