Global Sources
EE Times-Asia
Stay in touch with EE Times Asia
Vivek Nanda

The Indian electronics industry is now perched on the point of all-out growth. It is up to those in the business of technology to take it over the tipping point.
The elephant wakes up
By Vivek Nanda

There was no denying the excitement among the delegates to the 2007 Vision Summit organized by the India Semiconductor Association (ISA) in February in Hyderabad. Executives from local design houses, multinational chip vendors and EDA companies hung on every word from the analysts, venture capitalists and bureaucrats as they handed the industry its "report card" along with words of advice and, of course, promises of incentives.

That India has the potential to rapidly grow its electronics ecosystem was revealed in the report commissioned by the ISA last year. Frost & Sullivan, the researcher and author of the report, expects consumption of end-user electronic equipment in India to reach $363 billion by 2015, up from $28.2 billion in 2005. The firm estimates the market for ICs to increase to $36.3 billion by 2015 from about $2.82 billion in 2005.

The ISA this year commissioned Ernst & Young to deliver a benchmarking study to the Indian electronics industry. The consultant compared India with China, the Czech Republic, Israel, Taiwan, the U.K. and the United States. On availability and scalability of talent, India was at the top; on talent cost advantage, it was the second best location; and on IC market potential, it was fourth behind the U.S., China and Taiwan. Ernst & Young also identified areas of challenge: quality of technical education, maturity of IC design sector, quality of business environment, and legal/IPR regime. While the firm said that the advantages outweigh encumbrances, India is definitely weak in areas that need either government intervention or, at the very least, government support.

As if on cue, the Indian government seemed to have woken up to the demands of the industry, announcing in late February the broad direction of support for India's electronics industry, semiconductors in particular. The document, widely called the special incentive package scheme or simply the Indian semiconductor policy, is getting its final touches by an empowered group of ministers at the time of this writing. The government has, however, announced that its incentives will be focused on the manufacture of semiconductor products, various display technologies, storage devices, solar cells and other photovoltaic products, nanotechnology, and assembly and test.

The package, which applies through 2010, includes cash incentives of up to 20 percent of the project's capital expenditure (capex) during the first 10 years for units located inside Special Economic Zones (SEZs) and over current SEZ benefits like exemption from excise duty, value added tax, and tax on profits generated by the unit. Units outside the SEZs will enjoy a cash incentive equivalent to 25 percent of their capex.

The two most important announcements are the government's willingness to participate in business, although only up to 26 percent of equity, and the definition of "ecosystem units." The ecosystem comprises business units that together make up the design-to-manufacturing chain—including, for instance, suppliers of chemicals and gases to wafer fabs.

Together with planned government initiatives in education, including e-learning similar to MIT Open Courseware, and the establishment of three more Indian Institutes of Science (IISc), four to five Indian Institutes of Technology (IITs) and business schools like the Indian Institute of Management (IIM), the policy changes could very well address the areas of weakness identified by the Ernst & Young report.

The local industry is relieved that India will finally find purpose in the competitive electronics landscape with clear medium-term policy level support. Long seen as the "elephant" of Asia, albeit a sleeping elephant, as opposed to the "soaring dragon" next door, the Indian electronics industry is now perched on the point of all-out growth. It is up to those in the business of technology to take it over the tipping point.

Email the Editor

Back to top

Bloggers Say

Bloggers Say

See what engineers like you are posting on our pages.

Back to Top