Indian semiconductor market growing thrice as fast as global market

As per the India Semiconductor Association (ISA) and Frost & Sullivan (ISA-F&S), India's 2007 annual growth in the semiconductor market is nearly triple the rate at which the global semiconductor market is currently expanding.

The actual total market (TM) was $2.69bn and total available market (TAM) was $1.26bn. By 2009, the TM will likely grow at a CAGR of 26.7 percent to $5.49bn and the TAM will grow at a 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.

According to the report, the top five end-user products that are likely to drive growth are mobile handsets, desktops and notebooks, GSM base stations, set-top boxes and energy meters. Microprocessors, analog, memory and discretes are said to be the top four semiconductor products likely to drive revenues.

While these stats read great, I am wondering exactly how much of these handsets will be made in India. Rather, what percent of silicon going into these handsets will be made in India! Memory is said to be a driver of the revenue. Well, the DRAM market has been acting up.

Now, iSuppli reported in a recent report:

"Following a brief respite, market conditions for DRAM suppliers are set to take a turn for the worse in September, iSuppli Corp. predicts.

iSuppli previously forecasted that DRAM prices would undergo a downward correction in October, following the current period of relative strength that brought an end to a phase of severe erosion in the second quarter. However, iSuppli now believes the DRAM prices will begin to decline one month earlier, in September.

Near-term market conditions remain in a state of flux with a great deal of uncertainty in the supply chain as suppliers and distributors continue to work off a glut of DRAM inventory. Furthermore, sales momentum is waning in the DRAM spot market, as rising prices and falling supply of LCD panels cut into the available budget for memory in some PCs.

This is bad news for memory suppliers, which had been basking in the present period of relative pricing strength. Weak pricing in September will set the stage for further erosion in the fourth quarter. iSuppli now foresees the possibility of double-digit sequential price declines in the fourth quarter, erasing any increases that aided suppliers in the third quarter. Because of this, DRAM suppliers’ profitability will dwindle in the fourth quarter compared to the third, iSuppli predicts."

I'd be very interested to see how much of these memory predictions turn out to be correct! If they aren't, I wonder how memory is going to figure among the top four revenue drivers in the Indian semicon market, at least in the near and immediate future. Unless, I somehow missed a point somewhere!!