India has witnessed several crucial semiconductor announcements recently on both manufacturing and chip design segments.
Israel-based Tower Semiconductors and Adani Group have partnered to invest $10 billion to set up a semiconductor unit in the state of Maharashtra in Western India. This is possibly the biggest initiative announcement, which will build capacity to manufacture 40,000 Wafers per month in Phase 1 and 80,000 Wafers per month after Phase 2. The Deputy Chief Minister announced on X recently that it will also generate over 5,000 jobs.
Additionally, NXP Semiconductors will invest another $1 billion to boost its research and development efforts in the country. Furthermore, L&T will invest $300 million over the next three years to set up its fabless semiconductor project. And, the Government of India recently approved Kaynes Semicon to set up a semiconductor unit with an investment of $395.2 million in the state of Gujarat.
“Recent investments highlight the confidence semiconductor players have in India’s government policies and schemes. India's semiconductor industry is evolving, thanks to a growing consumer base, increased demand, and government initiatives,” said Parv Sharma, senior analyst at Counterpoint Research.
“The new investments can be grouped into two. Tower Semiconductor is more on the manufacturing side, while the rest are more on design. It’s not easy to see chip manufacturing in India by a local company (Adani), but it will be very exciting if this is successful in the future. NXP is one of the leading players in automotive and industrial; the investment shows its confidence in the Indian market and in the development of these fields in the long term,” said Helen Chiang, lead of Asia Semiconductor Research and General Manager of IDC Taiwan. “The investment from L&T shows the ambition to develop its local IC design capability. We believe India is also planning to reduce its dependence on foreign companies in the semiconductor industry.”
Significantly, the White House announced in a Joint Fact Sheet that India and the US will establish a fab unit with the “objective of manufacturing infrared, gallium nitride, and silicon carbide semiconductors.” This will be enabled by support from the India Semiconductor Mission and a partnership between Bharat Semi, 3rdiTech, and the US Space Force.
“President Biden and Prime Minister Modi hailed a watershed arrangement to establish a new semiconductor fabrication plant focused on advanced sensing, communication, and power electronics for national security, next-generation telecommunications, and green energy applications," according to the fact sheet.
Charting the next phase for the Indian semiconductor industry
These are all positive developments for the country, which has taken several steps to encourage international players to set up manufacturing units in the country. The India Government formed the India Semiconductor Mission (ISM) in 2022 with the objective of helping India emerge as a global hub for electronics manufacturing and design.
Initially, ISM offered $10 billion to enhance the country’s appeal in attracting global players to establish units in the country. After a few false steps, including Foxconn backing out of its partnership with Vedanta to set up a fab unit in the country, India finally seems to be making some headway in building a vibrant semiconductor ecosystem. The second phase of the ISM is likely to be launched in another six months.
“The first phase of the ISM, which had allocation, is almost exhausted, and India will have an ISM 2.0 soon. Under this second phase, the focus will be on developing semi-fabs, display fabs, silicon photonics, and other semi-components. This will expand the overall semi-ecosystem from ATMP, and OSAT to semi-manufacturing. Fabs will need more investment and expertise, so we expect ISM 2.0 to offer investment on project costs, tax breaks, and water and power at subsidized rates,” said Sharma of Counterpoint.
While the country has managed to generate some momentum in semiconductors, several challenges remain and the Government will need to provide support in several areas before the country is able to grow its profile in the global semiconductor industry.
“The Government needs to support a lot of things in building a local semiconductor industry. Talent is one of the cores which is hard to build in the short term. It usually takes at least three to five years to train a semiconductor engineer (not including the time in school). Government has to build a system to link universities and semiconductor companies (IC design, foundry, OSAT) in India to provide cooperative education and training so that he/she can have some level of ‘experience’ after graduation from school,” said Chiang of IDC.
“It is also important for the government to shape the culture so that employees contribute to semiconductor operations, especially some sectors, like fabs, which usually run 24 hours a day. Of course, building well-prepared infrastructure with power, water, and more is a must and relies on the government’s support,” she added.