Seizing the Trillion Dollar Opportunity by 2030

SUMMARY

India’s semiconductor market, currently valued at $23.2 billion, is expected to reach $80.3 billion by 2028, according to recent estimates.

The government estimates that the cost of setting up a chip plant in India could range from $5 billion to $7 billion.

The government launched the India Semiconductor Policy 2020 to reduce import dependence by promoting domestic semiconductor development and manufacturing capabilities.

The global semiconductor market is expected to be worth a trillion dollars by 2030, driven by developments in electronics, artificial intelligence and autonomous systems. This gives India a huge chance position yourself as an outstanding player in international supply chains.

The geopolitical environment is preventing Taiwan from diversifying its hegemony in chip manufacturing, so India’s goal of building a strong semiconductor ecosystem is not only ideal but also inevitable.

Prime Minister Narendra Modi unveiled a plan at the recently concluded SEMICON India 2024 that highlights India’s democratic ideals and robust supply chains, while combining the country’s growing skilled population with an investment-friendly climate.

India has a strong focus on semiconductor infrastructure with 85,000 engineers, technicians and R&D professionals. India is making serious efforts to establish itself as a global semiconductor manufacturing hub in line with global demand.

India’s Expanding Semiconductor Market: A World of Opportunities

The semiconductor market in India, currently valued at $23.2 billion, is expected to grow at an astonishing CAGR of 17.10% to reach $80.3 billion by 2028, according to recent estimates. The growing demand for electronics, smart devices and advanced technologies such as artificial intelligence (AI), which mainly rely on sophisticated semiconductor chips, are driving this growth.

The government’s commitment to reducing import dependence and developing domestic capabilities in semiconductor design and manufacturing is reflected in the India Semiconductor Policy 2020.

Semiconductor Design Creation capacity and increasing production volumes are the two main goals. The strategy encourages innovation and promotes research and development (R&D), creating an ecosystem of collaboration between research institutions, industry and academia.

The Indian government is further sweetening semiconductor manufacturers’ profits by providing financial incentives to develop domestic chip manufacturing through programs such as the Manufacturing Incentive Scheme (PLI). India hopes to do this to develop a self-sufficient semiconductor sector that caters to both the domestic and foreign markets.

Challenges to semiconductor self-sufficiency

However, India’s ambitious semiconductor journey is not without its challenges. The complexities and resource requirements of semiconductor manufacturing present significant obstacles that must be overcome.

Water and energy are widely used in the semiconductor manufacturing process. It requires large quantities of ultrapure water, which requires complex purification systems, as well as a constant source of energy.

Ensuring 24/7 availability of these resources is a challenge in a country with sometimes poor infrastructure, especially in areas with unreliable water and utility systems.

Additionally, setting up a semiconductor fab is expensive. The government estimates that the cost of setting up a chip plant in India could range from $5 billion to $7 billion. Investors may be seriously discouraged by this huge demand for advance capital unless it is offset by large government incentives and subsidies.

India’s long-standing struggle with an ineffective bureaucracy has hampered its semiconductor industry aspirations. Several government departments must approve the creation of domestic production, and delays at every level discourage potential investors. Simplifying this process will be essential to attracting and retaining the largest semiconductor companies.

Uninterrupted semiconductor production requires a constant and reliable power source. Unfortunately, there are not many places in India where chip manufacturing equipment can be located due to the country’s propensity for power shortages and blackouts.

Further expansion requires attention to energy infrastructure, especially in important semiconductor hubs.

Modern technologies, much of which are licensed by patent holders for an additional fee, are essential to the semiconductor industry. Acquiring these technologies and ensuring their proper use in India will be particularly costly for emerging semiconductor businesses. To overcome this obstacle, it is necessary to develop local knowledge and ensure favorable terms for technology licenses.

Finally, despite India’s efforts, FDI in electronics still accounts for less than 1% of total FDI inflows, largely due to obstacles such as shortage of skilled manpower, delays in land acquisition and uncertain tax regime. For India to attract the world’s semiconductor giants, it must address these structural issues and offer a clearer and more stable investment framework.

Paths to future success

India’s commitment to building a semiconductor industry is a declaration of will for the country’s future and not just an industrial goal. If this industry succeeds, it will establish the country as a leader in technology and ensure its survival in a world where sophisticated electronics and data-driven insights are becoming increasingly important.

The government is focusing heavily on boosting manufacturing, but to truly lift India’s position, greater emphasis on innovation and R&D is critical. Given the abundance of brilliant minds in the country, stronger government pressure to promote innovation could significantly accelerate the path to self-sufficiency, especially in the semiconductor sector.

Despite ongoing efforts, there is potential for more targeted initiatives that will contribute to the development of cutting-edge solutions. If we build a strong innovation ecosystem, it will not only reduce our dependence on foreign suppliers – it can make India a global leader, and other countries will look to us for cutting-edge technologies.