11 October 2023
An ambitious move by India to become synonymous with the production of semiconductors (microchips), may see the country leapfrog over other major global producers within the next decade. In this article, Linesight’s Ameya Gumaste (Executive Director and Country Head, India) discuss the key growth drivers, government initiatives, global investments, and key challenges that positions India as an emerging ‘global semiconductor hub’.
Underpinned by the Indian government’s US$10b ‘India Semiconductor Mission’ designed to promote the country’s semiconductor manufacturing ecosystem, potential manufacturers are now able to tap into financial incentives of up to 50% marketing and packaging, as well as outsourced assembly and testing units, development and deployment. 
As outlined in Linesight’s recent Q2 2023 India Commodity report, India is fuelling its electronic manufacturing sector with the aim of securing 11% global market share by 2026, the equivalent of around US$300 billion. Recent in-country commitments from international players like Micron, AMD and Foxconn are also poised to accelerate India’s efforts as those companies seek to mitigate risk with a broader geographical supply chain.
The move comes at time as multiple industries worldwide wrestle with a growing demand-supply gap for semiconductors.
These tiny electrical circuits are ubiquitous in just about every known electronic device. From the household refrigerator to the satellites orbiting Earth, they have become the currency du jour for life in the 21st century.
As lynchpins of critical industries such as defense, banking, medicine, transport, education and more, these small-yet-intricate components are helping the rapid transformations of those sectors and contributing to semiconductor manufacturing revenues of more than US$574 billion , which is expected to rise to more than US$1.8 trillion by 2032 .
Yet developing them cost-effectively at a massive scale takes advanced, precision manufacturing. With the Indian Government’s evident push to financially turbocharge semiconductor manufacturing efforts, international companies are looking to shorten those build timeframes and diversify their entrenched reliance on geopolitically insecure supply routes.
Lured also by India’s status as the world’s largest democratic nation and increasingly seen as a politically and socially stable long-term partner, investors see the country’s potential as a trusted manufacturing base.
Already the world’s fastest growing economy, the Asian powerhouse is itself making rapid technological advancements across numerous sectors. With close to 1.4 billion people and over half the population below the age of 30 , the country has big captive demand for electronic consumer goods and automotives and possesses a large pool of young skilled talent.
The ‘Make in India’ initiative launched in 2014 as part of the country’s renewed focus on manufacturing synergised initiatives, focused on reducing India’s electronics import dependency, which ultimately led to promoting skill training in the electronics sector. While the initial focus was on assembly, that focus has shifted to manufacture for both the domestic market and export.
India today has over one billion mobile phones even as the penetration rate of smart phones is still at 45%. According to the International Centre for Economic Analysis, mobile phone exports recently crossed the US$10 billion  threshold for the first time in this fiscal year 2023, and is predicted to reach an estimated US$11.12 billion (over INR 90,000) in FY23. The rapid penetration of other smart devices including tablets, laptops and TVs along with lifestyle electronics goods has driven the demand for semiconductor chips. The surge in e-commerce and digitalization, especially during and after the Covid-19 pandemic has further fuelled need for advanced semiconductors used in devices.
Local consumers are demanding state-of-the-art transport technologies and safety standards like advanced driver assistance systems. India’s automotive industry is already valued at over US$200 billion  and has been advancing at rapid pace. There is a big push for hybrid/electric vehicles and a nascent network of electric vehicle charging stations. Given the low cost of manufacturing in the country, automotive companies are increasingly exporting from India.
Industry 4.0 – also called the fourth industrial revolution or 4IR  – is the next phase in the digitization of the manufacturing sector, driven by disruptive trends including the rise of data and connectivity, analytics, human-machine interaction, and improvements in robotics.
Internet of things (IoT), adoption of AI, mass digitisation programme driven by Government of India and the roll out of 5G is driving exponential growth. Deeper penetration of internet and cheap tariffs have enabled the burgeoning middle class to adopt smart mobile devices, connected systems, and driving is and data consumption. This has spurred demand for semiconductor chips as well as investment in the construction of Indian data centres.
Recently, the Indian Government organized "Semicon India 2023," a six-day exhibition dedicated to the world of semiconductors. The event aimed to educate attendees about the intricate manufacturing processes involved in semiconductor production and showcased the remarkable strides made in this ever evolving and dynamic field.
The event was attended by world’s leading semiconductor businesses and memoranda of understanding were signed for investments in manufacturing projects and for developing research and development centers.
More and more multinational semiconductor companies are recognising India's potential as a crucial market and a talent-rich destination. Several industry giants have established or are in the process of establishing their design and manufacturing centers in India, propelling the growth of the domestic semiconductor ecosystem.
Some of the recent announcements include:
Despite the industry's significant progress, manufacturing semiconductors in India still faces some key challenges.
The lack of advanced fabrication facilities (fabs) and credible expertise and experience in manufacturing electronics products within the country remains a key concern.
While the country has a vast pool of skilled engineers, there is less depth in research and development. A sustained long-term investment needs to be driven locally – supported by the government to develop an indigenous world-class R&D and innovation ecosystem. This process also needs to be mindful of not just nurturing local talent but retaining workers to avoid ‘brain drain’ to western countries.
And although the national government has taken significant steps to promote ‘ease of doing business’, this needs further improvement and consistency across internal states. The local supply chain needs to be developed to match international standards and local capability will need to be enhanced by forging alliances, creating technology transfer agreements and securing long term investments in R&D and manufacturing.
India also faces competition from other semiconductor producing countries in Asia. Local and overseas manufacturers and investors will need to see a long-term, consistent approach in India if the country is to maintain its growth trajectory and continue to attract offshore interest.
This will necessitate:
• Suitable reforms to policies.
• Recognising semiconductor and allied industries a priority sector.
• Continuing incentives already on offer.
• Facilitating real-time single-window clearances for business establishments.
• Fast-tracking land allocations and construction permits.
• Shoring up power availability.
• Committing to big players’ environmental, social and corporate governance expectations.
Needless to say, production costs, taxation structure and incentives on exports will also play a big role in investor decision to continue to ‘Make in India’.
The semiconductor industry both globally and locally is poised for a decade of growth which provides a major opportunity for India. With its vast talent pool, stable political environment and a government commitment to the sector, it is attracting increasing attention from international companies. How well and how fast India tackles its key challenges will matter.
As India continues to embrace digitalization and advanced technologies, the semiconductor industry will play a pivotal role in shaping the country's journey towards becoming a global technology nexus.
Linesight is a global leader in providing and delivering professional construction consultancy services (including Cost Management and Project Management) and strategic support across a range of sectors.
Linesight is currently working on some of the largest and most complex projects in the high-tech industrial and semiconductor sectors. Our experience covers all phases from site preparation works, design development, construction, clean room dry equipment, production equipment, installation, and commissioning. Our subject matter experts are knowledgeable in the complex processes and requirements of FAB construction and delivery.
We have full understanding of the standards, processes and procedures required, as well as the global experience, in-house expertise and regional knowledge needed to support and successfully deliver the planned projects in this space.