India’s semiconductor revolution: A leap towards technological self-sufficiency

Robina Chetri

(Assistant Professor, Department of Accountancy.

Jhanji Hemnath Sarma College. She can be reached at robinachetri08@gmail.com)

The semiconductor industry has recently emerged as a linchpin of technological innovation, underpinning advancements across various sectors globally. However, India’s heavy reliance on imported semiconductors has not only posed significant challenges to its economic and strategic sovereignty but also highlighted vulnerabilities within its supply chain. To address these pressing concerns and foster domestic technological development, the Indian government has embarked on a mission to attract investments and promote indigenous semiconductor production.

The unveiling of three major semiconductor projects by Tata Group, CG Power, and Renesas, with potential involvement from HCL, represents a significant stride towards achieving semiconductor self-sufficiency and bolstering India’s position in the global tech landscape. India’s semiconductor projects couldn’t have come at a more opportune moment, given the prevailing disruptions within the global semiconductor supply chain. With India currently importing approximately 80% of its semiconductor requirements, these projects aim to bridge this gap by establishing cutting-edge fabrication plants capable of producing a wide array of semiconductor components. By reducing dependency on imports, India seeks to enhance its strategic autonomy and resilience against external shocks, ensuring the uninterrupted flow of critical technology components vital for the nation’s growth and security.

One of the most promising aspects of these semiconductor projects lies in their potential to spur job creation and skill development across various sectors of the economy. From highly specialized engineering roles to skilled manufacturing and maintenance positions, these projects are poised to generate a multitude of high-tech jobs, providing a much-needed boost to employment and economic growth. Moreover, they underscore the urgent need for investment in STEM (science, technology, engineering, and mathematics) education and vocational training programmes to equip the workforce with the necessary skills to thrive in the semiconductor industry of the future.

Furthermore, the growth of the domestic semiconductor industry is expected to unleash a ripple effect on allied sectors, ranging from electronics manufacturing to IT services and automotive. The availability of locally produced semiconductor components will not only reduce costs for domestic companies but also incentivize them to expand their production capacities, fostering innovation, job creation, and market competitiveness. This, in turn, will catalyse the development of a robust ecosystem of interconnected industries, driving economic growth and technological advancement across the nation.

These semiconductor projects signify a renewed emphasis on research and development (R&D) in semiconductor technology, positioning India as a hub for cutting-edge innovation. By nurturing indigenous chip designs and fabrication processes, India aims to not only address its domestic market demands but also carve a niche for itself in the global semiconductor landscape. Through strategic R&D investments, India can lead the way in developing next-generation semiconductor technologies tailored to specific market needs, thereby further cementing its position as a global tech leader.

The success of India’s semiconductor projects hinges on the collaborative efforts between the government and industry stakeholders. Initiatives such as the “India Semiconductor Mission” offer critical financial incentives, including subsidies and tax breaks, to attract investments and foster industry growth. The government’s commitment to creating a conducive business environment and investments in infrastructure and talent development underscores its unwavering support for the semiconductor sector. However, realizing the full potential of India’s semiconductor industry requires overcoming various challenges, including significant investment requirements, technological expertise, and infrastructure development. Competition from established semiconductor players and the rapid pace of technological advancements necessitate continuous innovation and agility. Addressing these challenges will require sustained efforts, strategic partnerships, and a long-term vision to propel India’s semiconductor industry to global leadership.

India’s current semiconductor import bill stands at approximately $70 billion as of 2022. Market research forecasts the global semiconductor market to reach $1 trillion by 2030, indicating substantial growth potential. Assuming a similar trajectory for India, the import bill could rise to $100 billion by 2030. Even a partial reduction in imports, say 20–30% over 10 years, could lead to significant dollar savings. This translates to potential annual savings of $20–30 billion by 2030. However, the benefits of import substitution accrue over the long term, making direct cost comparisons challenging. While the initial investments are substantial, they pave the way for reduced reliance on imports, bolstering India’s economic resilience and strategic autonomy. Additionally, investments in semiconductor projects create numerous high-skilled jobs, stimulate innovation, and strengthen the domestic ecosystem, contributing to long-term economic prosperity.

An in-depth look at global semiconductor players:

China’s Ambitious Rise: The “Made in China 2025” strategy spearheads China’s push for semiconductor dominance. Government funding fuels the research, development, and manufacturing of domestic chips through state-owned enterprises and subsidies. They prioritise indigenous innovation, strategic acquisitions, and partnerships to build a resilient and competitive industry. However, trade tensions with the US, intellectual property concerns, and technological dependencies remain hurdles. Additionally, achieving environmental sustainability and retaining talent pose significant challenges.

US Innovation Focus: The US strives to maintain its leadership through unwavering commitment to innovation, research, and domestic chip production. Significant government funding targets R&D and infrastructure, supplemented by tax incentives and grants to attract private sector involvement. Priorities include retaining the competitive edge, safeguarding national security, and strengthening supply chain resilience through collaboration and export controls. However, intensified global competition, a talent crunch, and ongoing chip shortages pose difficulties. Additionally, bolstering domestic manufacturing capacity and navigating geopolitical complexities are crucial endeavours.

Taiwan’s Specialisation Strategy: Taiwan, home to TSMC, a chipmaking giant, navigates the landscape through specialisation and robust global partnerships. Substantial investments in fabrication facilities, research institutions, and talent cultivation are bolstered by subsidies and tax breaks. Their approach champions specialisation, fosters innovation, and leverages diplomatic ties to maintain their global edge. Yet, geopolitical tensions, market volatility, and disruptive technological shifts pose significant challenges. Ensuring supply chain resilience amidst these uncertainties is another major focus.

South Korea’s Dominance through Investment: South Korea aims to perpetuate its dominance through relentless innovation and substantial investment across the semiconductor value chain. Significant government funding strengthens R&D and infrastructure, further fueled by grants and tax breaks to incentivize private sector participation. Priorities lie in specialisation, diversification, and robust global expansion, achieved through strategic collaboration and technology convergence initiatives. However, cyclical economic downturns, protracted technological transitions, and geopolitical uncertainties are ongoing concerns. Mitigating market saturation and fostering industry consolidation are additional challenges.

Europe’s Collaborative Approach: Europe seeks to bolster its industry through collaborative research initiatives and substantial investments in R&D and manufacturing. Public-private partnerships facilitate significant financial backing for these endeavours, alongside governmental grants, loans, and subsidies. Their strategy focuses on chip integration, fortifying resilience, and sustainability through concerted collaboration and assertive efforts towards digital sovereignty. However, fragmented markets, budgetary constraints, and complex regulations remain hurdles. Safeguarding technological sovereignty and attracting and retaining talent are also crucial aspects.

Japan’s Legacy and Specialisation: Japan, boasting companies like Toshiba and Sony, has a long-standing presence in the semiconductor industry. They invest in R&D and infrastructure to maintain their position in manufacturing and design, emphasising collaboration between industry, academia, and government. Strategies involve specialising in niche markets like automotive semiconductors, memory chips, and image sensors, prioritising quality, reliability, and precision engineering. However, an ageing workforce, competition from emerging economies, and evolving consumer preferences pose challenges. Key considerations include mitigating market saturation, technological obsolescence, and navigating global trade dynamics.

Israel’s Start-Up Strength: Israel, the “Startup Nation,” boasts a thriving semiconductor industry driven by companies like Intel and Broadcom. Investments in research, innovation, and entrepreneurship foster a dynamic ecosystem, leveraging military R&D and academic collaborations to drive innovation. Their strategies focus on disruptive technologies like AI, cybersecurity, and IoT, capitalising on these collaborations for advancement. However, geopolitical instability, talent shortages, and market access barriers are ongoing challenges. Addressing these involves establishing robust regulatory frameworks, export controls, and technology transfer agreements.

Vietnam’s Emerging Market Potential: Vietnam attracts investments from companies like Samsung due to its strategic location and growing market demand. Investments in infrastructure development, industrial parks, and workforce training support the growth of its semiconductor manufacturing sector, with a focus on electronics manufacturing, chip assembly, and supply chain integration. Intellectual property protection, technology transfer, and environmental sustainability practices are essential elements for Vietnam’s continued growth in the semiconductor landscape.

India’s semiconductor projects represent a transformative opportunity to propel the country towards technological self-sufficiency and economic prosperity. To carve a niche in the global chip race, India must learn from the best. Strategic government funding, like in China and South Korea, will fuel domestic innovation and chipmakers. Collaboration, mirroring Europe’s model, will foster a thriving ecosystem. India can specialise in areas like Japan and Taiwan while also diversifying across the chain, like South Korea. Investing in STEM education, like in Israel, will create a future-proof talent pool. Unwavering commitment to R&D, like in the US, is essential. Building domestic capacity, akin to the US and Europe, strengthens supply chains. Smart partnerships, inspired by Taiwan, and a focus on sustainability, following Europe’s lead, will solidify India’s position in the semiconductor landscape. With steadfast government support, strategic investments, and collaboration with industry partners, India can leverage its strengths to emerge as a powerhouse in the global semiconductor arena, driving sustainable growth and prosperity for generations to come.