Top engineering talent and government incentives to foreign investment and domestic start-ups have boosted India’s developing semiconductor industry as the country emerges as a major player in the global semiconductor market.
India, the world’s fifth largest economy, has emerged as a major player in the global semiconductor industry in recent years thanks to the country’s rapidly growing technology sector and supportive government policies. The Indian semiconductor industry, primarily concentrated in the cities of Bangalore, Hyderabad, and Noida, has experienced significant growth over the last few years. As it moves to increase chip manufacturing within its borders, many industry analysts expect its role in the semiconductor industry to continue growing in the coming years.
What challenges does India face in competing with established semiconductor manufacturing centers such as South Korea and Taiwan?
India faces a number of hurdles in their pursuit to gain ground on the traditional big players in the industry. Here are 5 obstacles they will need to address.
Infrastructure
The lack of adequate infrastructure, including power, water, and transportation, is one of the biggest challenges facing India’s semiconductor industry. This can make it more difficult and expensive to establish semiconductor fabs and other manufacturing facilities in the country.
Skilled workforce
While India has a large pool of highly-skilled, English-speaking engineers and scientists, the country still faces a shortage of workers with skills and experience specific to the semiconductor industry.
Technology
South Korea and Taiwan have been investing heavily in semiconductor technology for many years, which has allowed them to develop advanced manufacturing processes and technologies that are difficult for other countries to replicate. India will need to invest heavily in research and development to catch up with these established players.
Regulations
India’s regulatory environment can sometimes be complex and opaque, which can make it more difficult for semiconductor companies to navigate and comply with the rules and regulations in the country.
Financing
While India has made significant strides in attracting private investment in its semiconductor industry, the country still faces challenges in accessing the financing it needs to develop and scale its semiconductor manufacturing capabilities.
What steps are the Indian government and private sector players taking to address these challenges?
In January 2023, the U.S. Semiconductor Industry Association (SIA) and the India Electronics and Semiconductor Association (IESA) announced a program to strengthen collaboration between the two countries in the global semiconductor ecosystem. Specific goals of the task force include assessing readiness of the current state, identifying near-term opportunities and longer-term strategies to increase India’s role within the global semiconductor value chain, including chip manufacturing, and managing workforce development and exchange opportunities to benefit both countries. “This task force will help identify tangible ways to unlock this potential by increasing collaboration between the U.S. and India within the global chip ecosystem,” said SIA President and CEO John Neuffer.
In December 2021, the Indian government announced a $10b plan aimed at boosting the country’s semiconductor industry. The initiative included a range of measures to support semiconductor manufacturing and design, including tax incentives, funding for research and development, and support for the development of semiconductor startups. The goal of the initiative was to attract more investment in the semiconductor industry and make India a leading player in the global semiconductor market.
While Prime Minister Modi’s government is working to support the development of semiconductor innovation and design capabilities in the country, the Indian government is also encouraging domestic semiconductor manufacturing. This includes support for the establishment of semiconductor fabs, or fabrication facilities, in India.
Overall, the combination of a growing demand for semiconductors, favorable government policies, strong engineering talent, and a focus on design and innovation make the semiconductor market in India a dynamic and rapidly evolving space.
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