Despite the challenges, India has significant opportunities to drive growth in the semiconductor industry. The global semiconductor market is poised for substantial growth, with projections indicating that it will become a trillion-dollar industry by 2030
Manoj Kumar Pathak
India’s ambition to become a global semiconductor manufacturing hub marks a significant milestone in its economic and technological evolution. The recent Semicon India 2024 conference, inaugurated by Prime Minister Narendra Modi, underscored the nation’s determination to capture a major share of the global semiconductor market. While this vision aligns with India’s broader goals of technological self-reliance and economic growth, the path to becoming a semiconductor powerhouse is fraught with multifaceted challenges. Addressing these hurdles effectively will be crucial for India to realize its aspirations and to leverage the immense opportunities in the global semiconductor industry.
Semiconductors are the backbone of modern technology, enabling everything from smartphones to automobiles. The complexity of semiconductor manufacturing involves a delicate interplay of technology, precision, and capital. Establishing a semiconductor fabrication plant, or fab, is an immensely complex and capital-intensive endeavor. The cost of building a new fab can exceed $1 billion, encompassing the expenses of cutting-edge technologies, sophisticated materials, and a meticulously controlled production process. The advanced technology required for semiconductor fabrication is not only costly but also subject to stringent international patents and licensing agreements, which poses another layer of difficulty for emerging markets like India.
A major impediment to India’s semiconductor ambitions is the lack of a robust and integrated supply chain. The semiconductor supply chain is a global network that involves raw materials, equipment, components, and testing facilities. Currently, India is heavily reliant on imports for its semiconductor needs. This reliance exposes the country to global supply chain disruptions and makes it vulnerable to geopolitical tensions that could impact supply availability.
The establishment of a self-sufficient supply chain involves more than just setting up fabrication facilities. It requires the development of ancillary industries that can supply raw materials and components, as well as the creation of advanced testing and quality assurance facilities. Without these critical components, India’s semiconductor manufacturing ecosystem will remain incomplete and inefficient.
Infrastructure challenges are another significant barrier. Semiconductor manufacturing demands a stable and reliable infrastructure, including power, water, and logistics. The construction and operation of a semiconductor fab require uninterrupted power supply and high-purity water. In many regions of India, infrastructure deficiencies pose risks to the stability and efficiency of semiconductor operations.
The logistics of transporting delicate semiconductor components also require a well-developed infrastructure. Efficient transportation networks and warehousing facilities are essential to ensure that components and finished products are delivered on time and in optimal condition. Infrastructure limitations can thus slow down the establishment and growth of semiconductor manufacturing facilities in India.
India has a large pool of engineering and technical talent, which is a significant advantage. However, the specific skill sets required for semiconductor manufacturing are highly specialized and not yet widely available in India. The semiconductor industry demands expertise in areas such as photolithography, etching, and doping processes, which are critical for the production of semiconductor wafers. Developing this specialized talent pool requires substantial investment in education and training programs tailored to the semiconductor industry’s needs.
Moreover, the technological requirements for semiconductor manufacturing involve advanced equipment and processes that are often patented and licensed from international entities. Access to these high-end technologies is essential but can be prohibitively expensive due to licensing fees. India’s current technological capabilities and infrastructure are insufficient to support the development and manufacturing of advanced semiconductor technologies on a large scale.
India faces stiff competition from established semiconductor manufacturing hubs such as China, Taiwan, and South Korea. These countries have long been entrenched in the semiconductor industry and have developed sophisticated supply chains, advanced technologies, and substantial investments in infrastructure. China, for example, has heavily invested in semiconductor manufacturing as part of its broader strategy to become self-reliant in technology. Taiwan and South Korea have well-established semiconductor industries with advanced fabs and significant global market shares.
To compete effectively, India needs to offer incentives that are comparable to those provided by these established hubs. This includes not only financial incentives but also support in terms of infrastructure, technology transfer, and policy stability.
Policy stability and the attractiveness of incentives are critical factors in attracting international semiconductor companies to invest in India. The Indian government has introduced various initiatives to support the semiconductor industry, including the India Semiconductor Mission (ISM). The ISM aims to provide fiscal aid, foster innovation, and build a strong supply chain. By offering incentives such as tax breaks, subsidies, and grants, the ISM seeks to create a conducive environment for semiconductor manufacturing.
However, there are concerns that the incentives offered by the Indian government may not be as competitive as those provided by other countries. To address these concerns, India needs to ensure that its policy environment is both stable and attractive to international investors. This involves not only offering competitive financial incentives but also ensuring that regulatory processes are streamlined and transparent.
Another crucial aspect of developing a robust semiconductor industry is fostering research and development (R&D) collaborations between academic institutions and industry players. India has a strong base of academic institutions and research organizations, but there is a need for more collaboration between these entities and the semiconductor industry. By promoting joint research projects and technology development programs, India can accelerate the development of cutting-edge chip technologies and stay competitive in the fast-evolving semiconductor landscape.
The Indian government and industry stakeholders should work together to create research partnerships and innovation hubs that focus on semiconductor technologies. These collaborations can help bridge the gap between academic research and practical applications, leading to the development of advanced semiconductor technologies that meet the demands of the global market.
Despite the challenges, India has significant opportunities to drive growth in the semiconductor industry. The global semiconductor market is poised for substantial growth, with projections indicating that it will become a trillion-dollar industry by 2030. India aims to be a major driver of this growth by leveraging its strengths in engineering talent, innovation, and strategic international partnerships.
Strengthening the Supply Chain : Developing a comprehensive and self-sufficient supply chain for semiconductor manufacturing is essential. This involves investing in raw material sourcing, component production, and testing facilities.
Enhancing Infrastructure : Addressing infrastructure limitations related to power, water, and logistics is crucial for supporting semiconductor manufacturing operations. Investments in infrastructure development should be prioritized to create a stable and reliable manufacturing environment.
Developing Specialized Talent : Expanding educational and training programs to develop specialized skills in semiconductor manufacturing will help address the talent gap. Collaboration between academic institutions and industry can facilitate the creation of specialized programs and research initiatives.
Improving Policy Incentives : Ensuring that policy incentives are competitive and attractive to international investors is critical. The government should continue to offer financial support and streamline regulatory processes to create a favorable investment climate.
Promoting R&D Collaborations : Fostering research collaborations between academic institutions and industry players will accelerate the development of innovative semiconductor technologies and enhance India’s competitive edge in the global market.
Leveraging International Partnerships : Strengthening international collaborations through initiatives like the QUAD Semiconductor Supply Chain Initiative will help India integrate more effectively into the global semiconductor ecosystem and access advanced technologies and markets.
India’s journey towards becoming a global semiconductor hub is both ambitious and achievable. By addressing the challenges related to supply chain integration, infrastructure, talent development, and policy incentives, India can position itself as a major player in the global semiconductor industry. Strategic initiatives such as the India Semiconductor Mission, combined with a focus on research and development, will play a crucial role in driving the country’s semiconductor ambitions forward. As India navigates these challenges and seizes opportunities, it has the potential to make a significant impact on the global semiconductor market, driving technological advancements and economic growth for years to come.
