By Sanjay Gupta, Global Head of Engineering, L&T Semiconductor Technologies
The semiconductor industry has become the cornerstone of the technological revolution in the 21st century, driving advancements across sectors, stimulating digital disruption, advancing economy and establishing itself as a critical component of modern innovation. In recent years the industry has witnessed significant growth driven by the uptick in demand across emerging markets like artificial intelligence (AI), the Internet of Things (IoT), and 5G. Globally, the race for semiconductor autonomy has intensified, with countries, including India, making significant strides toward achieving self-reliance and positioning themselves strategically for future technological developments. Despite these advancements, the semiconductor manufacturing ecosystem remains highly limited, with only a handful of nations capable of designing and producing them.
India’s focus to attain leadership in semiconductor design
India has rapidly emerged as a growing hub for the semiconductor industry, with its market valued at around $23.2 billion and projected to reach $80.3 billion by 2028, reflecting a compound annual growth rate (CAGR) of 17.10%. A key driver of this growth is the India Semiconductor Mission (ISM), launched in 2021 with an initial outlay of Rs 76,000 crore, aimed at bolstering semiconductor manufacturing, packaging, and design capabilities in the country. To further encourage growth, the initiative also offers production-linked and design-linked incentives, attracting companies to establish semiconductor fabrication units, testing facilities, and design centers in India.
In 2024, the government announced plans to expand the ISM, further supporting semiconductor chip fabrication, packaging, and other ecosystem companies. Additionally, India plays a vital role in the global semiconductor design sector, contributing around 20% of the world’s design talent, with over 35,000 engineers engaged in chip design. This growing pool of talent, combined with supportive government policies has enabled India to solidify its position as a key player in the global semiconductor market and laid a solid foundation in terms of semiconductor design capabilities.
Furthermore, strengthening domestic manufacturing will create a multiplier effect across industries, significantly boosting the economy. It will also enable India to achieve self-sufficiency, enhance data security, and attain digital independence.
Strengthening manufacturing partnerships
India’s strategy to build manufacturing partnerships is a crucial pillar in its ambition to establish itself as a global semiconductor hub. By attracting international semiconductor firms to set up fabrication and assembly facilities, India aims to strengthen its manufacturing capabilities and integrate more seamlessly into the global semiconductor supply chain. A key initiative in this effort is the Production Linked Incentive (PLI) Scheme, which offers financial incentives to companies investing in semiconductor fabs, testing facilities, and design houses in the country.
The shift towards domestic manufacturing
The COVID-19 pandemic highlighted the critical need for semiconductor manufacturers to achieve self-reliance due to disruptions in the global supply chain. The shortage of chips can impact production across nearly every industry, highlighting the importance of diversifying chip supply. Currently, India, like many other countries, imports all of its chips from regions such as Taiwan, Singapore, Hong Kong, Thailand, and Vietnam. To address this dependency, the Indian Government has initiated efforts to attract foreign companies to establish semiconductor manufacturing units within the country. As part of these effort, initiatives like ‘Make in India’ and the National Policy on Electronics (NPE) are playing a pivotal role in strengthening India’s electronics and semiconductor ecosystem. Building on these measures, the Government of India also announced a substantial allocation of USD 10 billion under the Semicon India Program to enhance the semiconductor and display manufacturing ecosystem. This program adopts a comprehensive approach by fostering growth across sectors of the semiconductor industry, extending beyond fabrication facilities (fabs) comprising packaging, display wires, outsourced semiconductor assembly and testing (OSATs), sensors, and other critical components, ensuring the development of a complete semiconductor ecosystem. Additionally, various state-level initiatives in Gujarat, Assam, Karnataka, among others have also significantly contributed to the growth of the semiconductor landscape in India.
The Future of India’s Semiconductor Market
Building on the shift towards domestic manufacturing, India’s semiconductor market is poised for significant growth. To realise its ambition of becoming a global hub for semiconductor manufacturing, reports emphasise the need to focus on advancing supply chain infrastructure, manufacturing capabilities, and research and development. With numerous new initiatives launched by the Indian government to strengthen the semiconductor sector, India is set to emerge as a key player on the global stage. These efforts will not only drive technological independence but also enhance the country’s competitiveness in the semiconductor industry.
Moreover, India’s significant design talent further solidifies its role in the global semiconductor landscape. India is forging international collaborations with countries like Singapore, the US, the EU, and Japan, focusing on technology transfers, R&D, and workforce development to address industry’s skills shortage. While manufacturing may be outsourced to global foundries, India’s unique intellectual property (IP) remains central to the process, ensuring the country’s continued influence in semiconductor design and innovation.
With the necessary resources to design and manufacture semiconductors, India is also well-positioned to build a comprehensive end-to-end supply chain domestically. Strategic initiatives and robust government support will drive innovation and growth to meet the growing domestic demand effectively.