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NXP India’s Rajeev Mehtani on top trends in global/Indian electronics and semicon!

December 9, 2008 Comments off

When a new year approaches, we start analyzing the year gone by and try to gauge what could happen in the coming year. This really holds true, as far as the technology industry is concerned.

It’s been a week since I’ve been mulling over these myself, especially, pondering over developments in the global semiconductor and electronics industries, as well as what could happen in India during 2009. Well, lots will happen, and I can’t wait for the new year to start!

I caught up with Rajeev Mehtani, vice president and managing director, NXP Semiconductors, India, and discussed in depth about the trends for 2009. Here’s a look at that discussion.

INDIA — ELECTRONICS & SEMICONDUCTORS

1. The DTH story will continue to increase in India with companies such as Tata Sky, DISH TV, BIG TV, etc., gaining market share. Owing to these challenges, there would be significant consolidation among the cable operators. Digitalization will also be seen in 2009.

2. The slowdown will affect growth across all sectors. Our view is that LCD TVs as well as STBs will continue to grow.

3. The year 2009 will witness e-commerce revolution and the RFID sector will grow at a 40-50 percent clip. The government has been sponsoring a lot of projects, which include RFID in the metros, e-passport cards and national ID cards. By mid-2009, we can expect a mass deployment of these projects as well as micro payments.

4. Manufacturing in India will continue to grow; EMS or OEMs, such as Samsung, Nokia, Flextronics, etc.

5. There could be a move from services to products in electronics and semiconductor spaces. The number of funded startups has grown significantly over the last years and more and more ideas are coming on the table.

6. The solar/PV sector will grow in India. High entry cost of capital for panels will be a barrier for this sector. Government enhancement is necessary. India will be different than other countries as people won’t push energy back into the grid; it will be used more for household consumption. The India grid is unstable. Tracking it requires a lot of expensive electronic switching. Solar deployment could be at the micro level, and also community level, where it makes more sense.

7. The startups in India are mostly Web 2.0 based, although there aren’t many hardware startups.

GLOBAL — ELECTRONICS & SEMICONDUCTORS

1. The semiconductor industry is truly global, That is mostly because it is a very expensive industry.

2. Things are a bit murky in the semiconductor industry. It would probably be dipping 10-15 percent next year.

3. Globally, energy management and home automation will start to take off in 2009. Satellite broadcasters will also continue to gain more strength.

4. On a worldwide scale, 3G will win. You will have 3G phones, and you’d add LTE to those. India is slightly different. Only 20 percent of Indian households are ready for broadband access. In India, WiMAX could be a way to have wireless broadband at home.

5. Industries moving to 300mm fabs will be making up only 20-25pc of the market. Not many need 45nm or 40nm chips. People will question any major capex, until there’s a big return and wait for recession to end. The bright spot is solar!

6. The fabless strategy would be the only way to go forward. While MNCs with fabless strategy are present in India, Indian startups in this space are quite few.

What India brings to the table for semicon world! And, for Japan

August 24, 2008 Comments off

This semicon blog’s title has been inspired by some queries, largely from friends in Japan, who are looking at the Indian semiconductor market. The topic of great global (and Japanese) interest is: What does India bring to the table for the semicon world to go to India!

Interesting! The world has been keenly following the Indian semiconductor and fab policy, and can gather a lot of information off my blog itself! For those who’d like to know it all again in specifics, here we go again!

Indian semicon and fab policy
Around September last year, the Department of Information Technology, Ministry of Communication and IT, Government of India, came up with the Special Incentive Package Scheme (SIPS) to encourage investments for setting up semicon fabs, and other micro and nanotechnology manufacturing industries in India!

The “ecosystem units” have been clearly defined as units, other than a fab unit, for manufacture of semiconductors, displays, including LCDs, OLEDs, PDPs, any other emerging displays; storage devices; solar cells; photovoltaics; other advanced micro and nanotechnology products; and assembly and test of all the above products.

What has happened since?
Lots! Initially, there were two major proposals from HSMC and SemIndia for setting up wafer IC fabs. While those haven’t really taken off yet, more investments have since happened in India.

Quite recently, the Indian semiconductor and fab policy attracted 12 major proposals, worth a whopping Rs. 93,000 crores! The Department of Information Technology (DIT), Government of India, has set up a panel of technical experts to evaluate these proposals.

Ten (10) of these proposals are for solar/PV. One is for a semiconductor wafer — from Reliance Industries worth Rs. 18,521 crores, and another for TFT LCD flat panels — from Videocon Industries, worth Rs. 8,000 crores.

The 10 proposals for solar/PV are from: KSK Surya (Rs. 3,211 crores), Lanco Solar (Rs. 12,938 crores), PV Technologies India (Rs. 6,000 crores), Phoenix Solar India (Rs. 1,200 crores), Reliance Industries (Rs. 11,631 crores), Signet Solar Inc. (Rs. 9,672 crores), Solar Semiconductor (Rs. 11,821 crores), TF Solar Power (Rs. 2,348 crores), Tata BP Solar India (Rs. 1,692.80 crores), and Titan Energy System (Rs. 5,880.58 crores). This is as far the latest developments are concerned!

Solar fabs have also been announced earlier by leading firms such as Videocon, Reliance and Moser Baer, etc. (Two of them are figuring here again!) There are also talks about developing solar farms in India, which is good.

What are India’s strengths?
The clear strengths of the Indian semiconductor industry are embedded and design services! We are NOT YET into product development, but one sincerely hopes that it gathers pace.

The market drivers in India are mobile phone services, IT services/BPO, automobiles and IT hardware. India is also very strong in design tools, system architecture and VLSI design, has quite strong IP protection laws, and is reasonably strong in concept/innovation in semiconductors.

Testing and packaging are in a nascent stage. India will certainly have more of ATMP facilities. Nearly every single semicon giant has an India presence! That should indicate the amount of interest the outside world has on India. In fact, I am told, some key decisions are now made out of the Bangalore based outfits!

Electronics manufacturing
In the electronics manufacturing domain, India’s strength lies in hardware, embedded software and industrial design, OEMs, component distribution (includes semiconductor and box build), and end user/distribution channel, as well as more than moderate strength in product design and manufacturing (ODM, EMS).

India is likely to witness $363 billion of equipment consumption and $155 billion of domestic production by 2015. India’s electronic equipment consumption in 2005 was 1.8 percent. It is likely to grow to 5.5 percent in 2010 and 11 percent in 2015, as per a joint study conducted by the ISA and Frost & Sullivan.

The Indian semiconductor TAM (total available market) revenue is likely to grow by 2.5 times while the TM (total market) is likely to double revenues in 2009. The TAM is likely to grow at a CAGR of 35.8 percent and the TM is likely to grow at a CAGR of 26.7 percent, respectively, during the period 2006-09.

Telecom, and IT and office automation are the leading segments in TM and TAM. Consumer segment occupies the third fastest growing area in the TM, and the industrial segment is the third fastest growing area in the TAM.

The major semiconductor categories of interest include microprocessors, analog, memory, discretes and ASICs, while the major end use products include mobile handsets, BTS, desktops, notebooks, set-top boxes and CRT TVs.

India, the embedded superstar!
India’s embedded design industry has been going from strength to strength. An IDC-ISA report forecasts the revenues from India’s VLSI, board design and embedded software industry to grow to $10.96bn by 2010 from the current $6.08bn in 2007.

India is also focusing on moving up the semiconductor value chain. It is emphasizing on end-to-end product development, investing in IP development, developing India specific products, and partnering with OEMs to understand the market needs. Also, be aware that several leading EMS firms are present in India as well.

What should investors do?
Certainly, invest in India! The Indian semicon policy clearly defines the “ecosystem units.” Global manufacturers of displays, including LCDs, OLEDs, PDPs, any other emerging displays; storage devices; including SSDs, solar cells; photovoltaics; other advanced micro and nanotechnology products, should certainly look at investing in India, and consider manufacturing here!

Lots of solar fabs are likely to come up, so there will be a great demand for solar related equipment, chemicals, testing, etc. We hope that one wafer IC fab comes up as well, so there will be opportunity for semicon equipment manufacturers. However, do be prepared to wait as things may not move as fast as some may expect.

There is lot of opportunity for fabless companies and in ATMP as well. There are several Indian firms, small ones, who may be interested in partnering. Some trading companies may find India of interest, especially in the solar/PV and ATMP segments.

Keep an eye on the IT/semicon policies some states, especially, Karnataka have in store. A host of opportunities could become available, once Karnataka comes up with a policy. More states may follow suit!

Well, do contact me in case you need further assistance!

India’s growing might in global semicon

May 12, 2008 Comments off

It is no longer a secret that India is fast becoming the world’s destination, and increasingly the source too, for semiconductors. India also shows the most rapid growth potential among the BRIC countries.

Speaking at the recently held International Electronics Forum (IEF) 2008 at Dubai, organized by Future Horizons, S.Janakiraman, the outgoing Chairman – India Semiconductor Association, and President & CEO – R&D services, MindTree Ltd, touched upon India’s growing might as a being the third largest country in terms of purchasing power parity, as well as its growing presence in the global semiconductor industry.

It is no surprise that the current market drivers in India happen to be mobile phone services, IT services/BPO, automobiles and IT hardware. Add to these are the facts that India is very strong in design tools, system architecture and VLSI design, has quite strong IP protection laws, and is quite strong in concept/innovation as far as the semiconductor industry is concerned.

Testing and packaging are in the nascent stage. While India lacks a semicon wafer fab, as of now, there have been several announcements regarding solar fabs by leading firms such as Videocon, Moser Baer, Reliance, etc.

In the electronics manufacturing domain, India’s strength lies in hardware, embedded software and industrial design, OEMs, component distribution (includes semiconductor and box build), and end user/distribution channel, as well as more than moderate strength in product design and manufacturing (ODM, EMS).

India is likely to witness $363 billion of equipment consumption and $155 billion of domestic production by 2015. India’s electronic equipment consumption in 2005 was 1.8 percent. It is likely to grow to 5.5 percent in 2010 and 11 percent in 2015, as per a joint study conducted by the ISA and Frost & Sullivan.

The Indian semiconductor TAM (total available market) revenue is likely to grow by 2.5 times while the TM (total market) is likely to double revenues in 2009. The TAM is likely to grow at a CAGR of 35.8 percent and the TM is likely to grow at a CAGR of 26.7 percent, respectively, during the period 2006-09.

Telecom, and IT and office automation are currently the leading segments in both TM and TAM. Consumer segment occupies the third fastest growing area in the TM, while the industrial segment is the third fastest growing area in the TAM.

The major semiconductor categories include microprocessors, analog, memory, discrete and ASIC, while the major end use products include mobile handsets, BTS, desktops, notebooks, set-top boxes and CRT TVs.

Emerging base of EMS firms
India is also becoming an emerging base of EMS companies, thereby completing the electronics ecosystem. Five of the top 15 EMS companies globally have set up their manufacturing facilities in India. These include Celestica, Elcoteq, Flextronics, Jabil Circuit and Solectron. Two other large companies are in the process of setting up plants — Hon Hai Precision Industry and Sanmina-SCI.

Nokia has set up its manufacturing facility as well. It has invested $210 million in the plant since January 2006. The India plant has set another benchmark of achieving the fastest ramp up across all Nokia facilities worldwide. Currently, approximately 50 percent of the production from the plant is consumed domestically and the rest is exported to other countries.

Indian embedded design industry
The Indian embedded design industry has been going from strength to strength. The recent IDC-ISA report puts revenues from India’s VLSI, board design and embedded software industry to grow to $10.96bn by 2010 from the current $6.08bn in 2007.

As of 2007, embedded has 81.1 percent share, hardware board design 6.3 percent; and VLSI design 12.3 percent, respectively.Source: ISA.

The challenges and focus areas for the embedded design industry include manpower — focusing on increasing productivity, creating readily deployable engineering workforce, and focusing on developing high-end skills.

Another area India is working on is moving up the semiconductor value chain. India is now focusing on end-to-end product development, investing in IP development, developing India specific products, and partnering with OEMs to understand the market needs.

The challenge is posed by the cost structure. India needs to better address cost management, i.e., increasing infrastructure and salary costs, as well as managing the dollar’s impact.

India design inside
Several global products have been now developed out of India. Some recent examples are: Harita Infoserve Ltd is developing interior parts and conducting computer tests on components for General Motors Corp.

Next, Ittiam’s videophone design will become almost entirely an India story: part of the chip, the product design, the software and, finally, the manufacturing also done here. Plexion Technologies has worked on the interior design and windows for a DaimlerChrysler (DCX) bus.

Quasar Innovations designed and developed a dual SIM card — PTL910 mobile phone for Primus, to be launched in the European market. The mobile phone allows the user to have SIM cards from Primus for two countries, with the phone automatically choosing the correct SIM depending on the user’s location.

Finally, MindTree itself has designed a feature rich satellite handset with mobile handset form factor for a European company.

Attractive semicon policy
India’s semiconductor policy is likely to attract investments of over $10bn. The government of India will bear 20 percent of the capital expenditure during the first 10 years for units located inside SEZs and 25 percent for those outside.

For semiconductor manufacturing (wafer fabs) plants, the policy proposes a minimum investment of $625mn. The same for ancillary plants would be $250mn.

The government’s participation in the projects would be limited to 26 percent of the equity portion. The key benefit here is the grant of the SEZ status.

India’s evolving ecosystem is driven by the bottom of the pyramid (BOP) opportunity. Tata Motors announced the now famous Nano — the Rs. 1 lakh (sub $2500) car -– said to be the world’s cheapest car. This has been indigenously developed in India, for India, by Tata Motors.

Nano has passed all mandatory crash tests and Euro IV norms. It is likely to be commercially launched in the second half of 2008.

All of these make India the most happening semiconductor and electronics destination. Don’t be surprised if companies not having an India strategy in place miss out on the action!

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