Traditionally, India has been a consumer in the semiconductor space. Around 85% of the country’s chip requirements are met by imports. The country manufactures less than 1% of the global semiconductors. It has few semiconductor fabrication plants and assembly facilities, and a little capacity. The wide gap between the demand and manufacturing highlights the enormous potential of the market.
The Indian Government launched the Semicon India Programme, in 2021, investing $9.2 billion, to fuel the semiconductor and display manufacturing ecosystems in the country. In 2024, the interim Union Budget raised the allocation to $833.7 million. The revised estimate of expenditure on Modified Programme for Development of Semiconductors and Display Manufacturing Ecosystem, reached $181.5 million, in FY24.
In 2023, the Indian semiconductor market was valued at $34.3 billion and is anticipated to grow at a CAGR of 26.3%, reaching $ 271.9 billion by 2032. The exports of chips by India reached an all-time high of $520 million, in 2022.
The market growth is driven by the rising need for IoT, AI integration, and wireless communication products. Chip applications in big data analytics, facial recognition, and machine learning are expanding the market. Additionally, the increasing demands for chips across industries, such as automotive, consumer electronics, and telecom, are bolstering the market. The market players investing heavily to leverage the opportunity.
Micron Technology invested $2.8 billion, to develop an assembly and test facility in Gujarat.
Foxconn will invest $600 million in India, for a phone-making project, and a semiconductor equipment facility.
Advances Micro Devices announced an investment of $400 million, to expand its R&D, and operations in India.
Applied Materials will invest $400 million in the establishment of an engineering center in India.
Vedanta partnered with Foxconn to apply for chip fab.
Why Semiconductors?
Talent
India attained a record number of 2,530 thousand STEM graduates in 2022, offering the skilled workforce required in semiconductor manufacturing, design, and R&D.
Cost Advantage
India offers a significant cost advantage in semiconductor manufacturing, owing to, the lower labor cost, and supply chain efficiency- driven by India's proximity to key markets, including, Asia, Europe, and the Middle East, and the emerging ecosystem.
Global Supply Chain Diversification
COVID-19 has prompted global producers to diversify away from China, making India a preferred destination for back-end assembly and testing operations. The stable political environment and the vast domestic market are strengthening India's position in the global landscape.
Favorable Policies and Incentives
The launch of the India Semiconductor Mission (ISM), Semiconductor Fab Scheme, Display Fab Scheme, Compound Semiconductor Scheme, PLI (Production Linked Incentive) program, and the development of Special Economic Zones are leading to the emergence of the industry.
