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  Date: 08/10/2019

Massive India semiconductor market growth fueled by phones

While the mobile phone shipments falling globally, India’s both feature phones and smart phone shipments are growing at double-digit. A total of 323.6 million feature phones and smart phones were shipped in 2018, according to a research by IDC. Smart phones with a shipment of 142.3 million units in 2018, has registered a growth of 14.5% year over year in 2018. A total of 181.3 million feature phone were shipped in India in 2018 constituting 56% of the total mobile phone shipment in India. Both these figures are from IDC's latest research.

Around 80% of mobile phones shipped in India are estimated to be manufactured in India in 2018. The extra push for domestic manufacturing of mobile phones came in the year of 2015. Government made policies and tax structure in such a way that, both mobile phone manufacturers and mobile phone buyers see cost benefits from domestically made mobile phones. In the recent budget of year 2018, the custom duty on mobile phones is increased further to 20% from past 15%. There is also 10% duty on import of populated printed circuit boards. Both these tax moves lead to full-fledged manufacturing of mobile phones. Due to all these actions, India is estimated to be exporting more than 20% of its locally produced mobile phones.

On an average, the semiconductors constitute 30% of the cost of mobile phone. The total value of semiconductor market for mobile phones in India can be estimated around $ 8 billion in 2019. And it can be easily estimated to be growing at 15 to 20% every year for another 3 years. That's a big and fast growing market for semiconductors in India compared to any other segment.

Qualcomm and MediaTek are the two leading players in the mobile chip market in India. Both together are estimated to be having a share of more than 70% of Indian mobile phone semiconductor market. In the high-end smart phone segment, Apple is a leading player in the Indian market and uses its own chips. In that sense, Apple can be estimated to be third biggest shareholder in the Indian mobile chip market.

Except for the non availability of precision electronic component manufacturing in India, India is turning out to be good place for electronics manufacturing. Nokia and Samsung have successfully experimented with India manufacturing by setting up its mobile phone manufacturing unit in Chennai and operating it successfully for many years. Now you have most of the leading mobile phone vendors having their phones manufactured in India either at their own manufacturing facilities or using contract manufacturing services.

Mobile phone driven charger market is another opportunity for semiconductor vendors in the Indian market. Compared to mobile phone, the charger technology is lesser complex. In mobile phone charges, the semiconductors constitute 50 to 60% of the cost. It's close to 1 billion US$ market opportunity. The semiconductors and mobile phone chargers constitute discrete power semiconductor devices and DC-DC converter ICs.

If this is about mobile phone manufacturing, if you look at the design activity around mobile phones, there are plenty of services available in India to design semiconductors for mobile phones, embedded software for mobile phones, and also complete mobile phone design. Both Qualcomm and MediaTek have large VLSI teams designing complete chips in India. Qualcomm also buys significant contract services from smaller VLSI chip design service companies.

What is yet to happen is an India based company designing and manufacturing its own branded mobile phone and selling it successfully both in India and export market. MediaTek has trained a team of engineers from multiple Indian electronics companies to design mobile phones. We got to wait and see, for any success of their mobile phone designs.

In the mobile phone SOC design space, the two Indian companies have come up with locally designed new chips for mobile communications. A company named Signalchip has developed a 4G and 5G modem chips. Another company named Saankhya Labs developed 5G broadcasting solution based chips for video streaming on mobiles.

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