India has the potential to become a semiconductor hub in the next decade, according to GlobalData, due to favorable government initiatives. The leading data and analytics company says that India is set to be a strong alternative to China, which is experiencing large supply chain disruption.

According to a GlobalData case study*, the impact of both the Russia-Ukraine conflict and COVID-19 on chip production highlighted just how reliant the world is on such a small number of raw material suppliers and manufacturers, which are mainly located in geopolitically high-risk regions. The effects of that overreliance are already evident through the chokepoints faced by the industry.

Kiran Raj, Practice Head at GlobalData, comments: “The semiconductor industry relies heavily on both China and Taiwan production. Governments of advanced economies have become alarmed by recent shortages, with many now rolling out plans to stimulate local production in the mid-term. However, such responses have come too late, and they are generally economically inefficient. The world will be looking for alternative semiconductor partners, of which India is a strong candidate. The country is gearing up and making significant moves to become a global semiconductor production hub.”

GlobalData’s Disruptor Intelligence Center highlights various strategic initiatives being taken by the Indian government, as well as regional and global companies to address the chip shortage:

Key Indian government initiatives

• The government has announced a nearly $10 billion scheme to incentivize chipset assembly, packaging, and manufacturing by 2027 to attract chipmakers to the country. Competing with this are similar investments such as the $49 billion EU Chips Act and the $52 billion US CHIPS Act
• A ‘Chips to Startup’ (C2S) program has been introduced that will ready a talent pool of highly trained engineers to help the country become a semiconductor hub
• The government is currently seeking applications from 100 local companies, start-ups, and micro, small, and medium enterprises (MSMEs) under the design linked incentive (DLI) scheme to create a vibrant ecosystem for semiconductor chip design in India

Vaibhav Gundre, Senior Consultant at GlobalData, comments: “The government of India is aiming to build a complete semiconductor ecosystem by focusing on chipset assembly, packaging, manufacturing of chips and semiconductor fabs, introducing startup programs, and launching government schemes. Such initiatives are anticipated to strengthen the country’s technological expertise in these areas of strategic importance and economic self-reliance.”

Notable investments from regional and international companies

• Five companies have made proposals worth more than $20 billion to set up semiconductor and display fabrication units in India. The companies involved are a joint venture between Vedanta Group (Vedanta) and Foxconn, Singapore-based IGSS Ventures, India Semiconductor Manufacturing Corporation (ISMC), Vedanta, and Elest
• Tata group has been in talks with multiple Indian states to buy land to build a chip facility and test unit, which is estimated to be worth $300 million
• Vedanta plans to invest $15 billion in display and semiconductor manufacturing in India over the next 5-10 years through AvanStrate, a group company that develops special glass used in liquid crystal display (LCD) panels
• ISMC Analog Fab has inked an MoU with India’s Karnataka state government to invest $3 billion in a 65-nanometre analog semiconductor fabrication plant
• US-based semiconductor display equipment manufacturer Applied Materials announced an investment of about $50 million in India to set up a manufacturing facility
• Intel has announced that it intends to set up a semiconductor production facility in India that will boost research, innovation, and manufacturing in the semiconductor sector

Gundre concludes: “India is seen to be readily investing in semiconductor-driven emerging areas including 5G, IoT, and clean energy technologies. The country is also working towards unleashing the next wave of innovation in data, AI, and related technologies and has undertaken various efforts to transform the manufacturing sector. The success of India to build a space ecosystem from scratch in merely a few decades and comparatively lower cost than Europe or the US, show strong signs that they have the potential to become leaders in the semiconductor space as well.”

*Case study as part of GlobalData’s report, ‘Semiconductor Shortage’, published in April on GlobalData‘s Disruptor Intelligence Center