The Indian semiconductor market is driven primarily by the growing demand for consumer electronics, the burgeoning automotive industry’s need for semiconductors, the growth of internet of things and smart devices, and the rising focus on renewable energy solutions. Further, the government’s commitment to fiscal incentives and regulatory support has generated significant interest from stakeholders.
Semiconductor chips have become as essential as oil reserves, because they power the new global digital economy. India has recognised its potential and is looking to become a powerhouse of semiconductor manufacturing in the coming years.
Incentivising semiconductor manufacturing
In December 2019, the government launched the India Semiconductor Mission (ISM) in line with its Make in India initiative. The ISM has an incentive outlay of Rs 760 billion for companies/consortiums engaged in making silicon semiconductor fabrication plants (fabs), display fabs and compound semiconductors/silicon photonics/sensors fabs, as well as semiconductor packaging, including assembly, testing, marking and packaging (ATMP)/outsourced semiconductor assembly and testing (OSAT).
To strengthen the semiconductor chip design ecosystem in the country, the government has launched the design-linked incentive (DLI) scheme. The scheme offers financial incentives and design infrastructure support at various stages of the development and deployment of semiconductor design for integrated circuits (ICs), chipsets, system-on-chips (SoCs), systems and intellectual property (IP) cores.
In June 2023, the Ministry of Electronics and Information Technology (MeitY) amended the schemes under the Modified Programme for Semiconductors and Display Manufacturing Ecosystem in India. Previously, the secretary, MeitY, was responsible for approving applications worth up to Rs 1 billion, while applications exceeding that amount were evaluated by the union minister for electronics and IT. However, the latest notification from MeitY has removed this classification and given the union cabinet the sole authority to approve applications under the scheme.
In addition, the futureDESIGN scheme under the India Semiconductor Mission has been launched to stimulate next-generation semiconductor designers. It also seeks to promote a culture of co-development and joint ownership of IPs with active industry participation, and indigenous development of semiconductor chips for automobiles, mobility, communication and computing.
Further, MeitY has set up the ChipIN Centre at the Centre for Development of Advanced Computing (C-DAC) in Bengaluru to dedicate its services to the semiconductor design community. The facility acts as a one-stop centre providing semiconductor design tools, fab access and virtual prototyping hardware lab access to fabless chip designers. Moreover, the government has earmarked Rs 11 billion-Rs 12 billion to support semiconductor design start-ups.
Market scenario
According to a Deloitte report, India’s semiconductor market is projected to reach $55 billion by 2026, with more than 60 per cent of it being driven by three industries: smartphones and wearables, automotive components, and computing and data storage.
The DLI scheme for semiconductors has elicited a positive response, with the government receiving a total of 45 applications from companies, as of October 2023. These include five requests for the establishment of semiconductor fabs, two for display fabs, nine for compound and ATMP facilities, and 29 for the DLI scheme.
Further, the government is planning to expand the DLI scheme to include foreign semiconductor companies, enabling them to partner with Indian start-ups to design their products within India.
State initiatives
Indian states are actively involved in supporting the ISM and have formulated specific policies to promote the semiconductor industry by offering fiscal and non-fiscal incentives. Gujarat was the first state to introduce a dedicated semiconductor policy in 2022, followed by Uttar Pradesh and Odisha.
The Uttar Pradesh cabinet has approved the state semiconductor policy, whereby industrial groups investing in setting up semiconductor manufacturing units will receive a fund of Rs 800 billion from the central government, with the Uttar Pradesh government contributing 75 per cent of the amount. In a similar move, the Odisha cabinet has approved the Odisha Semiconductor Manufacturing and Fabless Policy to facilitate investors. In February 2024, this policy was amended to focus on bolstering fiscal support mechanisms, including interest subvention, PLI, and investments in research and development (R&D) and skill development training.
These state policies also aim to establish a single-window clearance system for all information required for a project.
Stakeholders scale up investments and collaborations
Several remarkable developments have taken place in India following the government’s increased focus on developing a semiconductor manufacturing ecosystem. On June 1, 2023, the ISM opened a fresh round of applications for setting up semiconductor and display fabrication units.
In June 2023, the union cabinet approved Micron’s proposal to set up a semiconductor unit in India with a capital investment of Rs 225.16 billion, providing 50 per cent fiscal support on a pari passu basis. Following this, the AMD revealed a $400 million investment in India to establish a design facility in Bengaluru.
However, the industry faced a setback when Foxconn terminated its joint venture (JV) with the Vedanta Group to manufacture semiconductors in India. However, following this, Foxconn partnered with STMicroelectronics NV to develop a semiconductor factory in India. Foxconn has submitted a new application to establish a semiconductor fab for a 40-nanometre chip facility, which is a mature chip used in cars, cameras, printers and a range of other machines in India. After pulling out of the deal with Vedanta, Foxconn also signed a letter of intent with the government Karnataka to invest Rs 50 billion in two projects.
Globally, India and Japan have signed a memorandum of cooperation to cover semiconductor development, manufacturing, research, design and talent development. In addition, India and the US have agreed to increase cooperation in the semiconductor sector.
India has initiated several strategic collaborations in this space lately. C-DAC is collaborating with Arm to facilitate semiconductor market growth in India. Meanwhile, an MoU has been signed between the Government of Gujarat and Simmtech for an investment of Rs 12.5 billion. Another MoU has been signed between Micron and Namtech for a partnership to advance the world-class talent pipeline required to propel India’s semiconductor manufacturing and missions. In addition, CG Power and Industrial Solutions Limited has partnered with Renesas America, Inc. and Stars Microelectronics (Thailand) PCL in a JV agreement, with a proposal to set up an OSAT facility in India.
In a remarkable move, the Government of Odisha has signed three MoUs with the India Electronic and Semiconductor Association, Synopsys, and the Electronics and Computer Software Export Promotion Council to build an ecosystem for the manufacturing of semiconductors. Additionally, the SRAM & MRAM Group has plans to invest Rs 300 billion to set up a semiconductor fabrication unit in Odisha.
Furthermore, the Tata Group is planning to invest Rs 2 billion for a semiconductor testing and packing unit in Narasapura, Karnataka. Continental Device India Semiconductors will also add new semiconductor packaging lines under the government’s Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors, to bolster annual capacity by 100 million units. In 2024, Kaynes Semicon plans to invest Rs 40 billion to set up an OSAT/ATMP plant, with preferred locations being Hyderabad, Ahmedabad and Bhubaneswar. The HCL Group is also pursuing a JV with Foxconn to set up a semiconductor OSAT unit in India.
Reliance Industries Limited has initiated a foray into semiconductor manufacturing to address its supply chain needs and cater to the growing chip demand in India. The Tata Group is also likely to announce plans to build a new semiconductor fab in Gujarat in 2024.
R&D thrust
Stakeholders are also ramping up their efforts to boost R&D in the semiconductor industry. The government has already established R&D and incubator centres for semiconductors. Recently, the Indian Institute of Science and Samsung Semiconductor India Research have partnered to promote R&D in the on-chip electrostatic discharge (ESD) protection segment. The collaboration seeks to build cutting-edge ESD device solutions to protect ultra-high-speed serial interfaces in advanced ICs and SoC products.
Moreover, the central government will invest $1.2 billion to modernise the semiconductor laboratory in Mohali to achieve volume production and create profitable assets.
Sustaining the momentum
As global industry players are chipping in to push India closer to its semiconductor dream, the goal is to keep the momentum going. Developing an ecosystem for semiconductor manufacturing in a greenfield location is a major challenge, as hundreds of chemicals and gases are needed for chip fabrication, and it is important to have access to clean water.
However, India’s greatest asset lies in its vast, highly skilled workforce. Dedicated efforts have been made by the government to this end. Thus, buoyed by favourable market conditions and the government’s support, India is poised for a big push towards becoming a prominent player in the global semiconductor industry.
