A recent report from IESA and Counterpoint Research, found that India’s semiconductor consumption was expected to be worth $64bn in 2026, rising to $110bn by 2030.
Considering that the market was valued at just $22bn in 2019 that’s an impressive rate of growth and suggests that India will account for approximately 10 percent of global semiconductor consumption by 2030, in which wireless communications ($26.5bn), consumer goods ($26 bn), and automotive ($22 bn) will be the main customers.
India, as a result, is looking to significantly increase its local sourcing of semiconductors to 17 percent by 2026, which would represent a sixfold increase in locally sourced semiconductor by revenue compared to 2019.
India’s electronics production was valued at $101bn in 2022 and is expected to triple to $300bn by 2026.
What these statistics point to is a fast-growing economy that offers immense scale. If India continues to grow at its current rate, it could become the world’s third-largest economy by 2027.
At the same time global semiconductor demand is surging and it is expected to become a trillion-dollar industry in a few years. Consequently, over 70 new semiconductor fabs are expected to be constructed worldwide by 2030 and India is certainly looking to compete for a share of that growth.
India is also benefitting from the economic and political tension that has emerged in recent years between the US and China. More companies are looking to improve the resilience of their supply chains and a growing number are moving investment away from China to the likes of India, Thailand and Vietnam.
According to the Economist Intelligence Unit, “India is well-placed to benefit from geopolitical and economic trends that are driving the diversification of Asia’s manufacturing supply chains.”
Not only does India offers a large domestic market with a population of over 1.4 billion people, it has a skilled labour force and a government that is actively providing incentives and concessions to encourage foreign direct investment.
New Investment
India has recently approved three semiconductor plants, worth in excess of $15 billion, which suggests that there is real substance behind its ambition to become a global hub for the electronics industry.
The projects involve two fabrication plants (fabs) and one packaging facility, with Tata Group and CG Power among the key investors working in collaboration with international partners such as Taiwan’s Powerchip, Japan’s Renesas Electronics, and Thailand’s Stars Microelectronics.
The construction of these plants is expected to begin in the next few months and highlights both the urgency and priority that the Indian government places on the sector.
The joint venture brings together CG’s manufacturing expertise, while Renesas will provide advanced semiconductor technology. Stars Microelectronics, a Thai based OSAT, will provide both technology for legacy packages as well as staff training.
The investment covers a five-year period and will be financed through a mix of subsidies, equity, and potential bank lending.
The state-of-the-art manufacturing facility to be built in Sanand, Gujarat, will have a capacity that will ramp up to 15 million units per day and will manufacture a wide range of products – from legacy packages such as QFN and QFP to advanced packages such as FC BGA, and FC CSP and will cater to a broad mix of industries .
Commenting on the partnership, Hidetoshi Shibata, CEO of Renesas described India as being a critical part of Renesas’ business. “We value its innovative landscape and robust potential growth and are committed to accelerating our investment in India. Through this partnership we will bolster India’s semiconductor ecosystem and address growing semiconductor demand worldwide.”
India currently has a strong presence in integrated circuit (IC) design and employs around 20 percent of the world’s semiconductor design engineers - almost every one of the world’s top-25 semiconductor design companies, including Intel, Texas Instruments, NVIDIA, and Qualcomm have set up R&D centres locally.
Last year Advanced Micro Devices (AMD) announced a five-year, $400 million investment in India that will include a new campus in Bangalore that will serve as the company’s largest design centre creating 3,000 new engineering roles.
Companies involved in semiconductor manufacturing equipment design are also well represented and Lam Research, a US manufacturer, has been in India since 2000 and plans to train up to 60,000 Indian engineers through its Semiverse Solutions virtual fabrication platform to accelerate India’s semiconductor education and workforce development.
While much of the design work currently carried out in India is performed by foreign-owned multinationals there are a few domestic start-ups that are beginning to make their mark. Mindgrove Technologies is a systems-on-chip (SoC) developer which specialises in designing 28 nm chips for connected devices, while Signalchip, a fabless design company, is developing chips that enable high-speed wireless communication standards such as 4G-LTE/3G-WCDMA and 5G-NR.92
While the $15bn investment announced is significant it forms part of a much broader strategy by the Indian government to bolster the electronics manufacturing sector.
In fact, the Indian government provides some of the world’s most generous incentives to attract semiconductor ATP and fabrication companies.
The ISM, for example, is a government organisation that provides a range of incentive packages to attract semiconductor-sector investment that covers design, fabrication, and ATP. At its heart is the “Semicon India Programme,” which includes several different mechanisms that are intended to help create a vibrant ecosystem.
To accelerate the development of this ecosystem, India has also created a Design-Linked Incentive (DLI) scheme, which combines direct Indian government support with additional incentives to encourage the development of ICs, chipsets, SoCs, systems and IP cores, and semiconductor-linked designs. The Indian government also offers Indian start-ups additional support, for example, such as acquiring licenses for EDA tools.
Separately from semiconductor-focused incentive packages the government has also created a $20 billion Production Linked Incentive (PLI) scheme that supports electronics manufacturing and through its Semicon India Programme is funding R&D in advanced logic, packaging R&D, compound/power semiconductors, and chip design and EDA activities. There are also plans to set up a India Semiconductor Research Center (ISRC).
Conclusion
Semiconductor manufacturing is an immense challenge and extremely complicated and needs sophisticated technology, skilled labour and an extensive ecosystem.
That is certainly a challenge and explains why the semiconductor industry is dominated by just a few key players.
Success, for India, will depend on not only delivering on the projects that have been announced but on developing and attracting skilled talent, creating a supportive ecosystem and, crucially, investing in R&D.
The Indian government’s role in facilitating this, through policies, incentives, and infrastructure development, will be crucial. If India succeeds it could ultimately become a key player in this dynamic global technology industry.
