Ford rejected Tata Group’s 1999 offer to sell its automotive division, saying it would only purchase it out of courtesy. In 2008, Tata paid $2.3 billion to acquire Jaguar Land Rover, which was a huge step forward for India’s standing in the international business community. In an effort to improve India’s standing on the world tech map, the Tata Group is currently making comparable advancements in the semiconductor sector.

The Tata Group announced on March 22, 2024, that it would establish a semiconductor ATMP (assembly, testing, marking, and packaging) unit in Assam, with an estimated cost of INR 27K Cr. After that, in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corporation, Tata Electronics was given permission to build India’s first AI-enabled semiconductor production facility in Dholera, Gujarat. The project would cost INR 91K Cr and generate over 20K jobs.

Tata is not the only company involved in this expanding semiconductor industry. A chip foundry is being constructed in Dholera, SaaS MNC, by Vedanta Group. While US-based Micron Technology is establishing an INR 22K Cr semiconductor testing and packaging plant in Gujarat, Zoho is proposing to establish a commercial semiconductor manufacturing unit in Tamil Nadu. India’s growing dominance in the semiconductor industry is further cemented by Tesla and Tata Electronics’ strategic cooperation.

However, given that the semiconductor industry has historically been dominated by the US, South Korea, Japan, Taiwan, and Taiwan, why the sudden optimism in India’s potential? As per the findings of a Visual Capitalist analysis from March 2024, Taiwan accounted for 68% of the advanced foundry capacity in 2023. By 2027, though, it is anticipated that the US and Japan would have made large domestic fabrication investments, causing this supremacy to decline. By 2030, this worldwide transformation offers a $1 trillion potential, with India positioned to play a major role.

The semiconductor business in India is expected to increase at a remarkable rate of 24% from $33 billion in 2023 to $150 billion by 2030, according to a report by Atom News titled “The Rise Of India’s Semiconductor Startups Report 2024.” India’s talent advantage in design and engineering, developed in the software business and now applied in the semiconductor sector, is the driving force behind this rise.

The Making Of An Indian Chip: A Saga Of Five Decades

With the founding of the Semi-Conductor Laboratory (SCL), an independent organisation under the Ministry of Electronics and Information Technology (MeitY), India made a formal entry into the semiconductor industry in the middle of the 1970s. But the title of being the nation’s first private-sector semiconductor factory goes to Continental Device India (CDIL), which was established in 1964.

India has a thriving industry of producers of electronic equipment in the 1990s. However, import taxes on IT and semiconductor products were removed by the WTO’s Information Technology Agreement (ITA-1) in 1996, forcing India to compete on a global scale. In contrast to other countries, India did not support its semiconductor industry with substantial subsidies until the launch of the India Semiconductor Mission (ISM) in 2021, which included an INR 76K Cr investment to revive the ecosystem.

Additionally, the government has set aside INR 1K Cr to support entrepreneurs in semiconductor design, with major state contributions anticipated. An additional $30 billion is allocated for electronics and semiconductors, with $10 billion going towards research and design related to semiconductor production. Introduced in December 2021, the design-Linked incentive (DLI) scheme provides additional support for semiconductor design to domestic enterprises, startups, and MSMEs.

The government has eliminated the basic customs charge on a number of capital goods and machinery in an effort to promote domestic manufacturing. However, as designing chips frequently necessitates frequent data exchanges, India’s request to the WTO to not prolong the customs duty moratorium on electronic transmissions could be detrimental to local design companies working for international partners.

Challenges And Opportunities

India’s semiconductor sector has had difficulties over the past fifty years, such as poor infrastructure, a slow rate of technological adoption, muted demand, a lack of top talent, and budgetary limitations. It can cost more than $500 million to establish a single outsourced semiconductor assembly and test (OSAT) facility, and even fabless businesses need to spend tens of millions of dollars before turning a profit. But government assistance has increased the availability of such funds.

COVID-19 brought to light how important it is for semiconductors to be self-sufficient. The disruption of the worldwide supply chain caused a serious shortage of chips, which had an effect on the electronics and automotive industries. The Ministry of Statistics, Planning, and Implementation (MoSPI) anticipated supply shortages in industries utilising chip-based gadgets in a forecast for 2019–20, which had an impact on consumer spending and the economy.

India has a chance to become a centre for semiconductors thanks to the post-pandemic environment. Investing in the semiconductor industry is now possible due to the growth of the startup environment and the need for popular technology categories.

India’s Semiconductor Startups: A Rising Force

In the semiconductor value chain, over 100 startups with a focus on R&D, design, assembly, verification, and validation are identified in an Atom News story. In an IoT/IIoT environment, semiconductor chips will become more and more in demand, powering anything from smart devices to consumer goods.

The brains of all things technological, semiconductor chips are constructed of silicon and include transistors, which are interconnected electronic components. Nanometer-scale advanced processors guarantee quick processing, low power consumption, and little heat production. But strict quality control and a high level of technological complexity are needed, which reduces the number of manufacturers worldwide.

While larger design features below 200 nm satisfy for many applications, including automotive and audio processors, India may not yet be producing the most sophisticated semiconductors. The domestic market will be driven by the nation’s emphasis on networking devices, telecom equipment, deployment of 5G, and AI.

Key Players And Investments

With 63.7% of initiatives, Bengaluru continues to be the most active location for semiconductor startups. At 9.9%, Hyderabad (5.5%), Chennai (4.4%), and Delhi NCR (9.9%) are the next most active hubs. Early-stage funding has been drawn to startups such as Mindgrove Technologies, AGNIT Semiconductors, and InCore Semiconductors.

Asia remains the world leader in the production of chips and electronics, with leading innovators collaborating with leading producers from Taiwan and South Korea. India is expected to be investigated by international corporations as an emerging hub since it concentrates on both fab and non-fab capabilities.

The Path Forward: Challenges And Prospects

India wants to become a manufacturing powerhouse, but there are many obstacles in its way, such as a lack of fabrication facilities, a lack of manufacturing experience, and a reliance on foreign suppliers of raw materials. According to the Zinnov-NASSCOM report, there is a scarcity of service and maintenance professionals rather than a lack of engineering ability, with over 50,000 specialised workers serving over 55 semiconductor GCCs nationwide.

There’s hope in the form of new semiconductor facilities and strong government support. Leaders in the region and around the world working together, like Taiwan’s PSMC and India’s Tata Electronics, promises excellent results. The business will be further boosted by the government’s intentions to build a GPU cluster and offer substantial incentives.

The findings

The Indian semiconductor industry is about to undergo a significant upheaval. With robust government support, a developing startup scene, and expanding international attention, the nation is positioned to take advantage of a $150 billion market potential by 2030. Even if there are still obstacles to overcome, industry participants and legislators working together can make sure that India becomes a major force in the world semiconductor market.

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Saiba Verma, an accomplished editor with a focus on finance and market trends, contributes to Atom News with a dedication to providing insightful and accurate business news. Saiba Verma analytical approach adds depth to our coverage, keeping our audience well-informed.