India’s semiconductor ambitions are drawing giants like Micron, but profitability and scalability pose hurdles

Policy Push

The production-linked incentive (PLI) scheme, introduced in December 2021, has acted as a catalyst, with big players like US-based chipmaker Micron, salt-to-software conglomerate Tata group, and the Murugappa group setting up manufacturing facilities.

The government has also announced a substantial allocation of $10 billion under Semicon India Program for the semiconductor and display manufacturing ecosystem. Of that, around $2 billion was disbursed last fiscal (FY24) and another $4 billion is expected to be spent in FY25.

“The centre’s initiative is not just about silicon manufacturing; it extends to areas like assembly, testing, and packaging,” says Navin Bishnoi, Country Head at Marvell India & AVP Central Engineering. These areas, known as OSAT (Outsourced Semiconductor Assembly and Test) and ATMP (Assembly, Testing, Marking, and Packaging), are integral to building a robust semiconductor ecosystem.

“The roll-out of comprehensive policies, coupled with incentives and funding, has laid the groundwork for expanding manufacturing capabilities in India,” Bishnoi tells Business Today. The response has been encouraging, with four major announcements, he says, marking a significant step forward in strengthening India’s position in the global landscape.

Among the announcements are Micron Technology’s $825-million investment in Gujarat, Israel-based Tower Semiconductors and the Tata group’s joint $8-billion project to build a semiconductor fabrication plant in Assam. Tata Electronics Private Limited has also partnered Taiwan’s Powerchip Semiconductor Manufacturing Corp to set up a semiconductor facility in Gujarat with a projected investment of about $11 billion. Moreover, CG Power has teamed up with Japan’s Renesas Electronics and Thailand’s Stars Microelectronics for a $222-million venture in Gujarat.

Though India is a late entrant in this space, stakeholders are confident that the country has the potential to emerge as a powerhouse.

Satya Gupta, the President of the VLSI Society of India, flags three key focus areas of manufacturing, products, and skilling. VLSI is a very large scale integrator, a process for producing integrated circuits.

He says semiconductor products are the drivers of the industry with product companies like Nvidia and AMD leading it. So, the focus should be on the products. “India’s $115-billion electronic manufacturing contributes 3-4% in terms of economic value, while an electronic or chip level product’s economic contribution is 30-50%,” Gupta tells BT.

This is important because India’s semiconductor market is tipped to cross $100 billion in valuation by 2030 and $800 billion by 2047, according to the government.

Tracing the Journey

Challenges like supply chain, skilled workforce, and support infrastructure can act as impediments to India’s ambitious dream.

Gursharan Singh, Senior Vice President, BE Operations at Micron Technology, says despite some initial teething troubles, there is strong participation from the central and state governments.

But challenges remain. For instance, he says, the quality of roads on which it will transport wafers are not up to scratch. “We also have a lot of new college graduates as well as single team members who cannot find convenient accommodation,” Singh tells BT.

The availability of skilled workforce—from engineers to technicians—is also an issue that Micron, the Tata firms, and Murugappas are dealing with. The companies have started online and offline professional courses by tying up with premier institutes like the Indian Institute of Science (IISc), and IITs, amongst others.

Rangesh Raghavan, Corporate Vice President and General Manager at Lam Research India, a supplier of wafer-fabrication equipment and related services to the semiconductor industry, emphasises that this is a global issue. There is a worldwide talent shortage that might hinder the ability to meet the anticipated AI-driven demand for chips, and educating the next-generation of engineers is challenging, as providing physical access to the most advanced nanotechnologies is expensive for academic institutions. He believes the solution lies in the virtual simulation of real-world labs.

To address the talent gap, the government is rolling out initiatives aimed at skilled workers. Lam Research has signed an MoU with the India Semiconductor Mission and IISc to train more than 60,000 engineers in semiconductor manufacturing technology.

VLSI Society has started an undergraduate programme in VLSI design in 350 BTech colleges, 450 colleges offering Masters and PhD programmes. Still, it is a struggle to find trained faculty and infrastructure in terms of design tools.

Rabindra Srikantan, the Vice Chairman of CII Karnataka and Founder and Managing Director of technological services firm ASM Technologies Ltd, says some states like Karnataka have taken the lead in developing skill clusters, especially in semiconductors.

Towards 2047

India has a robust chip design industry and it must establish similar dominance in chip manufacturing. To further develop the domestic value chain, the centre is expected to introduce a components incentive scheme. Make in India has a unique opportunity to build for and take advantage of the Indian market, says Singh. “So, I think there’s a huge opportunity ahead of us and Micron is well-positioned to support our customer base,” he adds.

Experts say the question now is how India can convert these growing semiconductor consumption numbers to local demand and for local products.

If India is targeting $100 billion in demand by 2030, it must reach the goal of ensuring at least 30% of this consumption is fulfilled by Indian products. “It will increase the contribution to GDP. We need to make more economic impact by moving to products,” says VLSI Society’s Gupta.

In Gupta’s opinion, the business side of the semiconductor industry will be the biggest challenge in the years to come. He feels the government could drive domestic demand through mandates for ‘Make In India’ chips.

India has caught global attention as it treads the path to becoming a semiconductor hub. But will that be enough to scale domestic companies up to the levels of AMD or Nvidia? Only time will tell.

@richajourno, @PalakAgarwal64