Wednesday, January 28, 2009

Global semi to dip by 28pc in 2009; Indian semi to grow at 13.4pc by 2010! Don't get carried away!!

Contrasting numbers, isn't it!

Let's start! Yesterday, Malcolm Penn, CEO and founder of Future Horizons, said at the International Forecast Seminar (IFS) in London that the global semiconductor market will fall by 28 percent in value and by 26 percent in unit shipments in 2009 after the unprecedented collapse of Q4 2008.

Penn has added that Q2 2009 will be the bottom of the dip, with a 15 percent increase forecast for 2010 and 28 percent in 2011.

This afternoon, the India Semiconductor Association (ISA) released the ISA-Frost & Sullivan report update 2008-10", the third report on the subject and the second update, which stated that the total revenues of the Indian semiconductor market are likely to grow from $5.9 billion in 2008 to $7.59 billion in 2010 at a CAGR of 13.4 percent. The total available market (TAM) revenues are anticipated to climb from $2.53 billion in 2008 to $3.24 billion in 2010 with a CAGR of 13.1 percent.

Be aware that these numbers do not include India's strength in embedded and design services. This will be covered in a separate report. Nor do these numbers include any potential growth for India in the solar photovoltaics space, which also has its separate report.

Now, these ISA numbers should make anybody wonder: the Indian semiconductor industry is in for a boom time! Far from it!! India's contribution to the global semiconductor industry is still quite small for it to really make an impact.

Some other points to note!

First, according to the ISA-F&S update, the decline in CAGR, from 26.7 percent, in the earlier report of 2007, to 13.4 percent, in the current report, is on account of revised investment and manufacturing scenario seen in the second half of 2008.

Also, as Ms Poornima Shenoy, president, ISA, indicated: "India is a story of growth and this is important in such times though growth may be below past projections. The current slowdown will impact manufacturing investment prospects. A low manufacturing index for electronic products leads to higher imports and thus lowers the local potential for semiconductors, their key component."

Next, India's electronics industry manufacturing index of just 0.39 forecast for 2010 will result in an opportunity loss of $4.35 billion for semiconductor sales in India.

I haven't seen many new start-ups and Indian product companies. While IT/office automation (IT/OA), wireless handsets and communications segments are going to define the semiconductor market growth, it remains to be seen how much of these come out from Indian, home grown companies. Perhaps, Indian entrepreneurs are averse to risk taking in semiconductors. We also have India's wafer IC fab story, which didn't really take off as expected.

It would be advised not to overlook these points and rejoice in the numbers for the Indian semiconductor industry. We still have many, many miles to go!

I would personally be much more pleased, and am sure, most of you will agree, if all of these numbers for the Indian semiconductor industry came more from the Indian based companies, rather than the Indian arms of multinationals. Besides, I am still waiting to see what sort of steps are being taken to incubate such companies.

I will be writing more about the global and Indian scenarios in depth, especially, the Indian scenario, in separate posts.

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