According to recent estimates, the Indian semiconductor market, currently valued at $23.2 billion, is expected to reach $80.3 billion by 2028.

According to government estimates, the cost of starting a chip manufacturing plant in India could range between $5 billion and $7 billion.

The government launched India’s Semiconductor Policy 2020 to reduce import dependency by promoting domestic semiconductor design and manufacturing capabilities.

By 2030, the global semiconductor market is expected to be worth a trillion dollars, thanks to developments in electronics, artificial intelligence and autonomous systems. This gives India a huge chance positions itself as a prominent player in international supply networks.

The geopolitical environment moves diversification away from Taiwan’s hegemony in chip manufacturing, so India’s goal of building a strong semiconductor ecosystem is not only ideal but 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 nation’s growing skilled population with an investment-friendly climate.

India is putting a lot of emphasis on semiconductor infrastructure as it develops a workforce of 85,000 engineers, technicians and R&D specialists. India is making a significant attempt to establish itself as a global hub for semiconductor manufacturing in line with global demand.

India’s Expanding Semiconductor Market: A World of Possibilities

According to recent estimates, the semiconductor market in India, currently valued at $23.2 billion, is expected to grow at an astounding compound annual growth rate (CAGR) of 17.10% to reach $80.3 billion by 2028. Growing demand for electronics, smart devices and cutting-edge technologies such as artificial intelligence (AI), which are mostly based on sophisticated semiconductor chips, is what drives this growth.

The government’s commitment to reduce import dependency and promote domestic semiconductor design and manufacturing capabilities is reflected in India’s Semiconductor Policy 2020.

Semiconductor building design capacity and increased production volume are its two main objectives. The strategy fosters innovation and fosters research and development (R&D), creating a cooperative ecosystem between research institutions, industry and academia.

The Indian government is further sweetening the pot for semiconductor manufacturers by providing financial incentives to develop chip fabs domestically through programs such as the Production Linked Incentive (PLI) Scheme. India hopes to do this to develop a self-sufficient semiconductor sector to serve both domestic and foreign markets.

Challenges to semiconductor self-reliance

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 used extensively in the semiconductor manufacturing process. It needs large amounts of ultrapure water, requiring complex purification systems as well as a constant power source.

Ensuring these resources are available around the clock is a difficult task for a nation with sometimes faulty infrastructure, especially in areas with unreliable water and utility systems.

In addition, setting up a semiconductor manufacturing plant is expensive. According to government estimates, the cost of starting a chip manufacturing plant in India could range between $5 billion and $7 billion. Investors can be seriously deterred by this huge initial capital requirement if it is not offset by large government incentives and subsidies.

India’s long-standing struggle with inefficient bureaucracy hampers its aspirations in the semiconductor industry. Several government agencies must approve the establishment of domestic production, and delays at each level discourage potential investors. Simplifying this procedure will be essential to attract and retain the greatest semiconductor companies.

Smooth semiconductor manufacturing requires a consistent and reliable power source. Unfortunately, there are not many places in India that can accommodate chip production equipment due to the country’s propensity for power shortages and blackouts.

For continued expansion, attention must be paid to energy infrastructure, especially in important semiconductor hubs.

Modern technology, much of which is licensed for a price from patent holders, is essential to the semiconductor manufacturing industry. It will be expensive for emerging semiconductor companies, especially, to acquire these technologies and ensure that they are properly deployed in India. To overcome this obstacle, developing local knowledge and ensuring favorable conditions for technology licenses are essential.

And finally, despite India’s efforts, FDI in electronics remains below 1% of total FDI inflows, largely due to obstacles such as shortage of skilled labor, delays in land acquisition, and an uncertain tax regime . For India to attract global semiconductor giants, it needs to address these structural challenges and provide a clearer and more stable investment framework.

Pathways to future success

India’s aspiration for the semiconductor industry is a statement of will for the country’s future, not just an industrial goal. If this industry succeeds, it will establish the country as a technology leader and guarantee survival in a world where sophisticated electronics and data-driven ideas are becoming increasingly important.

The government has focused a lot on boosting manufacturing, but to really elevate India’s position, it is crucial to put more emphasis on innovation and R&D. With the abundance of bright minds in the country, a stronger push from the government in promoting innovation could significantly accelerate the journey towards self-reliance, especially in the semiconductor sector.

While efforts are underway, there is potential for more targeted initiatives that encourage the development of cutting-edge solutions. If we build a strong innovation ecosystem, it will not only reduce our dependence on foreign vendors, but could position India as a global leader as other nations look to new advanced technologies.