In­dia: The Next Mo­bile Chip Bat­tle­field

In­dia is turn­ing out to be a bat­tle­ground for the lead­ing chip mak­ers. Qual­comm, Me­di­aTek and Spread­trum are gear­ing up to gain max­i­mum mar­ket share in this do­main. These ma­jor play­ers are con­tin­u­ously en­hanc­ing the de­vel­op­ment and de­sign ca­pa­bil­i­ties of

Electronics Bazaar - - Front Page - By Abid Hasan

There has been a quan­tum leap in what chip mak­ers are of­fer­ing the In­dian mar­ket to­day and there is a rea­son for this. In Oc­to­ber 2017, In­dia dis­lodged the US to be­come the sec­ond largest smart­phone mar­ket in the world, after China. In­dian mo­bile phone ship­ments grew by 23 per cent in 2017 com­pared to 2016, of which 40 mil­lion were smart­phones, a re­port from tech an­a­lyst firm Canalys states.

By 2022, the elec­tron­ics mar­ket in In­dia is ex­pected to in­crease to US$ 400 bil­lion. While the to­tal pro­duc­tion of elec­tron­ics hard­ware is ex­pected to reach US$ 104 bil­lion by the year 2020.

With such im­mense op­por­tu­ni­ties for smart­phone mak­ers, chip mak­ers nat­u­rally want to cash in on their chances.

Cur­rent mar­ket sen­ti­ments

In­dia is one of the fastest coun­tries to adopt 4G. This has cre­ated mul­ti­ple op­por­tu­ni­ties for orig­i­nal equip­ment man­u­fac­tur­ers (OEMs) to po­si­tion their prod­ucts to con­sumers.

“In a mar­ket where around 50 per cent of mo­bile In­ter­net users are still on 2G, the sen­ti­ment in In­dia is nat­u­rally pos­i­tive and the mar­ket size is di­rectly pro­por­tional to the de­mand for smart­phones,” says Sachin Kalantri, di­rec­tor, prod­uct mar­ket­ing, Qual­comm In­dia.

The In­dian chip mar­ket is shift­ing from 3G to 4G, and from fea­ture phones to smart­phones and LTE

mod­els. Due to the high de­mand and the po­ten­tial for 4G fea­ture phones in In­dia, chip man­u­fac­tur­ers are com­ing up with en­hanced prod­ucts. Some of these have been de­signed and de­vel­oped by In­dian en­gi­neers.

Kalantri shares that the af­ford­able data tar­iffs and wider 4G net­work cov­er­age, cou­pled with a wide va­ri­ety of hand­set op­tions for con­sumers across mul­ti­ple brands and price seg­ments, will con­tinue to drive the de­mand for the next few quar­ters.

“We see the in­ter­est in prod­ucts with built-in in­tel­li­gence grow as the con­sumer be­comes more and more technology-con­scious. And the mar­ket has al­ready started re­spond­ing with smart elec­tron­ics and con­sumer durables with in­tel­li­gent func­tions and logic,” says Kuldeep Malik, coun­try head, cor­po­rate sales in­ter­na­tional, Me­di­aTek In­dia.

Growth in the In­dian chip mar­ket

In­dia is the biggest grow­ing mar­ket for all the chip man­u­fac­tur­ers. There is a sense that around 230 mil­lion chipsets were sold in In­dia in 2017.

Neeraj Sharma, coun­try head, Spread­trum Com­mu­ni­ca­tions says, “Though China is cur­rently the biggest mar­ket, it isn’t grow­ing. Over the last few quar­ters, it’s been go­ing down while the In­dian mar­ket is grow­ing. We are hop­ing it will grow at an an­nual av­er­age rate of 15-20 per cent.”

Ac­cord­ing to the Min­istry of Elec­tron­ics and In­for­ma­tion Technology (MeitY), nearly 2,000 chips are be­ing de­signed ev­ery year in In­dia, with over 20,000 en­gi­neers work­ing on var­i­ous as­pects of chip de­sign and ver­i­fi­ca­tion.

This has spurred the growth prospects for the In­dian semi­con­duc­tor in­dus­try as well. While mo­bile de­vices will be the pre­dom­i­nant growth en­gine, the mar­ket is also see­ing sus­tain­able de­mand in the au­to­mo­tive elec­tron­ics, com­mu­ni­ca­tions and broad­band equip­ment sec­tors. The In­dian semi­con­duc­tor and smart de­vices ecosys­tem is grow­ing – not just in terms of de­mand but also re­spon­sive sup­ply.

The up­com­ing bat­tle

Un­til last year, 4G LTE was the bat­tle­ground for chip man­u­fac­tur­ers; now, 5G is the new en­trant in the mo­bile chip do­main. Though still at a nascent stage, it will evolve sig­nif­i­cantly in the com­ing days. How­ever, Neeraj Sharma dis­agrees, say­ing, “I be­lieve LTE will con­tinue its ro­bust growth and I don’t see any com­mer­cial roll-out hap­pen­ing in 5G till 2019 or 2020.”

Sources in Me­di­aTek and Qual­comm feel that 5G technology is the next wave in this in­dus­try, and will act as a game changer.

“We have been work­ing on 5G for many years, build­ing upon our long­stand­ing ex­per­tise in 3G, 4G and Wi-Fi,” says Kalantri of Qual­comm.

Qual­comm has al­ready pre­viewed its first ref­er­ence de­sign for the test­ing and op­ti­mi­sa­tion of 5G technology within the power and form fac­tor pa­ram­e­ters of a smart­phone. It has also col­lab­o­rated with in­dus­try lead­ers across the mo­bile ecosys­tem for 5G NR (new ra­dio) tri­als.

Me­di­aTek is up­beat about the new technology and views 5G as an op­por­tu­nity and not a bat­tle­ground.

Malik of Me­di­aTek says, “As we look at the smart­phone in­dus­try’s ex­pan­sion glob­ally, the mid-mar­ket seg­ment has the most prom­ise for growth. Coun­tries such as In­dia (along with China) lead the way with con­sumers who want smart­phones that of­fer what we know as the ‘New Premium’—a mix of af­ford­able de­vices that de­liver the lat­est fea­tures and per­for­mance, all at the same time.”

Lo­cal man­u­fac­tur­ing

Lo­cal man­u­fac­tur­ing in In­dia is yet to take off with chip man­u­fac­tur­ers shying away from tak­ing this step. Some feel it’s the gov­ern­ment poli­cies as well as the heavy in­vest­ment re­quired that are the road­blocks, and it’ll take con­sid­er­able time to over­come both ob­sta­cles and ini­ti­ate lo­cal man­u­fac­tur­ing.

Chipset man­u­fac­tur­ing is a cap­i­tal-in­ten­sive busi­ness re­quir­ing huge in­vest­ments in set­ting up a fab. Such plants are typ­i­cally set up in ge­ogra­phies where the con­sump­tion of chipsets is high. Sharma feels that man­u­fac­tur­ing in In­dia can wait. He adds, “We should work on de­sign­ing in In­dia, since even in China, fabs are be­ing set up only now. Once we bring de­sign ca­pa­bil­i­ties to In­dia there will be more jobs and em­ploy­ment in the coun­try.”

Though lo­cal man­u­fac­tur­ing still feels like a dis­tant dream for elec­tron­ics man­u­fac­tur­ers, re­cent moves by the gov­ern­ment of In­dia may act like a stepping stone to make that dream a re­al­ity.

In a re­cent de­vel­op­ment, the gov­ern­ment has in­creased the cus­toms duty on sev­eral elec­tronic items in­clud­ing tele­vi­sions, mo­bile phones and mi­crowaves, mak­ing the im­port of these goods more ex­pen­sive. The cus­toms duty on push­but­ton phones, in­clud­ing mo­biles, and on smart elec­tric­ity me­ters has been in­creased to 15 per cent, from 10 per cent, as per a no­ti­fi­ca­tion is­sued by the Min­istry of Fi­nance.

This no­ti­fi­ca­tion is bound to im­pact the mar­ket and could work as a turn­ing point to boost lo­cal man­u­fac­tur­ing. The chip man­u­fac­tur­ers are also look­ing for­ward to the up­com­ing Union Bud­get, which they hope will of­fer ma­jor in­cen­tives to the elec­tron­ics in­dus­try.

The high growth seg­ment

Mo­bile phones in the range of US$ 100 - US$ 200 com­prise the fastest grow­ing seg­ment. In­dia is be­com­ing a mar­ket dom­i­nated by the seg­ment now re­ferred to as ‘New Premium’ —af­ford­able de­vices that de­liver the lat­est fea­tures and per­for­mance, chal­leng­ing the smart­phone sta­tus quo. This can mean new form fac­tors, new cam­era specs or even new mod­u­lar de­signs.

All the chip man­u­fac­tur­ers are ex­pect­ing to grow in this sec­tor. The US$ 100 -US$ 120 price seg­ment is ex­pected to be the ma­jor con­trib­u­tor to 4G de­vice sales.

“The growth seems to be pos­i­tive and 70 per cent of fea­ture phone users will switch to smart­phones. The max­i­mum growth will be wit­nessed in the US$ 100 US$ 200 smart­phone price band,” Sharma con­firms.

The num­bers game

Qual­comm, Me­di­aTek and Spread­trum have seen good growth in 2017. Glob­ally, Qual­comm clocked rev­enues of a whop­ping US$ 22.3 bil­lion. While an­nounc­ing the com­pany’s fourth quar­ter re­sults, Steve Mol­lenkopf, CEO of Qual­comm In­cor­po­rated, said, “We con­tinue to see strong growth trends for global 3G/4G de­vice ship­ments and are fo­cused on pro­tect­ing the es­tab­lished value of our tech­nolo­gies and in­ven­tions. We are lead­ing the in­dus­try to 5G, and are well po­si­tioned with our prod­uct and technology lead­er­ship to con­tinue our ex­pan­sion into many ex­cit­ing new prod­uct cat­e­gories, such as au­to­mo­tive, mo­bile com­put­ing, net­work­ing and the In­ter­net of Things.”

Tai­wanese chip maker, Me­di­aTek’s third quar­ter re­sults were also good. Its third-quar­ter global rev­enue was US$ 2.12 bil­lion (NT$ 63,651 mil­lion), up 9.6 per cent se­quen­tially, and down 18.8 per cent, year-over-year. The quar­terover-quar­ter in­crease was mainly due to in­creased sea­sonal de­mand of cer­tain con­sumer elec­tron­ics prod­ucts.

The new dis­rup­tor in the mar­ket, Spread­trum Com­mu­ni­ca­tions, has ro­bust plans for In­dia and is suc­cess­fully rid­ing on the back of Re­liance Jio fea­ture phones. The chip maker is also ex­pect­ing high growth from the In­dia mar­ket by the end of 2017 on ac­count of the in­creased de­mand for smart­phones.

“We have been grow­ing in In­dia in dou­ble dig­its since 2012-13. It is now the sec­ond largest mo­bile phone mar­ket. We are ex­pect­ing 20 per cent busi­ness growth by the end of this year, com­pared to last year,” said Leo Li, chair­man, CEO and pres­i­dent, Spread­trum, while speak­ing to the me­dia in Novem­ber 2017.

Spread­trum claims to have a 45 per cent mar­ket share in the In­dian mo­bile phone chip mar­ket, of which 20-25 per cent is for smart­phones and the re­main­ing is for fea­ture phones.

On the other hand, Me­di­aTek claims to have close to a one-third share of the to­tal smart­phone chip mar­ket in In­dia.

There is no doubt that the smart­phone seg­ment is go­ing to grow in 2018 and that the bat­tle for the chip mar­ket is not go­ing to be a cake­walk for the main play­ers. With 5G com­ing in, the de­mand for premium smart­phones will pro­vide a much needed boost to the chip man­u­fac­tur­ing in­dus­try.

Neeraj Sharma, coun­try head, Spread­trum Com­mu­ni­ca­tions

Kuldeep maliK, coun­try head, cor­po­rate sales in­ter­na­tional, Me­di­aTek In­dia

SachiN KalaNtri, di­rec­tor, prod­uct mar­ket­ing, Qual­comm

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