India Semiconductor Industry: From Chip Taker to Chip Maker

India’s semiconductor industry is poised to reach US$110 billion by 2030, demonstrating significant growth and promising opportunities for business and investors. This projected surge, nearly five times as great as the 2019 market size of US$22.7 billion, is driven by the most populous country’s huge domestic demand, particularly in its telecom stack and industrial applications. India boasts a large electronics consumer base, and its steady increase in smart phone users, proliferation of IoT devices across sectors, industrial automation, and the rapid adoption of technology and automotive electronics—especially in electric vehicles (EVs)— have contributed to the increased demand for semiconductors.

India has a strong, technology-driven market and a large talent pool, making it an attractive destination for semiconductor companies. In line with the national visions of “Make in India”, which aims to promote domestic production and manufacturing in India and for the world, and “Atamnirbhar Bharat”, which is a vision to make India self-reliant and minimize dependences on imports, India intends to become a global hub for semiconductor manufacturing, and it may be on its way.

However, while India has all the capabilities of and access to raw materials, R&D and talent pools, local manufacturing has not harnessed its full potential, and thus India operates with limited manufacturing units in this sector. In order to meet the rising domestic demand for semiconductors, India has instead relied on imports from China, Japan, Singapore Taiwan, South Korea and others. According to the ITC Trade Map statistics, India imported semiconductor products worth US$54.87 billion in 2021. Various programs and initiatives by India’s Central Government aim to address this demand-supply gap in the country’s semiconductor industry through attracting investors to manufacture domestically.

Recognizing the fragility of the global supply chain, as well as the importance of driving economic growth and fostering innovation in the country, India’s government has been gearing up to create a self-sustaining semiconductor ecosystem. The central flagship “Semicon India” program, with a financial outlay of US$10 billion, comprises the bedrock of this plan, intending to reduce India’s dependency on imports by attracting and incentivizing manufacturers setting up units for semiconductor and display fabs and developing R&D and design capabilities. Moreover, the government’s recent announcement to modernize the Semiconductor Laboratory in the state of Punjab through an investment of US$1.2 billion, along with its vision of 5G deployment across the country, semiconductor Production-Linked Incentive (PLI) scheme and 100% FDI in the sector, will boost growth and take India one step closer to being a major player in the industry.

Through government-to-government engagement, India recently signed an MoU with the United States to foster innovation and strengthen the chip supply chain. India is also working closely with Japan and Australia to establish a robust chip supply chain. These bilateral arrangements will support the free flow of technology and chip design capabilities that could boost manufacturing in India.

Efforts to establish new semiconductor fabrication units and expand existing ones in the country have been met with promising interest from global chip makers. Recent investment commitments from large players such as Foxconn and Indian conglomerate Vedanta, which plan to set up greenfield semiconductor and display manufacturing plants in India, have already set the momentum. Additionally, the announcement of three new semiconductor manufacturing facilities early this year—semiconductor fab at Gujarat, semiconductor ATMP at Assam, and  semiconductor ATMP unit at Gujarat— shall help India in shifting gears towards chip maker.

Given the high utility of semiconductors and their components across sectors, as well as ever-increasing demand both in India and globally, there is ample opportunity for manufacturers to grow their involvement in the industry. Some of the opportunities for foreign players in this sector in India include:

• Investing in semiconductor fabrication plants or partnering with existing fabs
• Setting up design and R&D centers to tap into the skilled workforce and foster innovation
• Partnering with Indian companies or investing in semiconductor manufacturing equipment, testing services, packaging, and assembly solutions
• Investing in Indian fabless semiconductor
• Investing in supply chain/logistics, warehousing, distribution, and supply chain management services in the semiconductor industry

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Authored by

Anuj Kumar is a Senior Consultant based in India with more than 12 years of experience in economic development. He is a seasoned practitioner and has advised more than 50 companies including Fortune 500 companies and SMEs in their cross-border trade and investment transactions. Mr. Kumar has expertise in managing FDI projects, cross-border collaborations, technology exchange & capital investment.

Contact Anuj (anuj.kumar@tractus-asia.com) today to learn how your company can tap into India’s growing semiconductor industry.