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Tuesday, February 6, 2007
HYDERABAD: Investors in semiconductor units in India should be cautious because global overcapacity could slow demand for chips by the time the units are ready, a senior official at Gartner said on Monday.
"The first quarter of 2007 is not looking as strong as anticipated because of rising inventories," said Bryan Lewis, research VP and chief analyst, semiconductor, Gartner. Lewis was speaking at a seminar organized by the India Semiconductor Association (ISA).
"In 2008, there will be a pick up and again in 2009 there will be an overcapacity situation," he said, "Should India be building state-of-the-art fabrication facilities now is a big question for industry and India."
India, which has made a name for itself in the software industry, aims to build competence in chip-making. Last month, the Indian government gave in-principle approval to a semiconductor policy which included 25 per cent subsidy on the capital expenditure in the first 10 years of a fabrication plant.
Last year, SemIndia, a consortium of overseas Indians had announced plans for a $3 billion chip-making facility in Hyderabad in partnership with Advanced Micro Devices Inc. (AMD) and Flextronics Software Systems Ltd and financed by a host of private equity funds.
Intel Corp., the world's largest chip maker, has been awaiting the policy to decide on manufacturing in India.
"India is very strong in design and that is where the focus should be," said Gartner's Lewis, adding that the industry's efforts should be directed at high growth sectors such as the consumer segment.
However, the design segment also poses challenges, said Jodie Shelton, executive director of the U.S.-based Fabless Semiconductor Association. Design costs are escalating, and there is a worldwide trend towards decreased venture capital funding for fabless or design projects, she said.
"Consumption of chips is going up rapidly while prices are going down even more. Spreads between prices and volumes today are quite significant," she told reporters.
The head of Elpida Memory Inc., Japan's only dynamic random access memory chip maker, was quoted last month as saying that the semiconductor market could shrink in 2007 due to tumbling prices, bucking industry expectations of solid growth.
Indian consumption of electronic equipment is estimated to be worth $363 billion by 2015, accounting for 11 per cent of global output, according to a report by ISA and Frost & Sullivan. At present, India's consumption is less than three per cent.
That presents an opportunity for more manufacturing of electronic equipment in India.
"Indian fabless companies should not merely think of designing for the world but should also design for the domestic market as well," said Vivek Sharma, director, India Design Centre, STMicroelectronics Pvt. Ltd.
Source: Reuters
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