Indian Semiconductor Industry: From an Outsourcing Destination to Manufacturing Hub

Posted on July 5, 2011 in Business and Economy

By Rohit Dhyani:

The Indian economy is expected to grow at 9 percent in 2010-2011. Now, the corporate world and the Finance Minister have started a debate on how to reach a GDP growth of over 9.5 percent. Finance Minister Mr.Pranab Mukherjee announced a good budget for the corporate world; he tried really hard to benefit everyone. It is in the second part of the budget that the common man has not got any relief from the budget.

The Indian market and the Indian GDP depend on outsourcing. India is the second largest country to provide outsourced labour. Indian companies are counted among the best for outsourcing services. Infosys, a leading technology provider in India, provides a complete range of services by leveraging to other foreign companies. But the Indian market is unable to break into manufacturing and if Indian companies try to start and get in the market, there seems to be no easy future because the customer always goes for brand name and value. We have the example of semiconductor manufacturing companies in the country.

The world’s semiconductor manufacturing hub has not stuck to being in one company. It is always on the move. In the early 1960s, USA was the leader. Then the hub relocated to Japan in the 1980s, and then in the 1990s to Taiwan, Singapore and Korea. All these past and present hubs registered a severe downturn in the 2000s.

Since the pressure to minimize costs is ever-present in this industry, companies look to outsourcing to countries with lower per capita incomes.

China has seized this as an opportunity to get into this segment of the manufacturing industry and has accelerated its momentum to become a major semiconductor player in the world market. The Indian market is unable to produce in this area and it seems to rather prefer to serve the outsourced verification and testing projects or do body shopping.

The Western market treats the Indian market as an outsourcing destination instead of a technology developer. In India, the gap between the top notch universities and the industry is widening, as Indian companies are looking for services for quick money than investing in new technology development. In the West, universities and industries go hand in hand, whereas in India, professors from top colleges are becoming inactive in industry forums. This, in turn, retards the quality of education in the universities. We strive to serve the developed countries the like to call ourselves a developing country. The Indian market has failed to produce bright opportunities for youth and highly educated engineers and doctors move to other countries.

Currently, the Indian semiconductor industry is struggling to find talented people to design new inventions. They have been limited to the IITs (marginally) & the IISc which get funded by MNCs for research. No Indian company, including Infosys, Wipro, Tata Elxsi, Mindtree, which lead the Indian IT field, are service-based companies. The lack of resources could be to blame. These companies serve other US & Europe-based MNCs like Freescale, ST microelectronics, Intel, AMD, Texas Instruments, Analog Devices, ST-Ericson, NXP and others because of the same. With government supporting new ventures in these sectors and with more packages, it is surprising that none of these big wigs are attempting a break in.

If the Indian Government gives incentives to technology-based industries like semiconductor manufacturing industries, it directly helps our GDP growth and brings employment to the country. Government has to open doors for new companies and give them opportunities to become self-dependent in the field of inventions as semiconductors have a huge market in the world. The market value has grown to be $300 billion today. External commercial borrowings and investments by foreign investors in the Indian market and equity are also at an all time high.