Semiconductors serve as the cornerstone of new-age innovation, playing a critical role in advanced technology manufacturing. In the case of electric vehicles (EVs), semiconductors are indispensable across key stages of development—from power conversion, battery management and high-speed charging infrastructure to infotainment, connectivity and safety systems.
For an emerging economy like India, which is outpacing growth prospects of all other major nations, balancing long-term climate goals is both crucial and complex, with the EV ecosystem being a key piece in the sustainability puzzle. A comprehensive EV landscape can not only enable India to meet domestic demands but also help in establishing itself as a major global player, catering to the diverse needs of other economies. In this context, the government is targeting to achieve 30 per cent EV sales penetration for private cars, 70 per cent for commercial vehicles and 80 per cent for two and three wheelers.1 Further, considering high growth prospects and positive market sentiments, India’s EV market is expected to grow at a CAGR of 49 per cent by 2030.2
India, chips and EVs: Ensuring a harmonious ecosystem
EVs roughly require up to three times more semiconductor content than conventional vehicles.3 Therefore, to facilitate a smooth transition and address the fast-growing demand, it will be essential to develop a strong indigenous semiconductor ecosystem that can reliably meet the needs of domestic manufacturers. So, what are the current challenges faced by domestic EV manufacturers and how can India ensure a more connected and seamless critical supply chain landscape? Let’s look at some key points:
1. Import reliance and exposure to global disruptions
India is currently dependent on major global semiconductor players (such as Taiwan, Singapore, Vietnam and Hong Kong)4 for its chip imports. This broad geographical reliance, combined with ongoing geopolitical tensions and ever-evolving global disruptions, is exposing domestic manufacturers to supply chain vulnerabilities for such a critical component. For instance, India imported 22,292 shipments of semiconductors between March 2023 to February 2024 from 1,062 foreign suppliers, which is 25 per cent more compared to the previous year.5 While India has made progress in reducing import reliance and developing domestic capabilities, its semiconductor programme is still in the nascent stages. For instance, India’s first semiconductor fabrication plant (which will manufacture 28 nm chips) is expected to be ready for production by 2026.6 Although this marks a significant progress for India’s semiconductor ambitions, it still falls short of the advanced technologies being produced around the world—such as chips measuring just 3–5nm7—that are being increasingly adopted by automotive companies. Hence, it becomes a strategic necessity for India to fast-track the progress of its semiconductor mission, which can ensure sufficient supply of indigenous chips needed to fulfil the growing appetite of automotive manufacturers.
2. Curbing the rising costs
As Indian EV manufacturers aim to enhance their production capabilities; they face a complex challenge—the escalating cost of semiconductor content in vehicles. According to estimates, the cost of semiconductor content has increased from USD312 per car in 2013 to USD400 today.8 As the industry progresses further, semiconductor spending in vehicles is projected to rise by about 56 per cent by 2026.9 These trends have the potential to pose hurdles for India’s EV agenda, as the local industry may struggle to stabilise prices and maintain affordability in the market. Therefore, a balanced approach is essential to mitigate rising costs while promoting steady EV adoption. Indian manufacturers need to invest in semiconductor R&D, along with increasing collaboration with the government and syncing with the broader semiconductor mission, which will help in reducing reliance on expensive imported technologies and components. Aligning the needs of automotive manufacturers with the country’s semiconductor agenda will facilitate a synergistic growth.
3. Ensuring quality component usage for enhanced safety
As the Indian EV sector continues to evolve, with emerging technologies and use cases constantly reshaping the market, EV manufacturers must prioritise quality product development that addresses both domestic needs and global standards. Reports indicate that to curb costs, the Indian EV industry often relies on semiconductors that are not fully optimised for automotive applications, resulting in performance issues, such as battery unreliability. When the EVs get exposed to extreme weather conditions, such as heavy monsoons and high temperatures, these components can contribute to incidents like battery fires. As such incidents increase, consumer confidence in EVs gets affected, posing further challenges to adoption rates. For instance, a recent survey revealed that 21 per cent of households are interested in electric scooters but are reluctant due to safety, performance and infrastructure concerns.10
Going ahead, as India develops a conducive semiconductor ecosystem there will be plenty of opportunities for automotive chipmakers to access the growing market and achieve economies of scale, ensuring supply of quality chips at competitive costs. This can substantially enhance the EV manufacturing landscape in India.
