BENGALURU, India While an industry survey predicted the Indian chip market would reach $3.8 billion in revenues in 2006, an update released Friday (Aug. 31) found that actual revenues were about one-third less than that at $2.69 billion.
The India Semiconductor Association began surveying the Indian chip market in mid-2005.
An analysis by market watcher Frost & Sullivan found that a sharp decline in average selling prices (ASP) in many end-user product categories contributed to the big shortfall between the forecast and the actual revenues. Products like mobile handsets accounted for most of the shortfall.
The global chip market is growing at a rate of 8 percent to 9 percent annually while the Indian market is forecast to grow at a compound annual growth rate of 26.7 percent through 2009. "As domestic demand for all electronics products is growing, India is emerging as one of the fastest growing region in the world," said Anand Rangachary, a managing director at Frost & Sullivan.
With the bill of materials for handsets falling sharply from $25.7 to as less as $11, the decline in ASPs by over 40 percent contributed heavily to the shortfall in Indian chip revenues.
Falling prices for discrete and memory products also cut chip revenues for color TV sets, especially those manufactured here.
The falling bill of materials for modems, which dropped from as much as $20.75 to just $4.9 per unit, was another contributor as did parts costs for monitors, a key driver for the IT and office automation segments.
The market update found that the chip market will nevertheless continue to grow since many Indian companies are expected to start manufacturing automotive electronic products. The market will also be boosted by anticipated demand for mobile handsets, desktops and notebooks, GSM basestations, set-top boxes and energy meters.
According to the update, microprocessors are the biggest revenue source for the Indian chip industry. MPUs generated $882 million in revenues last year, and are expected to grow to $1.7 billion by 2009.