India’s semiconductor ambitions: How to move up the value chain?

In the last few decades, prior to the current push, India made multiple attempts to join the global semiconductor industry but fell short primarily due to the lack of proactiveness in policy implementation. Drawing lessons from the past, the government can ensure swift execution of policies under its freshly formulated strategy. In recent months, India’s semiconductor landscape has witnessed a significant surge in momentum. For instance, several investments were announced after the Vibrant Gujarat Summit. According to publicly available information, this was followed by a partnership between an Indian conglomerate and a Taiwanese firm, which aims to establish India’s first fabrication plant that will produce indigenous chips for domestic and export markets. Going ahead, expediting more such projects will be crucial for India to remain aligned to its goal of expanding the semiconductor market size to USD110 billion and securing 10 per cent of the global market by 2030. The government had received five requests for fabs (out of a total of 45 applications) as of October 2023, and further accelerating some of these will fast-track overall progress. Additionally, organising more pan-India summits can further enhance global participation. Besides this, apart from central government incentives, state governments can also pitch in with individual semiconductor policies, similar to what Gujarat has done.

As they say, Rome wasn’t built in a day. To establish an end-to-end semiconductor ecosystem, India can consider strategically moving across the industry value chain one domain at a time. According to estimates, the design constitutes 50 per cent of the global value chain, followed by 24 per cent value added by front-end wafer fabrication and 20 per cent by pre-competitive research. The remaining value is added through back-end operations, such as ATMP, electronic design automation and core intellectual property. India can improve in the domains of Outsourced Semiconductor Assembly and Test (OSAT), ATMP, design and R&D where it already has an edge along with its efforts to establish a fab. A similar model was followed by China, which has established itself as a leader in relatively less skill- and capital-intensive activity of ATMP and is now expanding across the value chain. This will not only help in cultivating a competitive advantage but also establish a solid foundation for an indigenous ecosystem, fostering confidence among global players to make substantial long-term investments in India.

We can also take cues from other countries that are at the forefront of semiconductor technologies today. For instance, a key factor contributing to the success of Taiwan’s leading semiconductor company was the presence of industry clusters, which constituted a supplier ecosystem covering aspects such as design, raw materials, components and machinery and ensuring that a fab function seamlessly requires a supportive fabless ecosystem. Hence, India can eventually establish an end-toend chip industry by focusing on initial aspects of self-sufficiency in technological manufacturing— such as establishing a supply network of essential raw materials, enhancing logistical infrastructure, expanding research centres, and integrating smallto- medium enterprises in the value chain.

Estimates say that India will require 1.2 million skilled people in the semiconductor sector by 2032. The clock is ticking, and we must develop our talent ecosystem fast. A common factor among top nations excelling in semiconductor manufacturing is an exceptional education system. For instance, according to global education rankings, Japan (27), the US (13), South Korea (36) and Israel (25) are all among the top ranked countries. India, ranking 139, needs to invest more in education, which is the foundation on which skilling is based. Further, while the National Education Policy’s focus on STEM education or the Skills Acquisition and Knowledge Awareness for Livelihood Promotion (SANKALP) are steps in the right direction, more needs to be done to accelerate niche skills. For instance, key semiconductor-specific programmes offered by the country’s premier technical institutes can be expanded to other top- and middle-tier technical colleges to create a bigger talent pool. Additionally, increasing investments in educational infrastructure, enhancing faculty training programmes and fostering industry-academia partnerships can further help in creating a robust talent base.