Business model for IC testing and packaging services in India

Abstract

According to Indian Semiconductor Association Frost and Sullivan estimates the Indian Semiconductor consumption will reach $36 Billion in year 2015, from$2.82 Billion in 2005, growing at CAGR of 29.8 percent. Worldwide semiconductor revenue was reported around $257 Billion, in year2007, which grew by 3.8% compared to 2006. Outsourced IC testing and packaging industry grew by 9.2% in the same period. Total revenue from the IC testing and packaging units is $20.6 Billion. IC testing and packaging industry has recorded positive growth consecutively for last six years. It is expected to outgrow the overall semiconductor Industry. ISA-IDC reported that semiconductor design and supporting revenues reached$6 Billion; this is expected to grow at 21.7%. Revenue contribution from the VLSI was near $766.2 Million, and other contribution is from embedded software and board design. This implies a strong semiconductor design base in India. Semiconductor Manufacturing is in very nascent stage in India. BEL and SCL are two public sector companies having IC fabricating unit and testing and packaging facilities, which mainly cater to the defense needs. Tessolve in Bangalore and SPEL in Chennai are two other companies working in Testing and packaging. But with the forecasted growth in semiconductor consumption and semiconductor policy announcement last year nearly $16 billion proposals have been made by the private companies. Proposals are for setting up manufacturing units of solar panels, photovoltaic cells and testing and packaging. It is in this context that I explore the business model for IC testing and packaging services its opportunities and challenges.