⭐ A Special Invite for you at the End ⭐
Introduction
The global semiconductor industry, valued at over $588 billion, plays a critical role in modern economies by powering nearly all advanced technologies, from smartphones and electric vehicles to artificial intelligence (AI) and medical devices. India, with its growing economy and large pool of engineering talent, stands at a pivotal moment to expand its presence in the semiconductor value chain. However, for India to seize this opportunity, it must address several key areas, including workforce readiness, business environment, and government policies.
Why India Is Poised for Expansion
The COVID-19 pandemic, coupled with growing geopolitical tensions and rising labor costs in China, has led multinational companies to reconsider their supply chain strategies. As part of the global shift, India presents itself as an attractive alternative for semiconductor manufacturing and research due to its competitive labor costs, large domestic market, and favorable policy landscape.
India already contributes significantly to the semiconductor industry through its design capabilities, with the country employing over 125,000 semiconductor design engineers, which accounts for about 20% of the world’s semiconductor design workforce. India’s strength in chip design provides a solid foundation for expanding into semiconductor assembly, testing, packaging (ATP), and manufacturing. This transition could allow India to meet growing demand for semiconductors, especially in sectors like consumer electronics, automotive, and wireless communications.
Image: India’s Semiconductor Market
Challenges and Opportunities in Semiconductor Manufacturing
India’s current participation in the semiconductor value chain is largely limited to design and software development, but the country is keen to move into fabrication and ATP. The semiconductor manufacturing process is one of the most complex, requiring sophisticated technology, advanced infrastructure, and skilled labor. Establishing a full-fledged semiconductor ecosystem, including research and development (R&D), manufacturing, and post-production processes, will be critical for India’s success.
Image: Semiconductor Value Chain
India’s talent pool, consisting of more than 800,000 engineers graduating annually, offers an advantage, but there are gaps in industry readiness. Currently, only a fraction of graduates are equipped with the necessary skills to work in high-tech sectors like semiconductors. Enhancing education, providing targeted training, and improving industry-academic collaboration will be essential to address the talent gap.
⭐ A Special Invite for you at the End ⭐
Policy Initiatives to Support Growth
The Indian government has taken significant steps to attract semiconductor investment, including the introduction of the $10 billion Semicon India Programme. This initiative aims to foster an ecosystem for semiconductor manufacturing through attractive incentives, such as covering up to 50% of project costs. Additional policy measures like the Production Linked Incentive (PLI) scheme and Design-Linked Incentive (DLI) scheme offer financial support for companies involved in semiconductor design and manufacturing.
India’s regulatory environment is also improving, with efforts to reduce compliance burdens and streamline business approvals. Programs like the National Single Window System (NSWS) simplify the process for investors to obtain necessary approvals, improving the ease of doing business in the country. Additionally, reforms in taxation, labor laws, and tariffs are designed to create a more predictable and favorable business environment for foreign direct investment (FDI).
The Role of International Partnerships
India’s partnership with the United States, formalized through the U.S.-India Semiconductor Supply Chain and Innovation Partnership, highlights the growing collaboration between the two nations. This partnership is expected to facilitate knowledge exchange, R&D collaboration, and the development of complementary semiconductor ecosystems.
Micron Technology’s recent decision to invest in a semiconductor ATP facility in Gujarat marks a significant milestone for India. This investment, which is expected to create thousands of jobs and spur further ATP projects, signals growing confidence in India’s ability to support large-scale semiconductor manufacturing.
⭐ A Special Invite for you at the End ⭐
Image: Key Players
India’s potential to play a larger role in the global semiconductor value chain is undeniable. The country’s strengths in chip design, a favorable policy environment, and a large, growing market make it well-positioned to attract more investment in semiconductor manufacturing. However, addressing challenges such as workforce readiness, infrastructure development, and regulatory stability will be critical for India to fully realize its semiconductor ambitions. By continuing to improve its business environment and fostering strong international partnerships, India could emerge as a key player in the global semiconductor industry over the next decade.
Disclaimer
I, Ayush Agrawal, am registered with SEBI as an Individual Research Analyst under the registration number INH000013013, effective September 14, 2023.
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Ayush Agrawal
Research Analyst
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