Yes, but only if India plays its cards right. This is no time to gamble on short-term solutions, or focus solely on semiconductor manufacturing. A long-term strategy that drives an entire ecosystem of innovation, collaboration and value-added offerings is crucial.
There’s no denying that the global semiconductor industry is a high-stakes game. Cheaper alternatives from Taiwan and China, along with a weakening rupee, put India at a disadvantage. Global players have concerns over the ‘Made in China 2025’ initiative, which could give Beijing significant control over global chip manufacturing by 2025.
So, why should India even bother to join this race now? The answer lies in the ever-changing nature of tech. Semiconductors are at the heart of nearly every modern tech innovation, from EVs and RE solutions to AI and IoT. The global market is projected to grow to $53 bn by 2025, driven by innovations like generative AI, 3D printing, blockchain, cloud computing and EVs. In a field where obsolescence happens faster than you can say ‘microchip’, even established players must innovate or risk falling behind. What India missed in the past will likely be outdated in the next few years.
One of the key criticisms is that building a few semiconductor fabs won’t solve the problem. Critics are right. Throwing money at the problem without a clear, long-term strategy won’t bring immediate results. Setting up fabs can take 5-7 years and, by then, the tech will have shifted yet again.
However, India can chart a smarter course by adopting a phased approach. Focus on supporting its local fabless semiconductor companies, which design chips but outsource the manufacturing to other countries. By funding these firms, India can start producing substitute chips that reduce dependency on Chinese and Taiwanese foundries. Start migrating next-gen products to its own fabs, ensuring it doesn’t follow but leads the innovation curve. By gradually transitioning from being dependent on external manufacturers to self-sustaining semiconductor production, India can position itself as a formidable player in the global market.
India’s relationship with semiconductors isn’t new. In 1974, the Semiconductor Complex Limited (SCL) was set up as a PSU. However, it took SCL a decade to design and fabricate its first chip. An unfortunate fire in 1989 and lack of sustained state interest caused it to flounder.
Had there been a consistent plan to develop an ecosystem around the industry, India could have been in a prime position to benefit from today’s trade war between the US and China. Later, SCL was converted into a laboratory, marking the end of semiconductor manufacturing. Hopefully, the same mistake won’t be repeated.
Shift focus from manufacturing to building a sustainable ecosystem of innovation. The ₹76k cr allocation shouldn’t just be used to build factories. It should be also invested in a broader framework that includes R&D, talent development, and collaborations between academia, industry and government bodies.
For instance, the Shakti project at IIT Chennai, which developed India’s first indigenous Risc-V microprocessor, is a promising first step. India needs to encourage innovations that cater to the ever-increasing demands for faster, cheaper and more powerful chips. This includes providing greater funding to startups and private research institutions, much like how the US offers grants for projects that can create tremendous value for society.
India must diversify beyond building mainstream CMOS (complementary metal-oxide-semiconductor) fabs. It should invest in solar PV, gallium nitride (GaN) fabs for solid-state lighting, and other niche areas like RF (radio frequency) and HV (high-voltage) tech. This diversification would reduce dependency on foreign tech and push India to the forefront of emerging technologies.
Both demand-side and supply-side economies must align, and to compete globally, India must build value-added offerings. Here’s how that could be achieved:
Upskill engineers to increase the number of highly skilled IC software and system design engineers. They will be differentiators in value creation, as opposed to the more dominant IC design and testing engineers.
Faster time to market for manufacturers. They need to adopt new processes that reduce time to market by three months. The benchmark time for a new design is 19 months, and 14 months for the revision of an existing product.
Transparency and collaboration to create a transparent and collaborative environment where foundries and suppliers can share information on production, future tech and expansion plans. This will help manufacturers plan better and accelerate innovation.
Attract complementors to create an ecosystem with a vibrant group of players who produce complementary products and services, such as microprocessors, graphics ICs and software for programming and applications.
Leverage global media to cultivate good global media relationships to position India as a differentiated player in the semiconductor industry.
Late to the poker table, but with ₹6,903 cr on the line (the allocation in the interim budget of 2024-25), this isn’t just a chip game. It’s an all-in for tech supremacy.
The writer is co-founder,Medici Institute for Innovation
