BUSINESS MARKETING:

END TERM REPORT

SENSOR INDUSTRY

Submitted by:

Ashwini Rungta 2009066

Chetan Mascara 2009068

Mayank Goyal 2009076

MARKET OVERVIEW:

Encouraging Government Policies to Aid the Indian Automotive Sensors Market

The rise in domestic vehicle sales due to declining interest rates, increased spending on road
infrastructure, and institutionalization of the auto finance sector is driving the growth in the
Indian automotive sensors market. In an effort to raise the safety standards and the emissions
norms, the Indian Government is expected to introduce regulations, which will make the use
of sensors mandatory for all vehicles. This translates into an increasing number of electronic
components and an expanding market for sensors.

In addition to this, the Government is expected to make air bags mandatory in all passenger
vehicles, encouraging the installation of accelerometers, a type of crash sensor. With greater
recognition of the benefits offered by sensors, the market for automotive sensors in India is
expanding fast. This is ensuring economies of scale and improved efficiencies in production.
"Sensor manufacturers need to stay one step ahead of the Government's initiatives and be
able to supply vehicle makers with appropriate sensors as the emission and other norms are
upgraded," says the analyst. With sensors becoming a mandatory component in almost all
vehicles in the Indian automotive sector, the cost of sensors is expected to reduce, thereby
further hiking adoption rates.

Stringent emission norms are expected to be the most important driver for the Indian
automotive sensors market – the pressure, gas, and position sensor markets in particular.
However, sensor manufacturers should be able to supply the vehicle makers with the
appropriate sensors even before the regulations are implemented. The Government's decision
to allow a weighted deduction of in-house R&D expenses will also give a big boost to the
Indian automotive sensors market, and attract both domestic and international investment in
India. "The global automakers also view and intend to develop India as a major outsourcing
hub for motor vehicles and automotive parts," opines the analyst of this service.

The only hindrance to the rapid growth of this market is the high cost of incorporating these
sensors combined with the price sensitivity of the Indian market. The automotive sensors
market is still evolving, so automotive manufacturers are reluctant to absorb the costs
associated with it or to pass it on to the consumers. Previously vehicle production volumes
did not justify setting up manufacturing plants in India; but with the current growth in this
segment it is highly feasible to establish India as a manufacturing hub for automotive sensors.
The new production hub will cater to the Indian as well as the Asia Pacific market, which is
relatively well developed. This is expected to be an ideal option, since the developed markets
of Europe and North America have already reached saturation levels in terms of vehicle
penetration, unlike the Asia Pacific market, which shows tremendous scope for vehicle
penetration.

The image sensor market is set to rebound in 2008, according to IC Insights Inc.

In total, the image sensor market is expected to hit Rs30,646.13 crore ($7.6 billion) in 2008,
up 10 percent over 2007, according to the research firm.

CMOS image sensor sales are forecast to rise 19 percent in 2008 to Rs17742.50 crore ($4.4
billion) after falling 12 percent in 2007; meanwhile, CCDs are expected to decline 1 percent
in 2008 to Rs.12,903.64 crore ($3.2 billion) compared to zero growth in 2007, said Rob
Lineback, an analyst with IC Insights.

The 2007 drop was the image sensor market's first annual decline since the 2001
semiconductor downturn. ''In 2007, combined sales of CCD and CMOS image sensors
declined 7 percent, primarily due to inventory corrections in camera phones during the first
half of the year and some weakness in industrial and office equipment applications, such as
machine vision for manufacturing systems and optical scanners in copiers and computer
peripherals,'' according to a report from IC Insights.

The difficult global economy deeply affected the global automotive sensor market; total
sensor demand fell in 2009 by 15% in dollar terms as vehicle sales suffered. Despite the
recent turmoil, Strategy Analytics forecasts that demand for automotive sensors will grow at
10.3% CAAGR between 2009 and 2014, rising from $9.9 billion to $16.1 billion. This
automotive sensor forecast identifies application growth opportunities and detailed demand
trends for sensors in OEM factory fitted automotive electronic systems in North America,
Japan, Europe, Russia, South Korea, Brazil, China and India as well as estimates of sensor
demand from Rest-of-World (ROW) vehicle production.
TECHNOLOGIES:

 Speed Sensors: Speed sensors provide wheel speed signals to the tachometer (engine
speed) and speedometer (vehicle speed). They are also used by engine, transmission,
and powertrain ECUs to manage functions such as spark timing, fuel injectors, and
transmission shift points.

 Position Sensors: Position sensors are used to monitor the positions of exhaust gas
recirculation valve, pedal, steering, and throttle in the vehicles.

 Pressure Sensors: Pressure sensors are used in the power train, engine management
and the fuel systems of the vehicle. In recent years, pressure sensors are being
installed in the fuel injection system, to control the fuel pump.

 Temperature Sensors: Temperature sensors are often called thermistors, because they
change resistance with temperature. Temperature sensors are used to help manage and
safeguard a variety of vehicular systems.

 Gas Sensors: The two types of sensors, the oxygen sensor and the NOx sensor are
used for the purpose of monitoring these gases.

 Accelerometers: These are used in motor vehicle airbag systems as crash sensors.
These devices detect the severity of a vehicle crash by the closing of an electrical
circuit.

 Torque Sensors: Torque sensors have two potential automotive applications, namely
electric steering systems and electronically controlled automatic transmissions.

 Knock Sensors: These are piezoelectric devices that detect vibration caused by
improper combustion.
CUSTOMERS:

The Indian automobile industry is currently experiencing an unprecedented boom in demand

for all types of vehicles. This boom has been triggered primarily by two factors: (1) increase
in disposable incomes and standards of living of the middle class and (2) the Indian
government’s liberalisation measures during the mid 1990s such as relaxation of the foreign
exchange and equity regulations, reduction of tariffs on imports and banking liberalisation
that has fuelled financing-driven purchases. The car sales jumped from 348,000 in 1995 to
1.07 million in 2006. Industry observers predict that the numbers are expected to go to five
million (three million small cars) by 2016. Easy availability of finance with lower interest
rates has contributed to the growth of the Indian automobile industry. Going by the present
trend, the automobile industry is expected to grow at a CAGR of around 10 percent between
2006 and 2016.

The major OEMs in India fuelling this growth are Tata Motors, Maruti Suzuki, Hyundai,
General Motors, Volkswagen, Mahindra and Renault, Toyota, Honda, and Ford. Since the
major chunk of business comes from these OEMs, no one expects the industry to sustain the
fragmentation caused by more than a hundred plus OEMs as in the case of China. Car
components worth US$ 9 billion were produced in the financial year 2006. The components
market is rapidly growing and is expected to be more than US$ 25 billion in 2016.

A comparison between India and US-Canada shows that the current average “electronic”
content per vehicle in India is US$ 542.52 in 2006 and is expected to go up to US$ 745.27 by
2011, whereas in the US-Canada the number for the corresponding years is US$ 2,754.88 and
US$ 3,961.68 respectively. India’s automotive electronics market was about US$ 1.7 billion
in 2005 and is expected to grow at a CAGR of 22 percent to US$ 4.5 billion by 2016.
Independently, the automotive entertainment system market is set to grow at 11 percent
CAGR from 2005 to 2010 and the market for automotive sensors is expected to grow at 34
percent CAGR during the same period.
Apart from the automotive market, the aerospace market in India is on a rise and with
aviation majors such as Boeing, Lockheed Martin, SAAB and the indigenous HAL boosting
their production in India, the demand for high end sensors would witness a phenomenal
growth in future.

The sensors market in medical applications is poised to see rapid growth, driven by the
constant demand for better and improved healthcare, sensors’ rising importance in almost all
medical devices, further developments in sensor technology and newer medical applications
for sensors.

Sensors Market in Medical Applications, finds that the market earned revenues of $6,051.8
million in 2009 and estimates this to reach $12,445.6 million in 2016. The following sensors
are covered in this research: pressure, temperature, flow, accelerometer, bio, encoders,
SQUID and image sensors.

Rising healthcare costs, aging population and the need for medical diagnosis and treatment in
developing and underdeveloped regions are driving the sensors market in medical
applications. In addition, various world economies are expected to continue to drive trends in
the sensors market in medical applications, both from a growth perspective and
technology/product advancement perspective.
STRATEGY:

Citing the above, we foresee a tremendous potential and a relatively untapped market and
will plan our strategy in accordance with the same and as to best suiting our purpose.