NEWS & VIEWS: "India is a volumes market in the lower segment"

Infineon Technologies has announced an investment of 20 million euros in the
next year in India. Though the is aggressive on its smart-card business it does
not plan to set up chip-fabrication here. Still, India is very important for its
volumes. Martin Beyerlein shares his views on global and Indian SIM controller
market. Excerpts:

How big is the SIM controller market-globally and in India?

Our estimate puts it at 860 million pieces in 2004. Of this, 40 million
units have been sold in India. Of the global market in terms of volume we have
almost 43 percent market share, which makes for the 400 million units from us.
For India again it would be difficult to assess, as we are present here through
our card vendors. We estimate our share to be around 35 percent. Last year there
was shortfall of SIM cards. The companies were not able to meet the demand and
exhausted their reserve capacity as well. Infineon fell short by 50 million
units even after over shooting the production by 130 million units.

How do China and India rate in the SIM card business?

China is far ahead of any other market with annual sales of SIM cards
crossing 360 million units. While India and USA have a sale of 40 million units.
China is so ahead due to high churn and replacement rates. Also, people there
carry multiple cards. Comparatively, India has a normal growth rate and churn
and replacement rates have low influence. But the growth potential is certainly
high and we see India climbing up to the number two spot replacing Russia this
year. We are expecting the numbers to jump to around 60 million units this year.

There debate on SIM's memory. How is the Indian market here?

India has a very fragmented and segmented market. Here, price and average
return for the operator is a major factor. So operators are happy using 8 k and
16 k chips. But we are moving ahead with 64 k and 128 k memory. Some Indian
operators have been trying 32 k and conducting pilots for 128 K chips. These are
good signs but the fact remains that India is a volumes market, in the lower
segment whereas money lies in the upper segment chips. Unless the Indian user
moves to 3G applications and operators are able to get higher returns, high
memory chips would not be required.

Anurag Prasad