Semicon growth in India: Impetus and interventions

Reliable power supply, water resources, and proximity to airports and customs facilities are crucial for the growth of semicon industry where continuous reforms are needed

New Update


The semiconductor industry is a cornerstone of the global economy, shaping the modern digital era. As demand for electronic components soars, the landscape becomes more dynamic. United States, Japan, and Taiwan; dominate the semiconductor chip business with 22%, 16% and 14%, contribution respectively, to the global semiconductor manufacturing. Contemporary geopolitical developments have sparked a renewed interest from major economies, including India to enter the semiconductor manufacturing arena. As per Invest India Report (2023), Indian semiconductor industry is valued at USD23.2 billion and is projected to reach USD80.3 billion by 2028, growing at a CAGR of 17.10%.


Need for the Semiconductor Industry in India

India has experienced an increased demand for electronic gadgets and the automobile, leading to the derived demand of the semiconductor. As per PIB Report (2023), the automobile industry, aspires to double its auto industry size to INR 15 lakh crores by the end of 2024. As per the Statista report (2022), the Indian electronics consumer market is valued at USD73.73 billion and is anticipated to exhibit a CAGR of 6.8% from 2023 to 2030. However, the nation is mostly dependent on imports, particularly on semiconductors. Therefore, development of indigenous semiconductor manufacturing capabilities has been given top priority by the Indian government in order to overcome these obstacles and attain self-reliance). 

Government Incentives and schemes 


To address the semiconductor shortage, the Indian government has introduced various schemes over the time. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), launched on April 1, 2020, aims to strengthen India's electronics manufacturing value chain. Targeting the downstream value chain of electronic products, including semiconductors; it offers a substantial 25% financial incentive for capital expenditures, supporting new units and the enhancement of existing ones through renovation, expansion, and diversification. Additionally, the "Chips to Startup (C2S) Programme" aims to train 85,000 engineers in embedded system design and VLSI over the five years. 

Product Linked Incentives (PLI) Scheme with allocation of USD10 billion in (2021), aims to establish over 20 semiconductor design, component manufacturing, and display fabrication plants in the next six years. In this scheme, the government of India covers up to 50% of expenditures for semiconductor manufacturing projects, with 2.5% dedicated to R&D and skill development. In the 2021, Indian government also launched a Design Linked Incentive (DLI) Scheme that offers incentives and infrastructure support for various stages of semiconductor design development. 

In the latest interim budget announced on 1-February-2024, Finance Minister Smt. Nirmala Sitharaman announced to allocate INR 6903 crore for the semiconductor and the display manufacturing industry. All these initiatives should be seen in continuity with the ambitious "Make in India" program of Government of India. 


Indian and Foreign Player Participation

For boosting electronics ecosystem in India, collaborative innovation is underway with significant investments from leading foreign semiconductor firms. US based Micron Technology has announced a USD800 million investment in a new semiconductor manufacturing and testing plant in Gujarat. California based Lam Research Corporation and Applied Materials is also actively participating in training Indian semiconductor experts and establishing engineering units. In addition, an interim readiness assessment has been jointly conducted by the India Electronics Semiconductor Association (IESA) and the US Semiconductor industrial Association (USSIA) for strengthening semiconductor ecosystem in India.

India and Japan formalized a Memorandum of Cooperation last year (2023), emphasizing collaboration in the semiconductor supply-chain domain. Rapidus Corporation, a Tokyo-based semiconductor conglomerate, spearheads this collaboration. International Semiconductor Consortium (ISMC) is a joint venture between Israel's Tower Semiconductor, which Intel Inc. acquired in February of last year, and Abu Dhabi-based Next Orbit Ventures. The Karnataka government and the ISMC consortium inked a Memorandum of Understanding for a USD3 billion fabrication factory in Mysuru. In July of 2022, the Tamil Nadu government and Singapore's IGSS Ventures Pvt. Ltd inked a memorandum of understanding for the construction of a semiconductor high-tech park, complete with a fab unit, at a cost of USD3.5 billion, or ₹25,600 crore, over six years.


Indian companies are actively venturing into semiconductor plants. The Tata Group has applied to establish a semiconductor processing plant in Assam with a substantial investment of ₹40,000 crores. HCL Group is progressing with its plans in Karnataka, with an estimated investment of US $400 million. Kaynes technology is also investing INR 2800 crore for the semiconductor facility.

Challenges and Potential Solutions for Semiconductor Manufacturing in India

Despite these initiatives fuelling the growth of semiconductor industry, India faces significant challenges. The industry demands substantial capital and private investors are relatively hesitant due to the risks and intense competition from established hubs. Establishing a comprehensive domestic value chain is challenging, given that a significant portion of it exists outside India.


Creating the necessary infrastructure for chip production is another hurdle. Reliable power supply, water resources, and proximity to airports and customs facilities are crucial for the growth of semiconductor industry where continuous reforms are needed. Another important challenge is that India lacks skilled workers experienced in semiconductor manufacturing. Access to advanced technology for high-end chips is limited, and the possibility of export restrictions from leading countries can pose challenges. 

To bolster the semiconductor industry in India, a multifaceted approach is imperative. Improving essential infrastructure—such as a dependable power supply, access to clean water, and logistics designed to meet the particular needs of the semiconductor industry — should be the government's top priority (including the State governments) For seamless imports and exports, it is important to streamline the customs clearance procedures. To bridge the skills gap, it is imperative that specialised semiconductor training programmes be established in partnership with industry, academia and government. 

International cooperation is essential, and developing strategic alliances with leading semiconductor companies will help the Indian semiconductor industry become more credible internationally through the access of cutting-edge technology and investments. Furthermore, advancement in semiconductor technology depends on supporting research and development, including the creation of research centres and the financing of cooperative initiatives. Effective public-private partnerships will result in efficient sharing of resources, time-bound solution of various problems. In nutshell, words and actual actions need to be in sync.

The article has been written by Nityesh Bhatt, Professor – Information Management Area, Institute of Management, Nirma University and Chirayu Sharma, MBA Student, Institute of Management, Nirma University