Overview:

In recent years, India has been in the limelight when it comes to supporting technological developments & innovations. In early 2022, the Union Cabinet approved the National Green Hydrogen Mission to attract and support key green hydrogen players across the globe in various aspects. Considering this endeavor to take such initiatives, commitment-based attitude, and ability to disrupt the overdependence on China and Taiwan like few nations for semiconductors, India and the US signed a memorandum of understanding (MoU) on establishing semiconductor supply chain and innovation partnership during the Commercial Dialogue 2023 held last month. Earlier, the governing agencies of both nations tended to build a resilient semiconductor supply chain through their respective missions: the US’s CHIPS and Science Act and India Semiconductor Mission. The CHIPS and Science Act, approved in August 2022, would focus on reducing costs, strengthening supply chains, and creating jobs. On the other hand, India Semiconductor Mission—launched in December 2021—aims towards building a vibrant semiconductor & display design and innovation ecosystem, thereby enabling the nation’s emergence as a global hub for electronics manufacturing, designing, and packaging. The recent MoU aims to leverage the complementary strengths associated with both independent missions and facilitate commercial opportunities through talks on various aspects of the semiconductor value chain.

Government-Led Initiatives To Build A Resilient Indian Semiconductor Industry:

India does not have indigenous semiconductor manufacturing facilities, so it has begun to focus on attracting global chip makers to establish manufacturing facilities there. The nation has published a meticulous policy framework to offer financial assistance to businesses investing in semiconductor and display manufacturing; this will help pave the way for India’s expanding participation in the global electronics value chains. On December 15, 2021, the Government of India approved a $10 billion incentive plan, “Semicon India Program,” to attract investments related to semiconductor and display fabrication, as well as to become a key player in the global semiconductor supply chain. The Ministry of Electronics and Information Technology is simultaneously focusing on leveraging the global semiconductor supply chain & attracting foreign investment, for which it has set an ambitious target to achieve $300 billion in electronics manufacturing and exports by 2026. To align with this government-determined target, India will consume semiconductors worth $70-80 billion during the next four years.

Potential Opportunities For Global Semiconductor Players:

Global revenue generated through the value chain (fabrication of semiconductors), including foundries, equipment, chemicals, and wafer, is around $225 billion. With the announcement of the Semicon India program, the government is creating opportunities by offering subsidies, infrastructure, tax incentives, and other benefits to foreign investors for establishing semiconductor fabrication facilities in the country. The nation’s focus is on boosting the fabrication of semiconductors with various technology nodes, for which it has announced subsidies of up to 40 percent of the project cost for 28nm to 45 nm nodes and up to 50 percent of the project cost for 28nm to lower advanced technology nodes. So far, the government has received proposals from five leading companies to develop semiconductor and display fabrication plants. The renowned firms, including Vedanta, Foxconn, IGSS Ventures, ISMC, and Elest, have proposed to invest around $20.5 billion in the Indian electronics & semiconductors market.

The electronics industry seeks enormous investment in R&D and manufacturing capabilities, and the front-end manufacturing equipment for advanced semiconductors with 3nm technology nodes costs around $18 billion. Considering this figure, TSMC—the multinational Taiwan-based semiconductor contract manufacturing and design company—is investing $100 billion into additional chip capacity over the next three years. The geographical analysis of the Indian electronics & semiconductor industry deduces that Gujarat, Maharashtra, Tamil Nadu, and Uttar Pradesh are potential semiconductor manufacturing hubs. These four states lead in manufacturing automobiles, mobile phones, and industrial parts. Thus, setting up semiconductor manufacturing facilities adjacent to these would be advantageous. However, the remaining states are more favorable regarding the environment, semiconductor-grade water, high-quality power, logistics, and the research ecosystem.

Also, the government’s new plan, “Make-in-India,” encourages companies to manufacture & assemble display-centric consumer products for both domestic consumption and export markets. By establishing display fabrication facilities in the country, the cumulative cash outflows from the potential demand for display in India from 2021-2025 will likely be reduced from $60 billion to around $35 billion. For instance, Elest, a subsidiary of multinational gold retailer—Rajesh Exports, is set to invest about USD 30 billion to set up India’s first display fab facility in Telangana to manufacture advanced AMOLED displays that would be supplied to smartphones, TV, and tablet makers worldwide.

India is constantly adopting automation technologies. Sensors have become an integral part of advanced electronic equipment, and their phenomenally increasing demand will likely create leading opportunities for electronics & semiconductors companies. Several companies plan to design, develop, and produce automated & robotic appliances. An elevated demand for sensors is likely to be witnessed in Consumer Electronics, Industrial, Automotive, Telecommunications, Healthcare, and Logistics sectors, owing to the significantly shifting trend towards automation. In 2022, the demand for sensors across diversified industries in the country was 51.5 million units, which will potentially surpass two-fold by 2030, thereby touching the count of 113 million units.

Besides these, the Indian semiconductor industry paves the way for numerous enterprises across diversified sectors to transit and grab opportunities in this era of technological advancement. The EV sector is amongst the majorly influenced sectors by the semiconductor industry. In order to accomplish sustainable development goals along with innovation propulsion, automakers have been drastically shifting towards self-driving electric vehicles, which are equipped with high-end semiconductors and delicate sensors. Therefore, such a splendid transformation around the EV sector is possible through the uninterrupted supply of semiconductors. Secondly, telecommunication companies are consuming semiconductors ferociously due to the phenomenal demand for 5G smartphones and other highly-efficient consumer electronics. Thus, to meet the ever-increasing demand for premium smartphones and other electronic goods, there is a need for scale-up production of advanced semiconductors. In addition, the healthcare sector relies on semiconductors for performing robotic and minimally invasive surgeries with precision.

Commercial Initiatives For Tapping Into The Nation’s Electronics & Semiconductor Industry:

Considering the unprecedented growth potential and vast applications of this technology-intensive industry around consumer electronics, mobility, automation, and the IT sector, several enterprises and R&D organizations have been tapping into the less explored market.

• Intel to invest $600 million for expanding its chip manufacturing facility in Chennai.
• Vedanta has signed a joint venture with Foxconn to establish electronic chip manufacturing plants by investing $13.6 billion along with 28 nm to 65nm semiconductor fabs with a capacity of approx. 120,000 wafers per month.
• Samsung to invest $500 million to set up a smartphone display manufacturing unit in India.
• Tata Motors partnered with Renesas to establish their fabrication facilities in India to design, develop, and formulate semiconductor solutions and globally export EV-compatible silicon chips.

Analytical Perspective:

IEBS analysts anticipate that India has emerged as a potential hotspot for chip technology development & semiconductor manufacturing and a key link in the global semiconductor supply chain. The recent US-India MoU indicates that the US sees India as a future partner in building a resilient supply chain. IEBS experts believe that India has the potential to become a manufacturing hub in the next 4 to 5 years down the line.

The semiconductor industry relies on a complex global supply chain, including raw silicon wafers, chip design, wafer fabrication, and assembly, which comprises testing & packaging, chemicals, electronic design automation, and gases. Disruptions in the supply chain caused by geopolitical tensions have contributed to a semiconductor shortage across the industry’s value chain. Businesses worldwide are considering how to deal with supply chain disruption, largely due to overdependence on a few countries for chips. Therefore, India expects to step ahead and become a key player in the global supply chain.

Do you want to know how India will evolve in the semiconductor space over the next 4 to 5 years and how IEBS can assist you in identifying new play areas in India that may synergize with your existing technological know-how, products, and services, thereby positively impacting your revenues? Inquire about IEBS consultants’ thoughts/opinions.

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