Transforming India’s ESDM sector with AI: From design to deployment

India’s electronics system design and manufacturing (ESDM) industry is undergoing rapid transformation, driven by flagship initiatives like Make in India, strategic policy incentives, and shifting global supply chains. 

Valued at USD 400 billion in 2023, the industry is projected to grow to USD 520 billion by 2025 at a CAGR of 16.1%. India is now the second-largest mobile phone manufacturer, contributing 11% to global production. 

As we step into this pivotal growth phase, artificial intelligence (AI) is no longer a futuristic add-on, it is the strategic engine powering the sector across its entire value chain: from design to deployment.

AI in semiconductor design: Accelerating innovation at the core
Semiconductor design is the heartbeat of the ESDM value chain, determining both the speed and intelligence of the final product. AI is dramatically accelerating chip design by automating labor-intensive processes and improving accuracy. 

Machine-learning models enhance Very Large-Scale Integration (VLSI) layouts, flag design flaws early, and optimize power consumption, shortening design cycles and boosting overall performance.

India is home to over 250 semiconductor design firms, with Bengaluru alone contributing nearly 20% of the world’s VLSI design capacity. The Design-Linked Incentive (DLI) initiative is a critical enabler here, supporting 25 domestic startups innovating across IoT, automotive, and 5G domains, five of which have already achieved tape-out of their first chips.

AI technologies strengthen these outcomes by enabling predictive simulation and modelling, thereby reducing expensive trial-and-error cycles. With AI projected to contribute USD 967 billion to India’s economy by 2035, semiconductor innovation will be among the largest beneficiaries.

The faster India can iterate on design using AI, the more competitive it becomes in capturing global IP ownership and driving time-to-market advantage.

AI in manufacturing: Building smarter, faster, leaner
Once a chip is designed, the next frontier is scale — and scale today must be intelligent. India’s ESDM manufacturing momentum is evident: mobile phone exports touched USD 29.11 billion in FY24, a 23% jump over FY23. The Production-Linked Incentive (PLI) scheme has attracted over USD 2.5 billion in investments and created more than 200,000 direct jobs.

AI is pivotal here, transforming manufacturing operations through:
• Predictive maintenance that reduces equipment downtime,
• Computer vision systems that detect PCB flaws in real-time, and
• Robotics and automation that cut logistics costs by 15–20% in Electronics Manufacturing Clusters (EMCs).

Tamil Nadu, aspiring to reach a USD 100 billion ESDM economy by 2029, is already applying AI to improve cluster-level production efficiency. Meanwhile, under the SPECS program, India has increased local PCB manufacturing by 40% since 2021 — a move toward supply chain self-reliance.

AI allows India to transition from being a low-cost manufacturer to a high-intelligence production hub, one that is resilient, scalable, and globally competitive.

AI in deployment: Delivering intelligence at the edge:
India’s consumer electronics boom provides an ideal proving ground for AI-led product deployment. In 2023 alone, the wearables market surged by 53.3%, with 57.8 million units shipped. These devices -- from smartwatches to earbuds, are increasingly powered by edge AI, enabling instant data processing, personalized recommendations, and better user engagement.

Automotive electronics, accounting for 8% of the ESDM sector, are also being redefined by AI. Advanced driver-assistance systems (ADAS), predictive diagnostics, and in-vehicle infotainment are now AI-powered, underscoring how intelligent deployment is shaping the next wave of product innovation.

This aligns with India’s ambition to produce electronics worth USD 300 billion and export USD 120 billion by 2025–26.

Strategic insight
India’s vibrant digital consumer base doesn’t just consume innovation, it fuels it, creating feedback loops that enhance product intelligence and global market readiness.

Policy catalysts: Fueling AI-led ESDM growth
India’s policy framework is becoming a strategic differentiator in integrating AI across the ESDM lifecycle. The Union Budget 2023–24 allocated USD 2 billion to the Ministry of Electronics and Information Technology, a 40% increase over the previous year.

Key policy initiatives include:
• The USD 9.48 billion Semiconductor Ecosystem Scheme supporting AI-infused chip manufacturing,
• The Future Skills Summit 2024, which spotlighted AI skill-building across job roles, and
• ESSCI’s roadmap to train 10,000 semiconductor engineers annually, aligned with AI-driven design-to-deployment workflows.
• Public-Private Partnerships (PPPs) are also emerging as innovation hubs, bridging academia, industry, and government to fast-track R&D and talent skilling.

Policy is no longer a support pillar but it’s an enabler of AI competitiveness, bridging systemic gaps across funding, skilling, and infrastructure.

Barriers to scale, and how to overcome them
Despite AI’s transformative potential, several structural challenges remain:

Structural challenges
• India still imports 95% of display panels and 65% of PCBs, limiting true end-to-end manufacturing.
• Logistics inefficiencies consume 14% of GDP (vs. 8% in China), increasing production costs.
• Ecosystem maturity takes time — an estimated 5-7 years for full capability ramp-up.

Strategic enablers
• Industrial corridors under PM Gati Shakti aim to solve infrastructure bottlenecks.
• The Semiconductor Talent Development Program (STDP) trains 10,000 engineers per year, but needs to scale rapidly.
• AI-driven startups still face funding gaps, with overall tech startup funding dipping 67% to USD 6 billion in 2023.

India must adopt a systems-thinking approach, aligning policy, infrastructure, and AI capabilities to build for both today’s demand and tomorrow’s disruption.

India's ESDM moment is now
AI is the game-changer, and India needs to move from being an electronics assembly economy to a global innovation powerhouse. With a projected USD 520 billion market and 12 million jobs by 2027, the ESDM sector holds the potential to redefine India's economic trajectory.

To truly unlock this promise, India must:
• Simplify processes across the value chain through AI adoption,
• Reduce reliance on imports via local innovation, and
• Skill-fully invest in future-ready talent.

India stands at a strategic inflection point. The convergence of AI and ESDM is not just an opportunity, it is a national imperative. With the right execution, India will not only serve its domestic needs but lead the world in electronics innovation.

-- Amitkumar Shrivastava, Head of AI, Global Delivery Center India Fujitsu.