Steady Rise of India’s Semiconductor Ecosystem
With a burgeoning market for electronics and a massive pool of technical talent, India is poised to seize the opportunities towards building a robust semiconductor ecosystem, from design to manufacturing
In recent years, India has recognised the economic potential and geopolitical significance of the semiconductor industry. The total market size was valued at over $34 Billion in 2023 and is expected to cross $100 billion 2032, at an annualised growth rate of over 20%, according to Custom Market Insights, a US-based market research and advisory firm.
The unveiling of the India Semiconductor Mission (ISM) in 2021 marked a pivotal moment in India’s quest to establish itself as a key player in the global semiconductor value chain. Unlike previous efforts that focused on specific segments of the industry, ISM encompasses the entire semiconductor ecosystem, including research and development, fabless chip-making, design, fabrication, and equipment supply.
Global Dynamics and India’s Strategic Positioning
The global semiconductor value chain has undergone significant shifts, driven by factors such as pandemic-related disruptions, rising labour costs, and geopolitical uncertainties. As companies seek to diversify their supply chains away from traditional hubs like China, India emerges as an attractive destination for semiconductor manufacturing and assembly. Its relatively stable political environment and large domestic market make it an appealing choice for companies looking to de-risk their operations and tap into new growth opportunities.
India’s semiconductor ambitions are bolstered by proactive government policies and strategic partnerships with industry leaders. The ISM policy framework offers unprecedented subsidies and incentives to attract investments in chip assembly, fabrication, and peripheral infrastructure. Moreover, collaborations with companies like Taiwan’s PowerChip Semiconductor Manufacturing Corporation (PSMC), Renesas Electronics Corporation, Micron, and Samsung Semiconductor India Research signify growing confidence in India’s semiconductor program.
Expanding on recent developments, a recent report from The Diplomat highlights the pivotal role of government incentives, stating that “the central government’s offer of 50 percent capital support to new entrants in the fields of compound semiconductors, fabrication, assembly, outsourced semiconductor assembly and test, and photonics, coupled with additional incentives for setting up peripheral infrastructure within industrial clusters, has spurred significant global interest.”
Another crucial aspect of India’s semiconductor ecosystem is its focus on design and talent development. Partnerships with major electronic design automation (EDA) toolmakers like Cadence and Synopsys provide access to proprietary software for design engineers and universities. Additionally, initiatives like the RISC-V ecosystem aim to promote innovation and competition by developing custom processors based on open-source instruction set architecture. This emphasis on design capabilities positions India as a hub for semiconductor innovation and IP creation.
Challenges and Opportunities
While India’s semiconductor ambitions hold immense promise, they are not without challenges. Cost competitiveness, infrastructure limitations, and skilled-talent shortages remain significant hurdles that must be addressed to realise India’s full potential in the semiconductor industry. However, strategic government policies, international partnerships, and focused efforts on talent development and infrastructure expansion are laying the groundwork for India to overcome these challenges and emerge as a semiconductor superpower.
State governments are playing a crucial role in nurturing India’s semiconductor ecosystem through focused initiatives and policymaking, in this regard. States like Gujarat, Odisha, and Tamil Nadu have implemented policies such as additional capital expenditure support to incentivise the establishment of semiconductor fabs, incubate fabless chipmakers, and subsidise research and development costs. By complementing central government efforts with state-level interventions, India can create a conducive environment for semiconductor innovation and manufacturing.
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India’s semiconductor journey is propelled by a shared vision of technological excellence and global leadership. By leveraging its strengths in talent, market size, and strategic partnerships, India is poised to become a reliable and strategic player in the global semiconductor industry. With continued investment in research, infrastructure, and talent development, the Asian tiger can establish itself as a hub of semiconductor innovation, driving export-led growth and nurturing the domestic technology market.