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India to take on domestic electronics

Posted: 09 Feb 2007 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor? equipment? manufacturing? India Semiconductor Association? ISA?

While India has a high profile as a software outsource destination for IT back-end and semiconductor chip design services, the emerging growth of the local electronics equipment hardware market is expected to accelerate rapidly, according to venture capitalists and leading U.S. chip companies based in Hyderabad and in Bangalore.

"India's digital economy is starting to develop and as it does it will drive the local [hardware] market," according to Bob Kondamoori, managing director for Sandalwood Partners, an active VC investor in India and the Asia-Pacific region. Kondamoori made his remarks at a VC panel at the ISA Summit here this week entitled: The road ahead for technology start-ups: New and evolving models on a global platform.

"There are big changes happening in broadband," Kondamoori asserted, noting that high-speed Internet connectivity will become one of the most significant drivers of demand in the domestic IT hardware sector.

While VC investments in Silicon Valley for networking companies, IT services and semiconductors have declined rapidly in the past few years, these same sectors are attracting VC funding in India at a growing clip, the panelist of VCs agreed.

"We're investing in things like manufacturing technology, semiconductors, Internet applications and systems software," Kondamoori noted, adding "You have to manufacture domestically," to tap into the Indian electronics market.

The coming ramp up in electronics design, development and manufacturing lags a similar trend that began in China nearly a decade ago, but has been slow to develop in India, which has been chiefly focused on IT outsourcing and chip design services. All that, however, is about to change, and it's a key reason that national and local political leaders in India, and the India Semiconductor Association (ISA), are scrambling to bring semiconductor and equipment manufacturing to the region.

India has a growing middle class population of nearly 400 million people. India's electronic equipment consumption, estimated to be a $28.2 billion market in 2005, is expected to reach $363 billion by 2015, growing at a compounded annual growth rate of nearly 30 percent. India's electronics equipment domestic production was $10.99 billion in 2005 and is projected to grow to about $155 in 2015, according to ISA estimates.

Key growth segments include communications, information technology and consumer electronics. Driving product sectors for the semiconductor and equipment sector will be mobile handsets, wireless equipment, STBs and smart card terminals.

- Richard Wallace
EE Times Europe

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