With a strong focus on becoming a global semiconductor hub, India aims toestablish a robust presence across the chip value chain.
With a strong focus on becoming a global semiconductor hub, India aims toestablish...
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- India’s semiconductor ambitions: How to move up the value chain?
- Neeraj Bansal, Partner |
6 min read
When it comes to delivering impact, often small hinges swing big doors. In today’s world, semiconductors— which sometimes measure no more than 2 nanometers (nm)—are the backbone of modern electronics, indispensably lodged at the intersection of a wide range of industries. Given their broad applicability, countries across the globe are strategising to mitigate risks associated with over-reliance on a single supply source of semiconductor chips. This also serves to fortify national security and economic well-being, considering recent geopolitical conflicts.
Amidst these global vulnerabilities, India stands at a crossroads of opportunity.
The India advantage
India has 20 per cent of the world’s semiconductor design workforce, a rapidly evolving technology landscape and a thriving domestic market, all of which are conducive in building an indigenous semiconductor ecosystem. Government initiatives, such as the National Electronics Policy or the USD10 billion PLI scheme for semiconductor manufacturing, are also boosting India’s chipmaking aspirations. Budget 2024 further made key announcements—an increased allocation for the semiconductor ecosystem and the establishment of a USD12 billion innovation corpus to incentivise R&D. That India is strategically positioning itself to attract global semiconductor companies is loud and clear.
So where do we go from here?
While the stage is set with continuous infrastructural investments, fiscal incentives and a strengthening R&D landscape, how do we sustain the growing momentum?
1. Pacing up of initiatives:
In the last few decades, prior to the current push, India made multiple attempts to join the global semiconductor industry but fell short primarily due to the lack of proactiveness in policy implementation. Drawing lessons from the past, the government can ensure swift execution of policies under its freshly formulated strategy. In recent months, India’s semiconductor landscape has witnessed a significant surge in momentum. For instance, several investments were announced after the Vibrant Gujarat Summit. According to publicly available information, this was followed by a partnership between an Indian conglomerate and a Taiwanese firm, which aims to establishIndia’s first fabrication plant that will produce indigenous chips for domestic and export markets. Going ahead, expediting more such projects will be crucial for India to remain aligned to its goal of expanding the semiconductor market size to USD110 billion and securing 10 per cent of the global market by 2030. The government had received five requests for fabs (out of a total of 45 applications) as of October 2023, and further accelerating some of these will fast-track overall progress. Additionally, organising more pan-India summits can further enhance global participation. Besides this, apart from central government incentives, state governments can also pitch in with individual semiconductor policies, similar to what Gujarat has done.
2. Inching up the value chain:
As they say, Rome wasn’t built in a day. To establish an end-to-end semiconductor ecosystem, India can consider strategically moving across the industry value chain one domain at a time. According to estimates, the design constitutes 50 per cent of the global value chain, followed by 24 per cent value added by front-end wafer fabrication and 20 per cent by pre-competitive research. The remaining value is added through back-end operations, such as ATMP, electronic design automation and core intellectual property. India can improve in the domains of Outsourced Semiconductor Assembly and Test (OSAT), ATMP, design and R&D where it already has an edge along with its efforts to establish a fab. A similar model was followed by China, which has established itself as a leader in relatively less skill- and capital-intensive activity of ATMP and is now expanding across the value chain. This will not only help in cultivating a competitive advantage but also establish a solid foundation for an indigenous ecosystem,fostering confidence among global players to make substantial long-term investments in India.
We can also take cues from other countries that are at the forefront of semiconductor technologies today. For instance, a key factor contributing to the success of Taiwan’s leading semiconductor company was the presence of industry clusters, which constituted a supplier ecosystem covering aspects such as design, raw materials, components and machinery and ensuring that a fab function seamlessly requires a supportive fabless ecosystem. Hence, India can eventually establish an end-toend chip industry by focusing on initial aspects of self-sufficiency in technological manufacturing— such as establishing a supply network of essential raw materials, enhancing logistical infrastructure, expanding research centres, and integrating smallto- medium enterprises in the value chain.
