During the 10th Vibrant Gujarat Global Summit that concluded a few days ago, Tata Group announced a state-of-the-art semiconductor fabrication plant in Gujarat's Dholera later this year. At a time when the Indian semiconductor industry is ready for its take-off, the industry offers abundant room in the entrepreneurial ecosystem, especially for the ones who can produce business innovation. Despite the presence of big-time semiconductor manufacturers, the Indian semiconductor ecosystem holds room for significant SME development and a plethora of aspirant entrepreneurs. Putting into perspective, the Indian Semiconductor Industry market size is expected to reach $ 271.9 billion by 2032, growing at a CAGR of 25.7 percent, according to reports. The segment generated 16-17 percent of India’s GDP pre-pandemic and is projected to be one of the fastest-growing sectors.
The vision of the PM Narendra Modi-led government has played a pivotal role in the country’s semiconductor manufacturing boom. “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’ in India,” PM Modi recently said. “India understands that semiconductors are not just a national need but a necessity for the world. To expedite the growth of the semiconductor sector in the country, we are continuously undertaking policy reforms and also working with partner countries for a comprehensive road map for the semiconductor industry,” he added. The government has been offering reform measures and tax incentives to companies wanting to set up their factories in the country.
The Big Things in the Making
Several Indian and global semiconductor companies are set to leverage this opportunity. Among them is India’s Tata Group. At the Vibrant Gujarat Global Summit, Tata Group revealed its plans to establish a semiconductor fabrication in Dholera, Gujarat. The fabrication plant is expected to start functioning in 2024, as the group’s chairman, N Chandrasekaran, stated that the negotiations for the plant are almost complete. “Tata Group has also made a commitment and is on the verge of concluding and announcing a huge semiconductor fab in Dholera, and we are about to complete these negotiations and start in 2024,” said Chandrasekaran.
Micron Technology, the US-based computer memory and data storage products company, is also ready to get in the mix. Sanjay Mehrotra, the CEO of Micron Technology, used the stage of Vibrant Gujarat Global Summit 2024 to announce that the first phase of the company’s semiconductor assembly and testing facility in India (Sanand, Gujrat), which includes 500,000 square feet of planned clean room space, will be operational by early 2025.
Additionally, Mehrotra mentioned that the project is already in motion and would create 5,000 new direct jobs in Sanand and an additional 15,000 indirect jobs in the coming years. He says, “We see our investment helping initiate a cluster of semiconductor investment, building momentum that will benefit India. We are hopeful that our investment will help catalyze other investments in the sector.”
If we focus on manufacturing chips used in these segments, we can become a global leader in these areas
Foxconn, a multinational electronics manufacturing services company based out of Taiwan, has also submitted an application to establish a semiconductor fabrication unit in India. In fact, Foxconn already operates an iPhone factory in the capital city of Tamil Nadu, employing more than 40,000 people. The new application from the company to establish a fab unit was revealed recently by Rajeev Chandrasekhar, the Minister of State for Electronics and IT. Indeed, the application, which was made under the new scheme for setting up semiconductor fabs in India, is a great boost to the government’s efforts.
Government Building a Strong Base
The Indian government set aside INR 2,30,000 crore in December 2021 to make India a global leader in electronics manufacturing, with semiconductors as the core component. It also dedicated INR 76,000 crore to building India's semiconductors and display production environment. Union Minister Ashwini Vaishnav says, “We are focusing on specific areas where we can take global leadership. We have emerged as a major telecom and EV (electric vehicle) semiconductors segment. If we focus on manufacturing chips used in these segments, we can become a global leader in these areas. Work is being done keeping these emerging areas in mind.” The center seems to have a clear vision of the matter.
Last year, the government of India also launched the India Semiconductor Mission (ISM) as an Independent Business Division within Digital India Corporation. It possesses administrative and financial autonomy to formulate and drive India’s long-term strategies for developing semiconductors, display manufacturing facilities, and semiconductor design ecosystem. ISM, headed by global specialists in the Semiconductor and Display industry, will act as the central authority for the effective, consistent, and seamless execution of the schemes.
New Schemes for Semiconductor-preneuers Under ISM
Scheme to set up Semiconductor Fabs in India: This scheme offers financial assistance to qualified applicants for establishing Semiconductor Fabs, which are intended to draw large investments for creating semiconductor wafer fabrication units in the nation. The following financial support has been sanctioned under the scheme.
- 28nm or Lower - Up to 50 percent of the Project Cost
- Above 28 nm to 45nm - Up to 40 percent of the Project Cost
- Above 45 nm to 65nm - Up to 30 percent of the Project Cost
Scheme for setting up Display Fabs in India: The Display Fabs scheme is a government initiative to encourage the establishment of display manufacturing units in India using TFT LCD / AMOLED technology. The scheme offers to cover half of the project cost for eligible applicants, up to a maximum of INR 12,000 crore for each unit.
Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / OSAT facilities in India: Eligible applicants who want to establish units for Compound Semiconductors / Silicon Photonics (SiPh) / Sensors (including MEMS) Fab and Semiconductor ATMP / OSAT in India can get 30 percent of the Capital Expenditure as fiscal support from the government under the scheme.
Design Linked Incentive (DLI) Scheme: The DLI Scheme is a government initiative that provides monetary benefits and design facilities to support the creation and implementation of semiconductor design for ICs, Chipsets, SoCs, Systems & IP Cores, and related design. Eligible applicants can get two types of incentives under the scheme: “Product Design Linked Incentive,” which covers half of the eligible cost up to Rs.15 Crore per application, and “Deployment Linked Incentive,” which ranges from six percent to four percent of net sales revenue over five years up to Rs.30 Crore per application.
What are the Challenges en route?
However, the industry and the market come with a fair amount of challenges. Customer expectations and quality benchmarks are just a couple of them. In a recent interaction with CEO Insights, Yash Kaul, the co-founder & CEO of Helmier—a medical robotics startup, says, “The challenge we face is the perception that products made in India must be sold cheaper. Dealing with this mindset has been a challenge.” He adds, “Customer satisfaction is not a value we hold, but exceeding the customer's expectations is!”
On the industry side, talent shortage is a sizable challenge. According to the data from job portal Indeed, the job openings in the Indian semiconductor industry have increased by seven percent between March 2019 and 2023 alone. It’s clear that we need more focused efforts from academia to interpret this Indian, global need to the students and make the whole proposition fashionable. At the Semicon India 2023 conference in July, Prime Minister Narendra Modi announced the launch of dedicated semiconductor courses in more than 300 leading Indian colleges. It’s a great start.