India is positioning itself to become a global hub for semiconductors, the vital components powering modern electronics. With the increasing importance of semiconductors in industries such as consumer electronics and defence, the world is recognising their strategic significance. Amid global supply chain disruptions and technological dependence, India sees an opportunity to establish itself as a key player in this crucial sector. However, for India to succeed, several technological and talent-related challenges must be addressed. This article explores India’s current semiconductor landscape, the gaps that need filling, and how the country can leverage its strengths to succeed.
Strategic Importance of Semiconductors
Semiconductors have become essential for both economic stability and national security. Countries like the United States, Japan, and China have prioritised semiconductor manufacturing to safeguard supply chains and reduce dependence on external sources. India’s semiconductor mission is grounded in similar goals, with a vision to become a global leader in this space by 2030 and to achieve self-sufficiency, aligning with the Aatmanirbhar
Bharat initiative.
The Indian Government has committed substantial financial support, including a USD 10 billion incentive package under the Production Linked Incentive (PLI) scheme. To achieve its semiconductor goals, India needs to develop its entire value chain, including chip design, manufacturing, assembly, testing, and packaging (ATMP). While India has a strong presence in design due to its thriving IT sector, it faces significant technological and skills gaps in semiconductor fabrication and manufacturing.
Technical Challenges
One of India’s biggest challenges is the lack of existing semiconductor fabrication plants (fabs). Building fabs requires a sophisticated infrastructure, including ultra-pure water, reliable power, and advanced technology, all of which India currently lacks. Additionally, setting up a fab involves substantial financial investment, technical expertise, and access to rare raw materials. Fabrication operates at nanometer-scale precision (as small as 2 nm), demanding cutting-edge technologies that India has yet to develop.
Aspiring to be Semiconductor Hub
- India currently accounts for 20 per cent of global semiconductor design talent
- The Government has planned to create a workforce of 85,000 skilled professionals, including technicians, engineers, and R&D experts, who will be industry-ready in the coming years
- India has established Rs 1 trillion research fund under the Anusandhan National
Research Foundation to enhance India’s research capabilities
- The Government is offering 50% financial support for setting up semiconductor manufacturing facilities, with state governments also actively participating in the process
- The Government is trying to secure critical minerals essential for the semiconductor industry
- The Government has launched Critical Mineral Mission, which aims to boost domestic production and secure overseas acquisitions of these minerals
- India is working closely with several countries, including Japan and the US
- India is a key partner in the QUAD Semiconductor Supply Chain Initiative and has signed multiple agreements to strengthen global semiconductor cooperation
- India has targeted to grow the electronics sector to $500 billion and create 6 million jobs by the end of the decade and semiconductor is going to play an important role
Govt’s steps to encourage domestic manufacturing
- The size of the Indian semiconductor market was about $38 billion in 2023 and is expected to reach $109 billion by 2030. Government has taken various steps to encourage domestic manufacturing of semiconductors in the country
- Government has approved the Semicon India programme with a total outlay of Rs 76,000 crore for the development of semiconductor and display manufacturing ecosystem in the country. The programme aims to provide financial support to companies investing in semiconductors, display manufacturing and design ecosystem
- Government has also approved modernisation of Semi-Conductor Laboratory, Mohali as a brown
field Fab
Investment in semiconductor manufacturing
- Vedanta group will invest $5 billion in the first phase of setting up a semiconductor fab, a packaging and testing unit, and a display unit.
- Foxconn will invest up to Rs 4.24 billion in its yet-to-be-named semiconductor joint venture (JV) with HCL for an OSAT plant in India
- Tata Electronics is expanding its semiconductor manufacturing capabilities with two additional fabrication plants (fabs) in Dholera, Gujarat. The first fab, in partnership with Taiwan’s PSMC, is currently under construction, and will manufacture chips for sectors like automotive, AI, and wireless communication. It is expected to begin production in 2026, producing up to 50,000 wafers per month
- A recently proposed US$10-billion joint semiconductor fab proposal by Israel’s Tower Semiconductor and India’s Adani Group is currently under review as part of the India Semiconductor Mission (ISM)
- Larsen & Toubro Ltd. has announced its plan to invest over US$300 million to establish a fabless chip company in India, aiming to design 15 products by 2027
- On September 9, 2024, it was reported that India’s Tata Electronics has signed an MoU with Tokyo Electron (TEL) to purchase equipment and services for its semiconductor facilities in Gujarat and Assam. The partnership will focus on workforce training, R&D, and enhancing semiconductor infrastructure
- As of September 5, 2024, India and Singapore have signed multiple agreements during Prime Minister Narendra Modi’s visit to the country, including in the areas of semiconductor cluster development and the cultivation of talent in semiconductor design and manufacturing
Growing exports
- In 2022, the Indian semiconductor market was valued at US$ 26.3 billion and is projected to expand at a CAGR of 26.3% to US$ 271.9 billion by 2032
- In 2017, semiconductor exports from India stood at US$ 0.21 billion, while imports were higher at US$ 4.65 billion
- By 2019, exports grew to US$ 0.33 billion while Imports fell to US$ 3.15 billion
- 2020 witnessed a downturn in both exports and imports, influenced by global economic disruptions such as the COVID-19 pandemic
- In 2022, exports from India reached an all-time high of US$ 0.52 billion
Key foreign Investors
- Micron Technology
- Applied Materials
- Advanced Micro Devices
- Faxconn
- Corning
- Key Indian Players
- Vedanta
- Tata Electronics
- Hiranandani
- Reliance industries Limited
- Larsen & Toubro (L&T)
- Murugappa
India also lags in other areas of the semiconductor value chain, such as wafer manufacturing, testing, and packaging, despite its achievements in semiconductor design. In contrast, countries like Taiwan, South Korea, and China have developed complete ecosystems around semiconductor production. For instance, Taiwan’s success is due to its integrated ecosystem, where local suppliers of packaging technologies, raw materials, and design software support fabs. India must replicate such models to gain a competitive edge.
Skill Shortages and Education
The shortage of skilled professionals in India’s semiconductor sector poses another significant challenge. By 2032, the country will need 1.2 million skilled workers to meet the industry’s demands. Although India produces many engineers annually, few possess the specialized knowledge needed for semiconductor-related roles. The current education system falls short in advanced electronics, nanotechnology, and material sciences, which are critical for chip design and manufacturing.
Countries that lead in semiconductor technology, such as the United States and South Korea, heavily invest in STEM (Science, Technology, Engineering, and Mathematics) education. India, ranked 139th globally in education, needs major reforms to bridge the skills gap. While initiatives like the National Education Policy’s emphasis on STEM and programs such as Skills Acquisition and Knowledge Awareness for Livelihood Promotion (SANKALP) are promising, more needs to be done.
University departments should offer specialized programs in semiconductor technology, while partnerships between industry and academia should be expanded. Upskilling will also require improving faculty training and fostering research cultures in technical institutions. Collaborating with countries like Taiwan, South Korea, and the United States can help India establish world-class training programs.
Learning from Global Challenges
Many countries have faced difficulties in developing their semiconductor industries. A key lesson from global failures is the importance of strategic planning and targeted investment. For example, the U.S. lost its leadership in semiconductor manufacturing to Taiwan and South Korea due to underinvestment in fabrication technology. Similarly, despite its advanced technology, Japan struggled to keep up with competitors because of fragmented semiconductor policies and a lack of government support for R&D. India must avoid these pitfalls by implementing a long-term, comprehensive strategy that focuses on building the entire semiconductor ecosystem rather than isolated segments of the value chain. Investments should be targeted, and the private sector should have the flexibility to choose partners and locations based on technological merit rather than political factors. This will help attract foreign direct investment (FDI) from major global technology companies.
Strategic Advantages for India
Despite its challenges, India is uniquely positioned to achieve its semiconductor ambitions. First, the country has a large, technically skilled workforce, with 20 per cent of global semiconductor design talent located in India. Additionally, the growing domestic market for electronics, automotive, and telecommunications presents a strong demand for semiconductor products. This makes India an attractive destination for multinational companies looking to establish fabs and ATMP units.
India’s proactive Government policies are also helping to create a conducive environment for growth. Financial incentives for R&D, along with plans to build semiconductor fabs in Gujarat and Assam, are positive steps toward creating a robust semiconductor ecosystem. India can further capitalise on its strategic location by attracting investments from countries seeking to diversify their supply chains away from China.
Steps for Success
To ensure the success of its semiconductor mission, India needs to address both its technological and human capital challenges. Key steps include: Infrastructure Development: The Government must continue investing in essential infrastructure such as water, power, and transportation to attract semiconductor fabs. Public-private partnerships and collaboration between central and state governments will be crucial.
Skill Development: India’s education system must be revamped to focus on semiconductor-specific skills. Expanding STEM education, developing specialised university programmes, and fostering industry-academia partnerships will help build a skilled workforce.
Attracting Investment: Financial incentives, such as tax exemptions and low-interest loans, should continue to attract foreign semiconductor companies. Strategic partnerships with countries like Taiwan and South Korea will facilitate technology transfer. Supporting R&D: Continued investment in R&D is critical for maintaining competitiveness in the semiconductor industry. India must establish research centers focused on advanced chip design, packaging, and fabrication.
Building a Supply Chain Ecosystem: Developing a comprehensive semiconductor ecosystem, including suppliers of equipment, design software, and raw materials, will reduce reliance on imports and strengthen the domestic industry.
India’s semiconductor mission has the potential to propel the country into becoming a global technology powerhouse. While significant gaps remain in terms of technology and skills, India’s growing domestic market, proactive Government initiatives, and abundant talent pool provide a solid foundation for success. By strategically investing in the semiconductor ecosystem and learning from global experiences, Bharat can achieve its goal of becoming a major player in the global semiconductor industry by 2030.
