*By Rutam Vora. *Having recovered from the recession blues during 2008, the semiconductor market in India posted a healthy growth in 2009 and with Indian economy seen growing at the growth rate of over 9% for 2010-11 the semiconductor segment as well as the allied metal sectors are believed to get a boost on the growth.
A latest market report by India Semiconductor Association, ‘ISA – Frost & Sullivan India Semiconductor Market 2009- 2011’ indicated that the total semiconductor market (TM) revenues poised to grow from $5.39 billion in 2009 to $8.04 billion in 2011. The market is estimated to grow at a CAGR of 22.1%. India Semiconductor Association (ISA) is the apex trade body representing the Indian semiconductor industry. The boom in the telecommunications sector and IT industry has set the demand for semiconductors rolling like never before in the country. “The rapid growth of manufacturing index of electronic products in the country is seen in the following segments - wireless handsets, telecommunications and IT & Office Automation (OA).” the report said. Releasing the report, Poornima Shenoy, President - ISA, said “The semiconductor industry in India is growing at a CAGR of nearly 22%. This, points at the rapidly growing domestic market which necessitates the need to have electronics as a national agenda. It can contribute substantially to the GDP in the years to come.” The optimism on semiconductor industry is believed to leverage demand for base metals, which are the key ingredients for the semiconductor industry. The growth will not only impact the demand for the metals but create a positive environment for better price discovery for miners and traders. Base metals like, Aluminium and Zinc are widely accepted ingredient for semiconductor industry. Another on the list of manufacturers includes copper, which is highly appreciated by the industry as well as by the designers for its better conductivity to electricity than aluminium. One more, yet a fairly new ingredient, is silver that has also found a place in the semiconductor industry. However, the semiconductor industry is passing through a major technological change as by shifting its dependence on aluminium to other conductors like copper and silver. This will bear significant implication on the demand for these metals. Silver is becoming largely accepted ingredient with large drawbacks linked with aluminium, which gives lesser electro migration than what is required. Hence, combination with the more expensive materials like silver is proving more useful for the industry to make miniaturized structures. A recent analysis on the outlook for base metals by Karvy Comtrade Ltd, a commodities analyst firm stated that LME inventories are seen falling and prices may remain firm in coming days. However, looking into individual metal outlook the scenario seems to be favouring semiconductor industry as most ingredients are currently lying piled up on LME putting downward pressure on international prices for the metals. Another report from Angel Commodities stated that zinc prices had lost around 16% in the month of May and prices ended the month at $1,919. The downside pressure continued on the back of concern about the Euro Zone debt contagion and its impact in consumption. Prices touched a low of $1,823 in May but the metal managed to close above this level by the end of the month. Fundamentals in the case of zinc remain weak and are not supportive as the zinc market is headed for a significant amount of surplus this year. In the month of May, LME inventories for Zinc had gained a whopping 12% and on a year-to-date basis they hover above 26% at 617,125 tonnes as of 11th June, 2010. This seems to be favouring semiconductor industry as they will get cheaper inputs. Similarly, in aluminium too, the prices lost almost 10% on the LME and witnessed a rise in LME inventories by almost 1% in the month of May. The metal touched a low of $1,974 on the LME in the month of May but managed to close above the $2,000 mark. The huge inventory overhang in the case of Aluminum is one factor that indicates the slow progress in demand. Copper is viewed as a bellwether for the global economy as it is used in everything from wiring to plumbing. This creates positive outlook for copper as the demand from all sectors of manufacturing industry including semiconductor is seen growing at a rapid pace. Giving details of the avenues lying with the semiconductor industry in coming days, Anand Rangachary, MD, Frost & Sullivan, said "The Indian semiconductor market is presently being driven by the segments of IT & office automation, wireless handsets, telecommunications and consumer electronics. The next 2 years' forecast promises to be exciting with growth in 3G Networks, WiMAX networks, wireless handsets, notebooks, set-top-boxes and smart cards set to drive semiconductor sales. By end of 2010, India's share in the global semiconductor market is expected to be 2.28% and will be one of the fastest growing semiconductor markets globally.” According to the report, telecommunications infrastructure development related domestic semiconductor consumption will grow by a massive 132.5% from 2009 to 2011. Electronic Systems Design and Manufacturing, or ESDM, is considered to be a great opportunity ahead for the industry. “The Total Available Market for the Indian electronics industry is anticipated to rise significantly to $37.1 billion in 2011 from $25.4 billion in 2009, with a Compounded Annual Growth Rate (CAGR) of 21.4 percent," said Dr. Biswadip Mitra, Chairman, ISA. The overview for the base metals including aluminium, copper and zinc besides the bullion metal, silver seems positive from the growth prospects of the semiconductor industry in India and the extent of usage of these commodities in the manufacturing of the semiconductor equipments. -- Regards Hardik Shah -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
