Dr Mayank Shrivastava, Professor, Division of Electronics, IISc, Bengaluru
a 6 mins read.
Critical Recognition
India’s ambition to emerge as a global semiconductor powerhouse is not just a component of its industrial strategy but a cornerstone of its broader economic and technological vision. This ambition is propelled by the critical recognition of semiconductors as fundamental enablers of modern technology—from smartphones and computers to healthcare devices and automotive electronics. As the global demand for these devices grows, so too does the strategic importance of owning and controlling the technologies that power them. India is also uniquely poised to leverage its vast domestic market, which is one of the largest and fastest-growing in the world. With a burgeoning middle class, rapid urbanization, and an increasing penetration of digital technologies, the domestic demand for electronic devices is soaring to greater heights. The Indian electronics market is projected to reach USD 500 billion soon. This escalating demand also presents a significant opportunity for India to nurture a local semiconductor industry that can supply critical components.
The Indian government has recognized this opportunity and is actively supporting the sector through favorable policies. Initiatives such as the India Semiconductor Mission, and parallel schemes such as the Design Linked Incentive (DLI) and the Production Linked Incentive (PLI), aim to attract both domestic and international players to invest in semiconductor design and semiconductor manufacturing within the country. The government has earmarked approximately USD 10 billion as part of its broader goal to make India self-reliant in electronics manufacturing.
Furthermore, geopolitical dynamics add another layer of strategic importance to India’s semiconductor ambitions. With global supply chains disrupted by geopolitical tensions, particularly during the COVID-19 pandemic, there has been a renewed focus on diversifying supply sources. India’s democratic governance and strategic position as a counterbalance to China in Asia enhance its attractiveness as a semiconductor manufacturing hub to Western countries seeking to reduce their reliance on Chinese-manufactured technologies. Furthermore, the strategic development of the semiconductor sector is not just about economic gains but also about strengthening India’s position in global geopolitics. The ability to produce and control the supply of semiconductors—a critical component in everything from consumer electronics to defense systems—places a country at a considerable strategic advantage.
However, realizing this vision involves navigating a complex global landscape marked by intense competition from established players like Taiwan, South Korea, and China, who dominate the semiconductor manufacturing sector. For instance, Taiwan’s TSMC and South Korea’s Samsung are the leaders in advanced semiconductor manufacturing technologies, with significant investments in R&D and state-of-the-art facilities that are the result of decades of focused development. To compete effectively, India must undertake meticulous planning and substantial investment in building its semiconductor manufacturing capabilities. The rest of the article will address these aspects while addressing the question – “how to make India a semiconductor destination.”
Global Context and India’s Relative Position
The global semiconductor industry is characterized by intense competition and is dominated by several established players. Taiwan is the undisputed leader in semiconductor manufacturing, with Taiwan Semiconductor Manufacturing Company (TSMC) at the forefront, holding more than 50% of the global market share in semiconductor foundry services. TSMC’s dominance is marked by its cutting-edge development in advanced technology nodes (5nm and below), which are crucial for modern processors and memory devices.
In contrast, the United States excels both in design and manufacturing, with giants like Intel, AMD, and NVIDIA leading in microprocessor design and GPU technologies. Intel also engages in substantial manufacturing, although it has faced challenges recently in advancing its manufacturing capabilities to smaller nanometer technologies. U.S. policy initiatives, particularly those encapsulated in the CHIPS for America Act, underline a renewed focus on revitalizing domestic semiconductor manufacturing capabilities, with billions allocated to stimulate the sector.
South Korea, powered by conglomerates like Samsung and SK Hynix, is another significant player, especially in the memory segment, including DRAM and flash memory. Samsung, similar to TSMC, is advancing its capabilities in semiconductor manufacturing, working on sub-3nm technology nodes.
China’s approach has been considerably aggressive, underpinned by its “Made in China 2025” initiative, which targets the development of domestic semiconductor capabilities to reduce its dependency on foreign technology. The Chinese government has funneled billions of dollars into this sector, aiming to cover up to 70% of its semiconductor needs domestically by 2025. Companies like SMIC (Semiconductor Manufacturing International Corporation) are pivotal to these plans, though they currently lag behind Taiwanese and American firms in technology nodes, primarily operating at 14nm and above.
India, as a late entrant in this highly competitive arena, has its strengths primarily in semiconductor design and Very Large Scale Integration (VLSI) services rather than in manufacturing. MNCs in India have carved out a niche in providing design and design consultation services to global semiconductor firms. These services are critical, yet they represent only one segment of the semiconductor value chain. Moreover, while the country’s engineering talent pool is vast, with hundreds of thousands of engineers graduating annually, which is an advantage, however, currently with a significantly lower level of readiness for the high-tech requirements of semiconductor manufacturing. Transitioning from a service-based economy/mindset to complex manufacturing roles and eventually to a leadership position requires navigating complex technological, financial, and geopolitical landscapes. It involves not only huge capital expenditure and technological know-how but also strategic alliances and policy support at both domestic and international levels.
Government Initiatives
The strategic and economic stakes associated with establishing a local semiconductor industry are exceptionally high, and it has always been the government that played a pivotal role in building the manufacturing and R&D ecosystem to stimulate growth in this sector. The “India Semiconductor Mission” is a flagship effort aimed at establishing a self-reliant semiconductor industry through financial incentives, infrastructure support, and policy reforms.
Challenges and Gaps
India’s journey towards becoming a semiconductor powerhouse is laden with significant challenges that span technological, infrastructural, educational, and geopolitical realms. Despite robust government initiatives aimed at nurturing the semiconductor sector, several critical areas need immediate attention to realize the full potential of these efforts.
As emphasized in discussions at various industry forums, India’s current capabilities in semiconductor manufacturing technology and R&D are considerably underdeveloped compared to global standards. The country invests only about 0.7% of its GDP in research and development (overall), compared to over 2-3% in countries like South Korea and the U.S. which lead in semiconductor technologies. The % share invested in semiconductor R&D is further less. This underinvestment has resulted in a gap in indigenous technology development and a dependency on foreign technologies. To bridge this gap, India needs to establish dedicated centers of excellence for semiconductor research, enhance university-industry collaborations, and increase government and private sector investment in semiconductor-specific R&D.
Infrastructure and Supply Chain Development: Establishing a semiconductor fab is not only highly capital-intensive, with a single facility costing upwards of $5 billion, but also requires a sophisticated support infrastructure. Reliable power, ultra-pure water, chemical supplies, and specialized logistics are critical for semiconductor manufacturing, which demands an environment with extremely low levels of contaminants. Currently, India’s infrastructure in these areas is inadequate to support high-volume manufacturing that complies with the stringent standards of semiconductor production. The country must also develop a local supply chain for critical materials and equipment, which are predominantly sourced from abroad, to ensure sustainability and reduce supply chain risks highlighted during the global pandemic.
Skilled Workforce: Addressing the skill gap in the semiconductor sector requires a focused approach to education and training. While India annually produces one of the largest engineering workforces in the world, there is a stark gap in the availability of personnel trained specifically in advanced semiconductor design and manufacturing. As per the National Policy on Electronics, the Indian semiconductor sector severely lacks in personnel skilled in specialized areas such as VLSI design, semiconductor fabrication, testing, and packaging. Institutes of national importance such as the Indian Institutes of Technology (IITs) and National Institutes of Technology (NITs) are well-positioned to introduce specialized courses in semiconductor physics, fabrication processes, and materials science.
Currently, these institutions produce over 25,000 graduates annually in engineering and technology, yet the curriculum often lacks a focus on the niche skills required in the semiconductor industry. Expanding these programs to include hands-on fabrication experience, clean room protocols, and VLSI design, aligned with industry needs, could significantly enhance the quality and readiness of the workforce. For institutions beyond IITs/ NITs, India not only needs to reform its educational curriculum to include more semiconductor-specific courses but also needs to set up vocational training centers and initiate apprenticeship programs in collaboration with leading global semiconductor firms. This approach will help in quickly scaling the workforce to meet the specific needs of the industry. Indian Institute of Science’s (1) India Semiconductor Workforce Development Program (ISWDP) and (2) Advanced Certification Program in Microelectronics and Semiconductor Technologies are a few efforts in this direction.
Geopolitical Dynamics: Geopolitically, India is positioned to play a significant role in diversifying the global semiconductor manufacturing landscape, currently dominated by East Asia. By developing its semiconductor manufacturing capabilities, India can offer an alternative to countries seeking to reduce their reliance on China, given ongoing global trade tensions and supply chain vulnerabilities. Additionally, strengthening its semiconductor industry would allow India to have greater control over its technology supply chain, enhancing national security and technological sovereignty.
Strategic Imperatives
To surmount the vast array of challenges it faces on the path to becoming a semiconductor powerhouse, India must adopt a holistic and multi-dimensional strategy that addresses the foundational elements of the semiconductor industry: innovation, skill development, international cooperation, and ecosystem development.
Fostering Public-Private Partnerships: Public-private partnerships (PPPs) are crucial for leveraging the strengths of both sectors in advancing the semiconductor industry. Such collaborations can expedite the transfer of research into commercially viable technologies and optimize resource allocation. Unlike USA private funding in research has been largely missing in India. The government must mandate a certain % of industry funding and support in strategic areas while facilitating more extensive collaborations between leading academic institutions like IITs/ IISc and major industry players both domestically and internationally.
Enhancing Global Collaborations: Learning from global best practices is essential for India to quickly ramp up its semiconductor capabilities. Strategic international partnerships can provide insights into advanced manufacturing techniques, effective supply chain management, and cutting-edge R&D practices. For example, Taiwan’s expertise in managing mega fabs and Israel’s prowess in cybersecurity and chip design could offer valuable lessons. Collaborative agreements, such as the one India signed with Japan to promote cooperation in 5G technology and critical information infrastructure, serve as templates for how India could forge alliances in the semiconductor domain.
Investing in Local Ecosystems: Establishing fabs is just the beginning. A robust local ecosystem that includes suppliers of raw materials, specialized machinery, and related technologies is essential for a sustainable semiconductor industry. This approach not only supports the fabs but also stimulates the broader high-tech manufacturing sector, contributing to economic diversification and resilience. For instance, developing local suppliers for silicon wafers, photolithography equipment, and etching chemicals can reduce import dependencies, which currently pose a significant bottleneck.
Jump the Roadmap: To secure a leadership position in the global semiconductor industry, India must adopt a forward-thinking strategy termed “Jump the Roadmap.” This approach underscores the necessity of investing in futuristic R&D fields such as 2D materials. While the foundational aspects of silicon technology are well-established, with the major developmental milestones already achieved by global leaders, merely entering the manufacturing arena with licensed silicon technologies will not position India at the forefront of innovation.
Instead, to truly lead and influence the semiconductor sector, India must pioneer research in emerging materials and technologies beyond traditional silicon nodes. By focusing on next-generation materials like 2D semiconductors, which offer significant advantages in performance and integration over silicon, India can leapfrog existing technologies and set new benchmarks. This strategic leap in advanced R&D not only propels India into the leadership race but also ensures its competitive edge in the rapidly evolving tech landscape.
By integrating these strategic imperatives into its national policy framework, India can accelerate its journey from being a peripheral player in the global semiconductor industry to becoming a significant hub, capable of competing on an international scale. The success of this strategy hinges on a coordinated effort among government bodies, educational institutions, and industry leaders, both within India and globally, to implement these changes effectively and sustainably.
Strategic Vision
India’s ambition to evolve into a semiconductor powerhouse encapsulates a strategic vision aligned with broader technological and economic goals. Despite facing formidable challenges, there lies substantial potential for growth and advancement in the semiconductor sector. Realizing this potential necessitates a unified and well-executed strategy encompassing strategic planning, sustained investment, and robust policy support. The semiconductor industry demands substantial capital and technological investment—for instance, setting up a single semiconductor fabrication plant can cost over $5 billion.
The Indian government has recognized this, allocating about $10 billion under the India Semiconductor Mission to boost sector development. Yet, achieving a competitive edge also requires comprehensive policy support to nurture a conducive manufacturing environment and bridge the significant skills gap through specialized training programs, potentially modeled on successful international examples like Taiwan. Furthermore, India’s geopolitical stance as a counterbalance to China provides a strategic advantage in diversifying global supply chains, enhancing India’s technological sovereignty. Strategic international alliances and a focused domestic policy can transform these challenges into stepping stones for success, potentially positioning India as a pivotal player in the global semiconductor narrative, thereby enhancing its technological and economic sovereignty.
(Dr Mayank Shrivastava is a Professor, Division of Electrical, Electronics & Computer Sciences, Indian Institute of Science, Bengaluru. He is also the co-founder of AGNIT Semiconductors Pvt. Ltd. The views expressed are of the author and do not
necessarily reflect the views of The News Analytics Journal.)
