India’s semiconductor market is rapidly expanding, projected to surpass $100 billion by 2030. A report by the India Electronics and Semiconductor Association and Counterpoint Research highlights that sectors like mobile handsets and IT are spearheading this growth, contributing over 75% of total revenues. In 2023, the market was valued at $45 billion, with an expected annual growth rate of 13%, driven by increasing demand and government initiatives, such as the Production-Linked Incentive (PLI) Scheme.
What are Semiconductors?
Semiconductors are materials whose electrical conductivity lies between conductors like metals and insulators such as rubber. They have the unique ability to act as both conductors and insulators depending on the conditions. Semiconductors are integral to many modern technologies, often referred to as integrated circuits (ICs) or microchips, typically made from silicon or germanium. Through a process called doping, small impurities are added to these materials to change their conductivity. This versatility makes them essential for a broad range of electronic devices, including transistors, solar cells, LEDs, and integrated circuits.
Importance of Semiconductors
Semiconductors play a critical role in sectors like electronics, defence, healthcare, and automotive industries. They are the backbone of technological infrastructure, making them a strategic industry for countries worldwide. The 2021 global semiconductor shortage highlighted the dependency of industries on a few key suppliers, making it clear that semiconductors are crucial for sustained economic growth. Countries like Taiwan, China, South Korea, Japan, and the U.S. dominate the semiconductor market, with Taiwan holding approximately 44% of the global market share.
India’s Strategic Entry
Amidst growing global competition, India is making a concerted effort to become a key player in the global semiconductor market. The US and allied nations are strengthening their technology cooperation with India, especially in light of the increasing competition with China. India’s skilled workforce, cost advantages, and supportive government policies further bolster its potential to emerge as a leader in the sector.
Key Factors Favoring India:
- Skilled Workforce: India produces a large number of STEM graduates every year, providing a strong base for semiconductor design, manufacturing, and research & development.
- Cost Advantage: The cost of labor is lower in India, and the supply chain is efficient, making it an attractive destination for semiconductor manufacturing and testing.
- Global Supply Chain Diversification: India is becoming a preferred destination for back-end assembly and testing operations, with increasing potential for front-end semiconductor manufacturing.
- Government Policy Support: The Indian government has introduced several policies to encourage semiconductor manufacturing, positioning the country as a reliable alternative to China in the global supply chain.
Government Support
Semicon India Programme:
The Semicon India initiative aims to build a semiconductor and display manufacturing ecosystem within India. This programme provides financial support to companies investing in semiconductor, display manufacturing, and design ecosystems.
India Semiconductor Mission (ISM):
Launched in 2021 under the Ministry of Electronics and IT (MeitY) with a budget of ₹76,000 crore, the India Semiconductor Mission (ISM) is focused on building a sustainable semiconductor and display ecosystem. It seeks to attract global investment and encourage domestic manufacturing through various incentive schemes.
Components of ISM:
- Semiconductor Fab Scheme: Provides 50% fiscal support for setting up semiconductor wafer fabrication facilities in India.
- Display Fab Scheme: Offers 50% financial support for companies setting up TFT LCD/AMOLED display fabrication facilities.
- Compound Semiconductor Scheme: Provides 50% fiscal support for Compound Semiconductors and other facilities like ATMP/OSAT.
- Chips to Startup (C2S) Programme: Trains 85,000 engineers across 113 academic institutions, focusing on semiconductor design and related fields.
In 2024, the government approved the establishment of three semiconductor plants, two in Gujarat and one in Assam, further solidifying India’s commitment to building a robust semiconductor ecosystem.
The Road Ahead for India’s Semiconductor Industry
The rapid growth of digital technologies, AI, IoT, and 5G is pushing the demand for semiconductors to new heights. India’s strong tech industry and its positioning in the global market offer significant advantages for capitalizing on this growing demand.
- Foreign Investment: Global giants like Intel and TSMC are exploring investment opportunities in India, which will aid in developing local expertise and infrastructure.
- Startup Ecosystem: India’s vibrant startup ecosystem is making strides in semiconductor design and related fields, fostering innovation and growth in the sector.
- Infrastructure Development: The government is developing Special Economic Zones (SEZs) dedicated to electronics manufacturing, creating a solid foundation for the semiconductor industry.
- Talent Pool: India has a vast pool of engineering graduates and skilled professionals. The Semicon India 2022 Conference held in Bengaluru is a testament to the government’s dedication to driving innovation and building expertise in this field.
India faces challenges in becoming a major player in the global semiconductor industry, particularly in terms of infrastructure and high-tech capabilities. However, the government and private sector are working together to create a conducive environment for semiconductor manufacturing and innovation. Public Sector Enterprises (PSEs) like Bharat Electronics Ltd and Hindustan Aeronautics Ltd can play a pivotal role in setting up semiconductor fab foundries with international support. Rather than focusing solely on self-sufficiency, India should aim to become part of a trusted semiconductor ecosystem that collaborates with key global players, creating a plurilateral supply chain.