India a Bright Spot Among the Gloom
Amid all the economic doom and gloom splashed in media headlines appears a glimmer of optimism. According to a recent Nielson Global Consumer Confidence Survey¹ reported in Nielsens Consumer Insight Magazine, consumers in large developing markets view their medium-to-long-term prospects as strong.
Indian consumers are the most optimistic. The survey showed that 51% of consumers in India expect the global recession to end within the next 12 months, the highest of all other nations. One in two Indians believes the local economy will continue to show good growth, and that the global recession will have limited impact on their buoyant domestic market.
In addition, consumers in India were the most optimistic regarding job prospects and personal finances. Seventy five percent were optimistic that their job prospects are good or excellent and 77% expect their personal finances to be in good or excellent shape in the coming year.
This strong consumer sentiment is reflected in Indian semiconductor market projections. Even with the global slowdown which impacts multinational captive companies and start ups, the industry is expected to grow at double digit rates. The services outsourcing business tends to be less impacted directly by the economic situation, however, organizations face the risk of longer sales cycles and higher price pressures, according to Poornima Shenoy, president of the India Semiconductor Association (ISA).
The positive domestic Indian market is based in part on cultural differences. Nielsen reports that Indian investors have been safeguarded by the countrys relatively nascent financial market, where savings accounts are the principle investment option for many consumers, mainly due to the fact that fewer investment options exist overall. So it is not surprising that many Indian semiconductor start-ups rely on family and friends for early stage funding rather than on external sources.
The Indian Semiconductor Association is looking to work with the government of India to help set up other sources for funding such start-ups, Shenoy said.
Conversely, mid-size companies sitting on cash are looking for acquisition of teams, technologies and available companies at attractive valuations.
One of the fastest growing segments of the Indian semiconductor market is in the area
of design. An Ernst & Young study commissioned by the ISA in 2007, illustrates India's
global competitiveness when compared to Canada, China, the Czech Republic, Israel,
Taiwan, the UK and the US.
Shenoy stated that key factors positioning India, as a favored destination for
semiconductor embedded design are:
• Growing expertise and capabilities in end-to-end design
• IP protection
•IP development steadily gaining traction
•A strong pool of experienced engineers as well as talented emerging engineers
•Decades-long success stories of world-class captive centers in India
•Emergence of the outsourced third party design services companies
• Cost effectiveness as compared to Western Europe or North America
• A fast growing economy and huge domestic market coupled with accessibility to
other Asian markets
• Embedded design and development has been the strength of Indian software firms
that provide third party design and development services to product vendors
Companies in India and the US have enjoyed a decades-long and successful history of working together. There is a mutual trust due to the IP protection laws in both countries as well as Indias ability to provide quality talent that can be scaled up in a relatively short time period, Shenoy commented.
Shenoy advises companies looking to enter the Indian market to make a reconnaissance trip to India and network with local industry leaders.
¹ The Nielsen Global Consumer Confidence Survey polled 26,202 consumers in 52 countries in September 2008 as the global financial crisis reached a fever pitch.
