ISA-F&S: India growing almost thrice as faster as global semicon

NEW DELHI & BANGALORE, INDIA: According to India Semiconductor Association (ISA) and Frost & Sullivan (ISA-F&S), India's 2007 annual growth in semiconductor market is nearly triple the rate at which the global semiconductor market is expanding. The actual total market (TM) was $2.69bn and TAM was $1.26bn. By 2009, the TM will grow at CAGR of 26.7 percent to $5.49bn and total available market (TAM) will grow at CAGR of 36 percent to $3.18bn.

Anand Rangachary, Managing Director, South Asia & Middle East, Frost & Sullivan, said: "The global semiconductor total market is growing at a rate of 8-9 percent CAGR, whereas the India total market is growing at 26.7 percent CAGR till 2009. India, which represented 1.09 percent of the global semiconductor market in 2006 will be 1.62 percent by 2009. As domestic demand for all electronics products is growing India is emerging as one of the fastest growing region in the world."

India is one of the fastest growing regions in the world. TAM growth rate at CAGR 36 percent, compared to 26.7 percent of TM CAGR signifies higher growth in local manufacturing of electronics products. In the industry, the technology change is so dynamic that every year, a new application/product gets launched, which changes the demand forecast by many ways (eg. launch of iPOD or iPhone/ WiMAX/GPON/LCD TV) as well as ASP changes.

The government rules change demand, and therefore ISA captures these changes on a real-time basis. Hence, ISA decided to have an annual update of the India market report. All of these changes are well captured in the current report and India's growth looks almost three times compared to the global growth rate.

The ISA-F&S semiconductor market report 2006 forecast the Indian TM revenues to touch $3.8 billion and TAM revenues to touch $1.62 billion in 2006. The report update estimated TM at $2.69 billion and TAM at $1.26 billion. A sharp decline in various semiconductor ASPs in different end-user product categories contributed to the shortfall between the forecast and actual market estimates.

As per the ISA-Frost & Sullivan Report 2007-08, the TM revenues for semiconductors in India during 2006 were estimated at $2.69 billion. Telecom, IT and office automation (IT & OA), and consumer electronics segments contributed to 82.6 percent of the TAM revenues. Growth of these key user segments is anticipated to catapult the semiconductor TM revenues to $5.49 billion in 2009, growing at a CAGR of 26.7 percent.

The TAM revenues were estimated at $1.26 billion in 2006. This is approximately 50 percent of the TM, which highlights that the other half of the semiconductor market is waiting to be tapped. A reduction in the gap between TM and TAM is likely by 2009, as the semiconductor TAM revenues are set to grow at a CAGR of 36 percent. Semiconductor TAMs are likely to touch $3.18 billion by the end of the forecast period.

Some of the contributing end-user product categories are listed below:

i) Decline has been sharpest in mobile handsets, where the electronics bill-of-materials (BoM) per unit witnessed a steep decline from $25.7 to $11. Given the significant volumes generated by this market, this 43 percent average selling price (ASP) decline impacted TM and TAM revenues.

ii) A decline in prices of discrete and memory products reduced the contribution of color TVs toward semiconductor TAM revenues.

iii) The CorDECT market, which was anticipated to generate high volumes 650,000 lines, realized only 30,000 lines in 2006, thereby adversly impacting revenues.

iv) The eBoM for modems witnessed a sharp decline from $20.75 to $4.9 per unit over the past two years.

v) Monitors, a key volume driver in the IT and OA segment, experienced decline in its eBoM from $7.85 to $5.75 per unit.

vi) The engine management systems (EMS) market growth weakened as the overall vehicle market growth failed to sustain its momentum. Decline in eBoM per unit of EMS $21 to $14.8 also contributed to the lower revenue realization.

Globally, the semiconductor industry's growth cycle is driven by certain product categories. The semiconductor ASP of these product categories plummet with increasing consumption and supply, supplemented by technology advancement, thus affecting revenues.

Speaking on the occasion of the release of the report, Poornima Shenoy, President, India Semiconductor Association, said: "The Indian marketplace is rapidly evolving with changing dynamics. These findings are pointers to the direction in which the semiconductor market is headed. The decision to update the report is due to the evolving market place, new technology innovation and constantly changing dynamics."