Is India even serious about Semiconductor manufacturing?

From smartphones to AI-driven applications and autonomous vehicles, semiconductors underpin the foundation of modern technology. However, while India boasts one of the world's largest consumer bases for semiconductors, it has yet to establish a strong domestic semiconductor production capability.
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The rapid pace of technological advancement has thrust the semiconductor industry into the limelight, powering innovations that have fundamentally transformed our world.

From smartphones to AI-driven applications and autonomous vehicles, semiconductors underpin the foundation of modern technology.

However, while India boasts one of the world’s largest consumer bases for semiconductors, it has yet to establish a strong domestic semiconductor production capability.

In this article, we delve into the challenges India faces, the proactive initiatives it has undertaken, and the promising prospects for its burgeoning semiconductor industry.

Understanding the Global Landscape

At the heart of the semiconductor industry are powerhouse nations like the United States, Japan, South Korea, Taiwan, and the Netherlands.

The recent China-US trade tensions spotlighted the necessity for India to bolster its domestic chip manufacturing capacity, as export restrictions on high-end chips revealed the vulnerabilities of heavy reliance on global supply chains.

To attain leadership in semiconductor manufacturing, a coordinated effort encompassing government bodies, industry stakeholders, academic institutions, and research organizations is imperative.

The Imperative of a Comprehensive Semiconductor Policy

Unlike some of its global counterparts, India has historically lacked a comprehensive and cohesive semiconductor policy.

This has hindered progress across crucial domains including research and development, talent cultivation, infrastructure development, and incentives for semiconductor manufacturing.

The tide turned with the introduction of the Semicon India Programme in 2021, subsequently revamped and relaunched as the ‘Modified Semicon India Programme’ in 2022 & 2023.

This initiative, backed by an impressive investment of over US$10 billion, underscores the Indian government’s determination to cultivate a robust semiconductor ecosystem.

Read more: Semicon India 2023: What all happened?

Infrastructure Investment

A significant challenge faced by the semiconductor sector in India pertains to the absence of state-of-the-art infrastructure. The establishment of advanced chip fabrication facilities demands substantial investments, a prospect that often deters private entities due to the inherent risks.

In order to surmount this obstacle, the government needs to assume a central role by providing financial incentives, subsidies, and robust infrastructure support.

These measures are essential to foster an environment conducive to attracting both domestic and foreign investments into the semiconductor industry.

Capital investments of $10B+ facilities+Tax Breaks

The Indian government has approved a $10 billion incentive package to boost the semiconductor and display manufacturing industry.

The package includes fiscal support of 50% of the project cost on a pari-passu basis for all technology nodes under the Scheme for Setting up of Semiconductor Fabs in India. It also includes fiscal support of 50% of the project cost on pari-passu basis under the Scheme for Setting up of Display Fabs.

In addition, there is fiscal support of 50% of capital expenditure on pari-passu basis under the Scheme for Setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor ATMP /OSAT facilities in India.

Here is a breakdown of the incentives for different types of semiconductor manufacturing facilities:

  • Silicon semiconductor fabs: 50% of project cost on pari-passu basis
  • Display fabs: 50% of project cost on pari-passu basis
  • Compound semiconductor / silicon photonics / sensors fabs: 50% of capital expenditure on pari-passu basis
  • Semiconductor ATMP / OSAT facilities: 50% of capital expenditure on pari-passu basis

The incentives are available to companies that meet certain criteria, such as having a minimum investment of $1 billion and using advanced technology. The government expects the incentives to attract at least $100 billion in investment in the semiconductor and display manufacturing industry over the next decade.

In addition to the financial incentives, the Indian government is also providing other support to the semiconductor industry, such as setting up special economic zones for semiconductor manufacturing and providing tax breaks.

Private Ventures and Government Endorsement

Private sector engagement is a linchpin in India’s semiconductor aspirations.

The partnership between Vedanta and Foxconn, facilitated by the Production-Linked Incentive (PLI) scheme, was poised to position India as a semiconductor hub.

Although the Vedanta-Foxconn venture faced challenges, Vedanta’s commitment remains unwavering. Equally promising is the Tata Group’s strides through Tata Electronics and US-based Micron Technology’s intention to construct a chip assembly and test facility in Gujarat.

These endeavors exemplify the potential of private entities in shaping India’s semiconductor trajectory.

Micron’s Monumental Investment: A Game-Changer

Setting a precedent for large-scale investments, Micron Technology’s announcement of a $2.75 billion investment to establish an ATMP facility in Gujarat has garnered international attention.

The magnitude of this investment, the largest in India’s semiconductor industry, underscores the nation’s growing allure for global semiconductor giants.

This facility, projected to commence operations by 2025, holds the promise of creating over 3,000 jobs and significantly bolstering India’s semiconductor ecosystem.

Read more: India to Become a Global Semiconductor Hub as Micron Invests $2.75 Billion

Semiconductor Titans Pave the Way

In a resounding endorsement of India’s semiconductor potential, leading companies Applied Materials, AMD, and Microchip have announced significant investments of $400 million, $400 million, and $300 million respectively.

These investments not only inject capital into India’s semiconductor ecosystem but also underscore the confidence global players have in India’s capacity to contribute to the semiconductor supply chain.

Nurturing Specialized Talent and Revamping Infrastructure

India’s reservoir of engineering graduates presents a substantial asset, yet the semiconductor industry mandates specialized skills that traditional curricula may not cover comprehensively.

Bridging this skill gap necessitates the establishment of centers of excellence and fostering symbiotic collaborations between academia and industry. Furthermore, the absence of cutting-edge infrastructure poses a considerable obstacle.

In this realm, government intervention is pivotal, with financial incentives, subsidies, and infrastructure support needed to catalyze domestic and foreign investments.

The successful establishment of semiconductor manufacturing clusters, akin to models implemented globally, can be expedited through public-private partnerships.

Pioneering Open Source with DIR-V: A Paradigm Shift

The Digital India RISC-V (DIR-V) program is fostering a paradigm shift in India’s semiconductor landscape. Institutions like IIT Madras, C-DAC, INcore, Mindgrove, and Calligo are driving the development of RISC-V based solutions. RISC-V, an open-source instruction set architecture, represents a movement towards technology sovereignty, offering a viable alternative to proprietary ISAs.

Empowering a Skilled Workforce

Acknowledging the need for a skilled workforce, the All India Council for Technical Education (AICTE) has introduced a B. Tech program in VLSI Design (Very Large Scale Integration). This move aims to bridge the skill gap and cultivate professionals adept in the intricacies of semiconductor technology.

Fostering Research and Development Excellence

India’s commitment to research and development in the semiconductor field is showcased through the establishment of the India Semiconductor Research Centre (iSRC) and the modernization of the Semiconductor Complex Limited (SCL). These initiatives are poised to enhance India’s research capabilities, driving innovation and indigenization.

Public-Private Synergy

The symbiotic relationship between the government and private sector can propel the creation of semiconductor manufacturing clusters, driving innovation, economic growth, and job creation which India has lacked for quite a number of years.

Promoting Semiconductor Design with FutureDesign Scheme

India’s drive for semiconductor excellence extends to the design sphere. The FutureDesign (Design Linked Incentive) scheme has received government approval, offering financial support to semiconductor design companies.

Seven startups, including InnoSilicon Semiconductors, Pi Quadrant, Saankhya Labs, Sterlite Technologies, Texas Instruments, Veda Electronics, and Xillion, have been selected under this scheme, setting the stage for innovative semiconductor design in India.

Nurturing Startups with C2S Program and Skill Development

The Chips to Startups (C2S) program has been launched to nurture semiconductor startups in India. This initiative provides essential support, including mentorship, financial assistance, and market access, to help startups thrive in the competitive semiconductor space.

Additionally, the introduction of a B. Tech program in VLSI Design by the All India Council for Technical Education (AICTE) will bolster the skilled workforce for the semiconductor industry.

“Earlier, people were questioning our aim to make chips and were asking ‘why invest (in India)’. Now, the question has changed to ‘why not invest‘.

Whoever moves fast in this will get the first mover’s advantage… we are rolling out the red carpet for them,”

~Narendra Modi, Prime Minister, India


India’s semiconductor ambitions stand at a crossroads, where challenges are undeniably substantial, but the opportunities are equally momentous. Through a judiciously crafted policy framework, strategic investments in skill development and infrastructure, unwavering commitment to safeguarding intellectual property, and the fostering of effective public-private partnerships, India can indeed spearhead a semiconductor revolution. The Ministry of Electronics & Information Technology’s unwavering efforts to attract global semiconductor collaborators are commendable and augur well for India’s journey toward semiconductor superpower status and global leadership. The stage is set for India to carve its niche in the semiconductor landscape, with all signs pointing to a promising future.

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