By Shashwath TR, Co-founder & CEO, Mindgrove Technologies
India, long known as an outsourcing hub and an emerging internet powerhouse, is now setting its sights on becoming a global leader in deeptech. Over the past five years, the deeptech sector in India has seen impressive growth, with funding skyrocketing from USD 1.3 billion in 2019 to USD 10 billion in 2023. At the core of deeptech is the semiconductor industry, which supplies the essential components for sectors like automotive, communications, computing, energy, and healthcare sectors, making these tiny chips
indispensable in modern technology.
Given their widespread use, it’s clear that India’s deeptech ambitions heavily depend on these semiconductors. Despite this, India still relies largely on imports; in fact, the imports of semiconductor devices reached nearly USD 4.55 billion in 2022. But why? Initially, the pandemic kicked off a chip shortage, exacerbated by labor issues, geopolitical uncertainties, and disruptions in manufacturing. As sectors like AI, IoT, automation, and 5G rapidly expand, the demand for specialized chips and high-performance processors is straining supply chains even more. High costs for Electronic Design Automation (EDA) tools and the difficulty retaining skilled talent add to the funding woes.
Moreover, the Indian fabless ecosystem, while promising, is still in its infancy with annual revenues under USD 50 million. This makes product development challenging due to tight timelines and rapidly evolving technology, resulting in lengthy development periods and a higher risk of failure, which deters venture capital investment. Additionally, product deployment depends heavily on chip fabrication by
foundries, which often reject low-volume orders or charge high prices. Geopolitical tensions have further complicated things by disrupting international chip procurement, making it harder for Indian fabless companies to find global manufacturing partners. Given these challenges, what is India’s priority in semiconductor investment?
Prioritising the synergy of fab and fabless
India, while still in its nascent stages compared to global competitors, possesses a unique advantage due to its abundant talent and skilled labor. Recently, India has directed its focus towards semiconductor manufacturing, particularly in semiconductor fabrication and the assembly, testing, marking, and packaging (ATMP) stages crucial for producing advanced semiconductor packages. A significant exampleis the USD 2.75 billion ATMP facility in Gujarat, where the government has contributed around two-thirds of the funds.
Moreover, building on its existing semiconductor design and electronics manufacturing capabilities, India aims to establish itself in the manufacturing-centric aspects of production. By reducing reliance on imports and fostering a robust indigenous semiconductor ecosystem, India seeks to enhance its technological prowess and drive innovation for the deeptech sector reliant on advanced semiconductor technologies.
Along with this, the demand for chips is skyrocketing with the rise of IoT, 5G, AI, and automation in various industries. This is great news for the fabless chip sector but demands a more effective domestic supply chain. Companies are investing in infrastructure, R&D, and better strategies in the semiconductor supply chain sector. Instead of handling shortages everywhere, chip suppliers are now closely
monitoring their inventories to meet the high demand in some areas while avoiding an oversupply in others.
A robust government support
The Indian government is further boosting the semiconductor sector with significant subsidies covering 40–50% of the costs for setting up semiconductor fabs. This initiative underscores India’s growing prominence as a serious contender in the global industry. In February 2024, the government greenlit three semiconductor units as part of the Development of Semiconductors and Display Manufacturing Ecosystems in India initiative, with a total investment of INR 1,25,600 crore. To further enhance India’s semiconductor design ecosystem, the country has introduced the Design-linked Incentive (DLI) scheme. This scheme targets domestic companies engaged in semiconductor design and IP development, aiming to accelerate their growth. Additionally, Indian startups in this sector receive crucial support, including infrastructure assistance such as acquiring licenses for Electronic Design Automation (EDA) tools.
Future outlook
With the semiconductor industry projected to reach substantial revenue by 2024 and the country’s ambitious goal of becoming the third-largest global economy, India’s focus on manufacturing-led growth is clear. India aims to cultivate at least 20 lakh skilled deeptech engineers to sustain this momentum by 2030. Moreover, aligned with the Make In India initiative, India’s push towards semiconductor manufacturing underscores its commitment to self-reliance and global competitiveness. By entering the semiconductor product space, India strengthens its foothold in high-tech manufacturing and catalyzes innovation across the deeptech ecosystem.
