India lacks a robust and integrated supply chain for the semiconductor industry, which involves the availability of raw materials, equipment, components, testing facilities and skilled manpower
Though India aspires to be a global leader in the semiconductor sector, there are several challenges ahead and many lessons to be learnt from international experiences. Most important among them is that India lacks a robust and integrated supply chain for the semiconductor industry, which involves the availability of raw materials, equipment, components, testing facilities and skilled manpower. The complexity and capital intensity of semiconductor manufacturing is a major barrier, with a new fab costing over $1 billion to build. Setting up fabrication plants requires cutting-edge technologies, sophisticated materials and a meticulous production process. India has a shortage of skilled talent and lacks access to high-end technologies, which are licensed by patent holders at a high price. Apart from restrictive bureaucratic procedures, infrastructure limitations, such as power supply, water availability and logistics, can pose significant hurdles for semiconductor manufacturing. Also, India faces stiff competition from established semiconductor manufacturing hubs like China, Taiwan and South Korea. There is also an argument that the Centre’s incentives are not sufficiently attractive compared to what other nations are offering. There are also apprehensions about policy stability. India imports all chips and only a few elements of the semiconductor supply value chain are indigenously available. There is a need to promote research collaborations between academic institutions and industry players to develop cutting-edge chip technologies to keep pace with the ever-changing consumer demands and market trends. While India boasts a large pool of engineering and technical talent, there is a need for specialised skills in semiconductor manufacturing.
Though India traditionally had a strong base for the semiconductor design industry, hardware manufacturing has remained elusive. Over the last 15 years, several consortiums made multiple attempts at chip-making but without success. The Covid-19 pandemic and geopolitical tensions have exposed vulnerabilities in global supply chains, underscoring the need for domestic chip production to ensure both economic growth and national security. However, India’s current investment in low-level assembly and packaging repeats the mistakes of China and limits the country’s ability to move up the value chain. India must aim higher to compete on a global scale. It must foster innovation, encourage private-sector leadership and pursue global collaborations to access cutting-edge technologies. It needs a more comprehensive and forward-thinking strategy. Unlike China’s inward-looking approach, India must embrace international partnerships. It must create a favourable ecosystem for startups and entrepreneurs to enter the semiconductor space by offering incentives such as investment tax breaks and funding opportunities. Building state-of-the-art fabrication facilities (fabs) is essential for India’s semiconductor aspirations. The global semiconductor industry is poised for a decade of growth to become a trillion-dollar industry by 2030. The country aspires to be one of the major drivers of this growth by creating a conducive manufacturing environment and forging more international collaborations. The Indian semiconductor market, valued at about $23.2 billion, is projected to reach $80.3 billion by 2028.
