-By Naman Kashyap
Introduction
The semiconductor industry is the backbone of modern technology, powering everything from smartphones to advanced military systems. As the world increasingly relies on digital technologies, semiconductors have become crucial for economic growth and national security. India, with its burgeoning market and skilled workforce, is positioning itself to emerge as a global hub for semiconductor manufacturing and design over the next 25 years. This article explores India’s vision for its semiconductor sector, highlighting current initiatives, future goals, challenges, and opportunities.
Current Landscape
India’s semiconductor consumption is projected to grow significantly, from $22 billion in 2019 to an estimated $110 billion by 2030, capturing approximately 10% of global demand. The country currently contributes about 20% of the global semiconductor design talent, with over 35,000 engineers engaged in chip design. However, only around 4% of global semiconductor sales occurred in India in 2022, indicating a substantial gap between consumption and local production capabilities.
Government Initiatives
The Indian government has launched the India Semiconductor Mission (ISM) to create a vibrant ecosystem for semiconductor manufacturing and design. This initiative aims to enhance local manufacturing capabilities through various incentives and partnerships with global technology leaders such as Taiwan’s PSMC and Synopsys from the USA. The ISM focuses on establishing new semiconductor hubs across the country, with significant investments earmarked for developing fabrication plants (fabs) and assembly facilities.
Impact on Technological Self-Reliance
The ISM is pivotal in enhancing India’s technological self-reliance by reducing dependence on imported semiconductors, which currently accounts for about 65-70% of the country’s electronic components. By fostering domestic innovation through initiatives like the Design Linked Incentive (DLI) scheme, India aims to cultivate a self-sufficient ecosystem that supports emerging technologies such as 5G, artificial intelligence (AI), and quantum computing. This strategic shift not only mitigates supply chain vulnerabilities but also strengthens national security by ensuring stable access to critical components essential for defense systems and secure communication networks.
Strategic Goals
India’s strategic goals for its semiconductor industry include:
- Self-Reliance: Achieving self-sufficiency in critical infrastructure across sectors such as power, communications, space, and defence.
- Global Competitiveness: Establishing at least two semiconductor companies among the global top ten by leveraging partnerships with multinational corporations (MNCs) and supporting domestic startups.
- Market Expansion: Increasing the share of locally sourced semiconductors from 9% in 2021 to 17% by 2026.
Key Challenges
Despite its ambitious goals, India faces several challenges in establishing a robust semiconductor ecosystem:
- High Investment Costs: Setting up fabs requires significant capital investment, often amounting to billions of dollars. This financial barrier can deter potential investors.
- Lack of Advanced Manufacturing Capabilities: Currently, India does not have any fabs capable of producing advanced chips, lagging behind countries like Taiwan and South Korea.
- Resource Management Issues: Establishing manufacturing facilities necessitates effective management of resources such as water and energy.
To address these challenges, the government has implemented various initiatives including the Production-Linked Incentive (PLI) scheme that offers financial incentives based on production output.
Comparison with Global Competitors
India’s semiconductor strategy can be compared with those of other countries like Taiwan and South Korea. These nations have established comprehensive ecosystems supported by significant government investments and incentives that have fostered rapid growth in semiconductor manufacturing capabilities. For instance:
- Taiwan has become a leader in advanced chip manufacturing through companies like TSMC, which benefits from substantial government support and a robust supply chain.
- South Korea invests heavily in research and development while providing extensive financial support to companies like Samsung and SK Hynix.
In contrast, India’s approach is still evolving but aims to leverage its large domestic market and skilled workforce to build a competitive edge over time.
Role of Financial Incentives
Financial incentives play a crucial role in attracting semiconductor companies to India. The government has approved an investment of ₹1.26 trillion (approximately $15.2 billion) to support semiconductor production initiatives. This includes:
- 50% Capital Expenditure Support: New entrants receive substantial financial backing to offset initial setup costs.
- Production-Linked Incentives: Companies are rewarded based on their production output, encouraging higher production levels.
- State Government Incentives: Additional support from state governments further enhances the attractiveness of investing in India’s semiconductor sector.
These incentives are designed not only to attract foreign direct investment but also to stimulate domestic entrepreneurship within the semiconductor ecosystem.
Future Vision
India’s vision for its semiconductor industry over the next 25 years includes:
- Building a Comprehensive Supply Chain: Developing a complete supply chain that encompasses raw material sourcing, manufacturing processes, and advanced packaging solutions.
- Technological Innovation: Encouraging indigenous intellectual property generation and fostering collaborations with national and international agencies for research and development.
- Job Creation: By 2026, it is estimated that India’s semiconductor industry could generate over 300,000 jobs across various domains including testing and manufacturing.
Conclusion
India stands at a pivotal moment in its journey towards becoming a global leader in the semiconductor industry. With strategic government initiatives like the ISM aimed at enhancing technological self-reliance and reducing dependency on imports, coupled with significant financial incentives designed to attract investment, India is well-positioned to overcome existing challenges. By fostering innovation through collaborations between MNCs and local startups, India can build a sustainable semiconductor ecosystem that not only meets domestic needs but also contributes significantly to the global supply chain. As this journey unfolds over the next 25 years, India’s commitment to becoming a key player in the semiconductor landscape will undoubtedly shape its economic future.
References
- About India Semiconductor Mission: This page provides an overview of the ISM, its objectives, and its role in enhancing India’s semiconductor ecosystem.
India Semiconductor Mission – About ISM - Contact Information for ISM: This page includes contact details for various departments within the ISM.
India Semiconductor Mission – Contact Us - Press Release on India Semiconductor Mission: This press release details the government’s focus on building a semiconductor ecosystem and the financial support available for companies in this sector.
PIB Press Release on India Semiconductor Mission - Home Page of India Semiconductor Mission: The main page for ISM, providing access to various resources and updates about the mission.
India Semiconductor Mission – Home - Vision & Objectives of ISM: This page outlines the vision and strategic objectives of the India Semiconductor Mission, emphasizing its goals for innovation and self-reliance.
India Semiconductor Mission – Vision & Objectives - ISM Team Information: This page lists key personnel involved in the India Semiconductor Mission, highlighting their roles and responsibilities.
India Semiconductor Mission – ISM Team - Entity Registration for ISM: This page provides information on how entities can register with the India Semiconductor Mission for various initiatives.
India Semiconductor Mission – Entity Registration - Website of India Government on ISM: An additional link providing information about the India Semiconductor Mission as part of the broader Digital India initiative.
Website of India Government – ISM
