India, Vietnam lead Asia's chip growth

Domestic electronics demand and government support for foreign investments, will ensure the two markets enjoy high growth over the next few years, analyst says.
Written by Vivian Yeo, Contributor

SINGAPORE--Sizeable domestic addressable markets and strong government support for foreign investments are making India and Vietnam two of the region's semiconductor industry hotspots, according to research analyst Gartner.

India is tipped to be the world's fastest growing semiconductor market, with a compound annual growth rate (CAGR) of 19.2 percent between 2007 and 2012, Phillip Koh, Gartner's research vice president for semiconductors in the Asia-Pacific region, said Tuesday at the company's 14th annual semiconductors roadshow here. This means that globally, the Indian market has the highest increase in semiconductors required in devices.

Another fast-growing segment was what Gartner termed as "other Asia-Pacific" markets, which include Southeast Asian nations such as Indonesia, the Philippines, Thailand and Vietnam. Among this group, Vietnam scored the highest CAGR at 46 percent.

Source: Gartner
Note: TAM refers to total addressable market

Separately, in a statement Monday, Gartner said that the Asia-Pacific market will grow 6.4 percent this year to reach US$160 billion. The analyst house also forecast the regional market to generate a revenue of US$203 billion by 2012.

Koh on Tuesday singled out growing domestic demand for electronic equipment and a supportive investment climate, as drivers for the strong forecast for India and Vietnam. According to him, the Indian semiconductor market is expected to reach US$9.8 billion in 2012, more than double that of US$4.1 billion in 2007, while Vietnam's semiconductor market, added Koh, will be worth US$6.6 billion in 2012.

Over in India, the government has initiated investment policy changes to encourage companies to set up manufacturing presence in the country, noted Koh. It also has growing chip design competencies, accounting for nearly 25 percent of global semiconductor design services revenues for 2008.

Similarly, Vietnam has enjoyed "a lot of investment" within the last two years. The government has also provided much support to drive investment, he said. However, to be able to attract more investors and semiconductor players, the country needs to improve on various aspects of infrastructure such as transportation, as well as intellectual property protection.

"We expect that India is going to drive semiconductor growth [for the region] over the next one to three years; emerging markets like Vietnam will [be a significant contributor] over the longer term," noted Koh.

By 2012, India will contribute 5 percent of the region's semiconductor revenues, up from 3 percent in 2007, while Southeast Asian markets will contribute the majority of the 13 percent forecast for the Asia-Pacific region. China, however, will continue its lion's share of the regional market at 62 percent, up from 59 percent last year.

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