Small firms hold key for chip manufacturers

By Goutam Das

Bangalore, May 11: While the opportunity bucket for Indian semiconductor suppliers predominantly includes large MNCs such as the Nokias and Ciscos, the chip fraternity can ill afford to ignore smaller, domestic players who may form a big chunk of the available market, experts say.

The total available market (TAM) for semiconductor usage in local manufacturing is expected to be $3.18 billion in 2009, a report from Indian Semiconductor Association and market research firm Frost & Sullivan has predicted. This would represent more than a doubling of the market since 2006, when TAM was reported to be $1.26 billion.

"The few large firms are important to the market. They are not only designing in India but also manufacturing. However, we cannot ignore the ‘many small’ ones because they will be a huge grow-th engine for the industry going ahead," Mr Bobby Mitra, MD, Texas Instruments India, says.

All electronic goods incorporate semiconductors. The domestic demand for electronic products has been rising with the higher disposable income of the Indians.

While computers, cell phones, set top boxes, and MP3 players among others have been big drivers of semiconductors, future opportunities for players may lie in segments such as medical and industrial. "Many firms work on Ultrasound, for instance — on innovations such as how to bring the cost of ultrasound scan down," Mr Mitra says.

In the industrial sector, opportunities may stem from customers manufacturing UPS, inverters, solar inverters, and CCTVs among others. One such company is SLN that has built a control system for Moon Mission Earth Station and a thermal printer for point of sales applications. It uses chips from firms such as Freescale, Analog Devices, and Cypress Semiconductors among others.

However, many of these small firms may not have cash cushion to source expensive chips in volumes from leading firms. Experts from the industry are therefore mulling "supporting" them. "Lar-ger firms can help realign two-three firms together to manufact-ure a product," suggests Mr Sudip Nandy, CEO, telecom and product engineering solutions of Wipro. "Collaboration could mean consolidation," said Mr Aart J. de Geus, chairman and CEO of Synopsys, said.