Tuesday's Talking Points
India Semiconductor Mission – could see signs of success starting 2025!
What’s the Point?
India’s Semiconductor Mission is expected to start yielding results in 2025, with the production of locally made semiconductor chips in the second half of 2025. With the development of various kinds of AI applications, ability to manufacture semiconductors at scale are at the heart of an Atmanirbhar Bharat. With presence of a large talent base of semiconductor engineers and government support, India has the potential to be a significant player in this space. India’s foray into semiconductors is complementary to its efforts in building several different industries, such as mobile manufacturing where we have seen offtake. Ability to design, manufacture, assemble and test semiconductors helps us move deeper into value chains of modern manufacturing. India’s continued focus is evident in setting up of semiconductor plants with fiscal support for capex, along with production linked incentives (PLIs).
Meaningful progress being made across semiconductor plants
While India started with 3 plants being approved, today India has at least 5 different semiconductor plants in varying stages of being set up. Construction of these units could bring an investment of almost Rs 1.5 Lakh crore. The cumulative capacity of these units is about 7 crore chips per day.
Source: Press Information Bureau (PIB) and other publicly available information
What are Semiconductors and why are they important?
Technically, semiconductors are materials that possess properties between those of conductors (such as metals) and insulators (such as glass or plastic). The most commonly used semiconductor material is silicon (Si). Semiconductors is broad term used for a range of products such as microprocessors (CPUs for computers), memory chips (storing data), commodity integrated circuits, Systems on chips, and microcontrollers. They are an essential component of electronic devices, enabling advances in Artificial Intelligence, communications, computing, healthcare, military systems, transportation, clean energy, and countless other applications.
What is leading to confidence in India’s plans in the Semiconductor Space?
Confluence of multiple factors are leading to confidence in India’s capability in semiconductor manufacturing
- Policy initiatives to facilitate a manufacturing ecosystem in the country. The initial target is to make already mature technology, >28 nanometre (nm) nodes and then move to advanced nodes over time.
- Strong consumer demand for electronics products: India is amongst the largest consumers of mobile phones and other electronic products. This makes India a preferred destination for manufacturing for the world.
- Significant presence of Indian engineers in the global semiconductor design space: India accounts for 20% of the world’s design engineers. India is further developing this space by way of government grants.
With the rise of the multipolar world, there is renewed focus on ensuring the supply chains become diverse and not dependant on one country/location. India could be a big beneficiary of this trend.
Source: Press Information Bureau (PIB), BCG Analysis. OSAT: Outsourced Semiconductor Assembly and Test, PCBA: Printed Circuit Board Assembly, ODM: Original Design Manufacturer, EMS: Electronic Manufacturing Service, IC Chips: Integrated Circuit Chips
Conclusion
As the world gets smarter and more technology driven, semiconductors are becoming omnipresent. With advancements in the world of AI, particularly those making access to the technology cheaper through more efficient usage such as Deepseek, the need for smart chips will continue to increase. When the world saw a shortage of semiconductors in 2022-23, deliveries of key consumer goods such as cars and laptops saw significant delays and price-increases. In the 21st century of digital activity and economy, semiconductors will be as important as oil / energy were in the 19th / 20th century. India’s initiatives in this space are on the right track, and could lead to significant gains in terms of manufacturing competitiveness, technological advances, and economic growth.
Sources: PIB, BCG, and other publicly available information
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