India Semiconductor Industry

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August 01, 2023

Why in news?

Recently, at Semicon India Summit, the Government has made a fresh bid to attract major global chip manufacturers into the country.

Status of Semiconductor Industry in India

  • Workforce - India’s semiconductor design engineers makes up 20% of the global workforce.
  • About 2,000 integrated circuits and chips are designed in India every year with engineers involved in varied aspects of design and verification.
  • Semiconductor market - As per Deloitte report, India’s semiconductor market is to reach $55 billion by 2026 with more than 60% of the market being driven by 3 industries
    • Smartphones and wearables,
    • Automotive components, and
    • Computing and data storage
  • Global players operating R&D in the country include Intel, Micron and Qualcomm among others.

What steps were taken by the government to promote the sector?

Gujarat will become the first state in India to have a large-scale semiconductor manufacturing facility.

  • India Semiconductor Mission- It is an independent business division within Digital India Corporation having administrative and financial autonomy.
  • It aims to formulate and drive India’s long term strategies for developing semiconductors and display manufacturing facilities and semiconductor design ecosystem.
  • ISM has been working as nodal agency for the schemes approved under Semicon India Programme.
  • There are 4 subcomponent schemes announced under India Semiconductor Mission.
    • Scheme for setting up of semiconductor fabs in India-It provides fiscal support for setting up semiconductor wafer fabrication facilities in the country.
    • Scheme for setting up of display fabs in India- It provides fiscal support to eligible applicants for setting up of display fabs which is aimed at attracting large investments.
    • Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / OSAT facilities in India - Extends a fiscal support of 50% of the capital expenditure
    • Semicon India Future Design-Design linked incentive (DLI) scheme - Offers financial incentives, design infrastructure support across various stages of development and deployment of semiconductor design.
    • The scheme provides
      • Product design linked incentive - up to 50% of the eligible expenditure subject to a ceiling of ₹15 crore per application.
      • Deployment linked incentive - of 6% to 4% of net sales turnover over 5 years subject to a ceiling of ₹30 crore per application
  • SPECS scheme- It is the scheme for promotion of manufacturing of electronic components and semiconductors and provides financial incentive of 25%.
  • Program for Development of Semiconductors and Display Manufacturing Ecosystem- The modified programme offers fiscal support of 50% of project cost.
  • Semicon India Conclave 2023- India will emerge as global hub of semiconductor and chip-making industry.

What are the challenges?

  • Weak intellectual property- India holds a small portion of IP in design though it has thriving manpower.
  • Broader industry dynamics- Policies for semiconductor industry require long term strategy as the sector is capital intensive.
  • Low annual revenue- The cumulative annual revenue of domestic semiconductor design companies is meagre at ₹150 crore.
  • Long gestation periods- The returns from the investment are not immediate as setting up of design and fabrication units require long duration.
  • This implies that the design firms are not able to attract potential investors and venture capitalists as software companies have.
  • Higher valuation by foreign buyers- The Government plan to become a venture capital firm for chip design companies is ineffective as companies would pick foreign buyers.
  • Dependence on import- In 2021, India is the 9th largest importer of semiconductor devices in the world valued 2.17 billion dollar.

What lies ahead?

  • Adopt best practices of China- India focuses on building new logic fab, whereas China backed by massive financial support of the Government acquired loss making fabs and then set up its own.
  • Advantages of acquiring existing fabs- Reasonable price, stabilised technology, supply chain ecosystem, established product line and market.
  • Improve value chain- India must leverage value added activites to enable the ecosystem in a positive direction.
  • Robust mechanism- There should be an independent investment committee and a framework for governance to mitigate the moral hazard posed by politically driven equity investments.
  • Link investments-It must be linked to drive more innovation and employment generation in the chip sector.
  • Improve intellectual property- Realignment towards equity from the government requires consideration of the IP, this would foster the domestic chip companies to keep the IP.
  • Government as a stakeholder- It has the potential to create a state-of-the-art design ecosystem which will serve the national interest and also be a supplier to the rest of the world.



  1. The Hindu| Explained Chip tactics on India
  2. The Hindu| Mapping India’s chip ecosystem
  3. PIB| India semiconductor mission
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