SEMICON India 2024: Powering India's Semiconductor Ambitions

The India Semiconductor Mission (ISM) is a focused and stand-alone business initiative of the Digital India Corporation, precisely built to spur semiconductor and display ecosystem development in India.

January 23, 2025. By News Bureau

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SEMICON India 2024

State Bank Academy

State Bank of India

India Semiconductor Ambitions

India Semiconductor Mission

Semiconductor powerhouse

Semiconductor ecosystem

Gautam Bose

Semiconductor manufacturing

Digital India Corporation

“This is the right time to be in India. In 21st century India, the chips are never down. When the chips are down, you can bet on India.”

Words said Indian Prime Minister Narendra Modi at Semicon 2024, stating that he is certainly confident about the ascended position of India in the semiconductor industry. He further shared his ambitious vision of seeing Indian-made chips in every device worldwide, considering the determination of India towards not only becoming a global semiconductor powerhouse but also all-pervasive.

Semicon 2024, held in Greater Noida from September 11 to 13, 2024, marked a pivotal moment, demonstrating India's commitment to establishing a strong semiconductor ecosystem. With the theme of "Shaping the Future of Semiconductors", the event was attended by eminent world leaders, industry specialists, and governmental representatives, signalling a potential for a critical sector to grow in India.

It is a well-known fact that as on date, India heavily relies on imports for semiconductors and related components, due to the lack of domestic fabrication facilities. However, this event marks a crucial first step in transforming India’s semiconductor landscape and making the country a significant player in the global arena of semiconductors.

Semicon 2024 is now considered as the catalyst that fast-forwards India's semiconductor development, which in turn supports increasing its tech community, skilled workforce, and government policy. This presents a unique opportunity for India to emerge as a value-added center for semiconductor manufacturing in the near future, considering the present global movement toward the diversification of semiconductor supply chains out of China.

India is on the threshold of a new role in the world semiconductor industry, from a consumer to a major producer. The strategic and economic imperatives of semiconductor technology underscore the urgency for India to transition into a "Chip Maker" from a "Chip Taker," pivotal not only for consumer electronics like smartphones and computers but also for critical sectors including healthcare, defense, and infrastructure. Semiconductors have been the most important tools for various applications, which include medical devices and military equipment, in communication systems and encryption technologies, among other things, due to their reliability, compactness, and efficiency.

India's Semiconductor Journey:
This section provides a historical overview of the Indian government's efforts to foster a domestic semiconductor value chain.
1960-74: In 1964, BEL acquired technology on germanium and silicon, to be used in the manufacture of semiconductor devices, with the help of the Soviet Union.

1976-78: The government approved the creation of a new semiconductor company, Semiconductor Complex Limited (SCL). This was the first semiconductor manufacturing plant in India. In 1978, India started its first semiconductor plant in Mohali. The cost of the project was approx.15 crores rupees.

1980-83: SCL Mohali plant inaugurated, chip making started with the help of technology procured from American Microsystem Inc.

2007: The first real attempt in 2007 in the form of Special Incentive Package to establish a semiconductor fabrication plant did not evoke any response or result for India.

2012: The second effort was a yet another watered-down version of the Special Incentive Package but in more investor-friendly avatars. After much pressure, the Cabinet finally okayed two consortia. Among them, one was the partnership between Jaiprakash Associates, IBM and Israel based TowerJazz, and another between Hindustan Semiconductor Manufacturing Corporation in collaboration with ST Microelectronics. At the end, despite all these promising ties, the projects failed to raise the money required for building the fabrication plant, even after places were selected and land allocated.

2021: The Indian government launched the India Semiconductor Mission, which clearly depicted its strong commitment towards developing a domestic semiconductor ecosystem. Government of India, under the initiative brought in huge incentive scheme of around USD10 billion to attract investments and companies into establishing their semiconductor operations in India. Officially, the government began inviting applications from interested semiconductor industries to mark the beginning of a new era for the country's semiconductor sector.

2023: The Indian government extended the deadline for applying for the semiconductor incentive program in June. The initial deadline was too short, only 45 days, and did not attract enough interest from semiconductor companies. This new move was meant to encourage more companies to invest in India. Several American companies and Taiwanese company Foxconn announced plans to invest in India and set up operations there.

Indian Semiconductor Mission:
The India Semiconductor Mission (ISM) is a focused and stand-alone business initiative of the Digital India Corporation, precisely built to spur semiconductor and display ecosystem development in India. The core ISM objective is to enhance electronics manufacturing and designing capacities within the country.

To help achieve that, ISM works as a connecting agent that coordinates the actions of different parties involved and closely interacts with government agencies, business sectors, as well as educational institutions. Through this cooperative approach, government is intended towards creating an ecosystem, where plans are implemented efficiently and effectively toward maximising semiconductor production capacity, conducting more research and innovation, and further investments in the sector.

By developing a dynamic semiconductor ecosystem, ISM wishes to place India on a path of being a significant player in the global electronics agenda and, by doing so, encourage technology innovations and further economic development.

In Dec 2021, The Hon'ble Union Cabinet, led by the Hon'ble Prime Minister, has expedited the approval of the Semicon India program, with a budget of INR 76,000 crores to develop the entire semiconductor and display manufacturing ecosystem in India. This program aims to financially support companies investing in these sectors, as well as in design ecosystems. The Semicon India 2024 initiative is set to enhance India's presence in the global electronics value chain.

Four schemes introduced under the program to provide financial support to companies engaged in semiconductor business.

1. Setting up of Semiconductor Fabs in India:The scheme is designed to extend fiscal support to eligible applicants with the objective of attracting large investment towards setting up semiconductor wafer fabrication facilities in the country.

2. Setting up of Display Fabs in India:The scheme provides financial assistance to eligible applicants for establishing Display Fabs, specifically aimed at large investments in setting up TFT LCD and AMOLED display fabrication facilities within the country.

3. Scheme for establishing Assembly, Testing, Marking and Packaging (ATMP) / OSAT facilities in India:The Scheme offers financial assistance covering 30 percent of capital expenditure for eligible applicants to establish facilities for Compound Semiconductors, Silicon Photonics (SiPh), Sensors (including MEMS) Fabrication, and Semiconductor ATMP/OSAT in India.

4.DLI Scheme:The Design Linked Incentive (DLI) Scheme provides financial incentives to support design infrastructure at all levels of semiconductor design and deployment. This encompasses Integrated Circuits (ICs), chipsets, System on Chips (SoCs), systems, IP cores, and other semiconductor-related designs.

Establishing a robust domestic semiconductor fabrication ecosystem is considered a strategic move toward reducing dependence on other countries, but also toward shielding the economy from global supply disruptions and geopolitical tensions. Domestic fabrication benefits the economy beyond sovereignty. It promises to generate high-skilled jobs, attract foreign direct investment, and foster the growth of ancillary industries, thus contributing significantly to the GDP.

Advantage India

According to The Vision Research Reports, the India semiconductor market size is likely to reach approximately USD 214.81 billion by 2033 and grows at a CAGR of 20.13 percent during the period of 2024-2033.

As per another joint report by India Electronics and Semiconductor Association, semiconductor consumption in the country is to go from USD22 billion in 2019 to USD64 billion in 2026 - with 16 percent CAGR. Semiconductor consumption is estimated to double to nearly USD110 billion by 2030. This puts India in an even better position for accounting for almost 10 percent of the total semiconductor demand around the world.

PwC’s 'Global Entertainment & Media Outlook 2024-2028' report highlights how digital advertising, OTT platforms, online gaming, and Generative AI are key growth drivers transforming the digital media and entertainment industry. According to the report:

Indian advertising revenues is projected to grow at a CAGR of 9.4 percent to reach INR 1,58,000 crore (19.2 Bn USD) in 2028, which is 1.4x the global average of 6.7 percent.
Internet advertising in India is expected to grow at a CAGR of 15.6 percent, reaching INR 85,000 crore (10.2 billion USD) by 2028, the highest growth rate among the top 15 countries and 1.6 times the global average.
The online gaming and esports sector in India is growing at a CAGR of 19.2 percent and is projected to reach INR 39,583 crore by 2028 (4.8 Bn USD)
OTT platform revenues in India are projected to grow at a remarkable CAGR of 14.9 percent, the highest among the top 15 countries, to reach INR 35,061 crore (4.25 billion USD) by 2028.

India's electronics production, valued at USD101 billion in 2022, is projected to triple to USD300 billion by 2026 and to 5x to USD500 billion by 2030. This will create over 6 million jobs in the process. One of the significant contributors is the mobile phone industry, for which production is forecasted to increase from USD44 billion in 2023 to USD110 billion by 2026. India has already emerged as the world's second-largest mobile phone manufacturer, and over the past five years, its share in global smartphone production has doubled to 19 percent.
Electronics production in India stands at USD101 billion in 2022, expected to triple to USD300 billion by 2026 and 5x to USD500 billion by 2030. In the process, it is expected to generate more than 6 million jobs. A significant part of this growth is contributed by the mobile phone sector, for which production is expected to go up from USD44 billion in 2023 to USD110 billion by 2026. India has already emerged as the world's second-largest mobile phone manufacturer, with the share of its smartphone production increasing to 19 percent from the previous five years. (https://www.wrightresearch.in/)
sAs per a news article from Economic Times, recently Japan joined India as the second Quad partner, after the United States, to sign an agreement for joint development of a robust semiconductor ecosystem. This collaboration will strive to strengthen the resilience of global supply chain and advance cooperation in cutting-edge technologies. Reflective of Japan's increasing focus on India's semiconductor industries, several Japanese companies have now begun to explore a venture to set up India semiconductor manufacturing units.

In 2017, Indian semiconductor exports were at USD 0.21 billion while imports were higher at USD 4.65 billion. The exports grew up to USD 0.33 billion in 2019 while imports fell to USD 3.15 billion. However, 2020 saw a decline in both export and import figures due to the global economic disruptions caused by the COVID-19 pandemic. Pent up demand of the slowdown translated into remarkable rebound in 2021 and imports were at USD 5.36 billion. And, in 2022, we had the first instances of India taking serious intent towards being a semiconductor hub when exports touched all time high USD 0.52 billion.
India hosts 20 percent of the world's semiconductor design workforce, a rapidly evolving technology landscape, and a thriving domestic market-all of which are conducive in building an indigenous semiconductor ecosystem. Estimates say that India will require 1.2 million skilled people in the semiconductor sector by 2032. (KPMG data)

The global manufacturing landscape has undergone significant changes in recent years. Multinational companies like Apple are implementing strategies to reduce their reliance on China, which remains their primary manufacturing hub. In response to the COVID-19 pandemic and US-China tensions, many companies have adopted a "China plus one" (C+1) strategy. This approach involves diversifying manufacturing operations to other countries while maintaining some production in China.

How Banks Stand to Benefit
Major focus of SEMICON India 2024 was on the semiconductor industry, but there are expected waves and downstream effects through all sectors, including the banking industry. Thus, it would present a multitude of business opportunities for the banks toward business expansion, along with contributing to the nation's technological advancement in growth and development of the semiconductor ecosystem in India.

Financing the Semiconductor Boom
Historically, Taiwan has been the world's largest producer of semiconductors and relies mainly on local banks for financing. Taiwanese banks are well capitalised and knowledgeable about financing the semiconductor sector. The banks fund through loans, bonds, and syndicated loans, while government subsidies often subsidise semiconductor projects, especially in countries with ambitions to develop their domestic chip manufacturing capacities.

The semiconductor business is very capital-intensive, demanding massive investment in infrastructure, R&D, and manufacturing facilities. In this context, banks will likely continue to have a dominant share in financing the semiconductor companies, equipment manufacturers, and the balance of the value chain stakeholders conducting business in India. This includes, without limitation, project finance, working capital loans, and other credit facilities to make such players establish and expand their operations in India.

Facilitating Foreign Investments
The Government of India has implemented initiatives to attract foreign investment into the semiconductor industry. In this regard, banks have scope to offer a complete gamut of financial services for multinational companies and investors in foreign exchange transactions, trade finance as well as advisory services related to regulatory and compliance matters.

Supporting the Supply Chain
In fact, an efficient semiconductor ecosystem will form a large, even complex supply chain, involving thousands of suppliers, manufacturers, distributors, and retailers. Banks can offer a wide-ranging financial solution for seamless operations along the supply chain-from supply chain financing to inventory financing and payment solutions.

Enabling Digital Payments
The growth of Semiconductor sector will tend to propel the adoption of digital technologies across industry, thus fuelling demand for solutions in digital payments. Through such growth, banks can tap into this potential through various digital payment products and services such as mobile banking, online payments, and point-of-sale solutions.

Addressing the Changing Demands of the Industry
As the Indian semiconductor industry matures, the banks will have to step up in tandem with the development of highly specialised financial products and services for this industry. This could include customised lending solutions, risk management products, and advisory products specific to the issues in the industry.

Promoting Financial Inclusion
Other beneficiaries will be increased employment opportunities by all categories such as top-level engineers, technicians, and support staff. Banks can contribute significantly towards financial inclusion by providing banking services and teaching financial literacy skills to these persons and their families.

Major ongoing/ upcoming investments in India:

In September 2024, the Maharashtra cabinet has approved USD10 billion in investments for Tower Semiconductor along with the Adani Group to establish a semiconductor chip manufacturing plant in Taloja, Panvel. The facility will start its operations from an initial capacity of 40,000 wafer starts a month and ramp up to 80,000 WSPM in the second phase.
The Union Cabinet has cleared a ₹3,307 crore proposal from Mysore headquartered company Kaynes Semicon for its outsourced assembly and testing (OSAT) unit in Gujarat's Sanand. The unit is proposed to churn out 6.3 million chips a day.
Approximately ₹91,000 crore in investment is envisioned for the Tata Electronics Private Limited chip fabrication facility, which it will undertake in collaboration with Taiwanese Powerchip Semiconductor Manufacturing Corp. The chip factory is envisioned to produce 50,000 wafer starts per month.
Tata Semiconductor Assembly and Test Pvt Ltd (TSAT) plans to establish a semiconductor unit in Morigaon, Assam, with an investment of ₹27,000 crore. This facility is projected to have a production capacity of 48 million units per day and is expected to create 15,000 direct jobs and an additional 11,000-13,000 indirect jobs.
The semiconductor unit will be set up in Sanand, Gujarat, by the company CG Power in collaboration with Japanese firm Renesas Electronics Corporation and Thai firm Stars Microelectronics. Investment in the project stands at ₹7,600 crore and the project aims for a production capacity of 15 million units per day.
India's Gujarat-based company Suchi Semicon has inaugurated an OSAT (Outsourced Semiconductor Assembly and Test) facility in Surat, marking a significant milestone for the semiconductor manufacturing sector. The company has announced its plans to invest USD100 million over the next three years to scale operations. It will start commercial shipping in the first quarter of next year after finishing the testing procedures. At first, it will make 300,000 chips per day; however, its target is to increase it to 3 million chips per day in three to five years from now. Suchi Semicon is planning to enter the power semiconductor domain in its second phase of expansion, which may start as early as the next financial year and further diversify its offerings, contributing to India's self-reliance in semiconductor technology.

The road ahead
SEMICON India 2024 represented the most significant stride in India's semiconductor history. The event epitomised what a concerted capability, commitment, and collaborative effort it would entail to achieve such ambitious goals. Proactive policies from the government, industry engagement, and clear messaging on innovation and talent development are solid foundation blocks underpinning India's aspiration in semiconductors. As efforts continue, there is significant scope for India to assume the lead in the global semiconductor landscape-driven not merely by economic growth but importantly technology improvement.

One of the very important lessons Indian banks can learn from its Taiwanese peers is that these loans, bonds, and syndicated loans must be brought to the clients. More importantly, it can also support clients to be implementors of green principles and issue green bonds.

Although the road is not easy, the intent and effort of all stakeholders in this journey make it worthwhile. With SEMICON India 2024, much enthusiasm will be generated regarding the immense possibility for the future of India's semiconductor industry.

Conclusion
SEMICON India 2024 marks a definitive step for India in its ambition to become a global leader in semiconductors. "Indian chips" in every device—this dream was more vividly ushered in by the vision articulated by the Honourable Prime Minister, so the leaders in industry and governments celebrate India's intent in building a robust semiconductor ecosystem. India has always been an import-dependent country, but the scenario is now changing very rapidly.

The establishment of India Semiconductor Mission, which acts as the basis for a USD10 billion incentive scheme, tells us that the government is working in this direction. This highly ambitious plan will require financing, where banks will be encouraged to draw lessons from the more established semiconductor hubs such as Taiwan by offering loans and bonds and syndicated financing while making sustainable practices available to attract foreign investments at the domestic level. However, problems do exist. There is still a deficiency of skilled talent and unprepared workforce waiting for India in this new sector. Its administration also needs to be regularly facilitated with eased rules and regulation and business-friendly environment.

A spark ignited at SEMICON India 2024, illuminating the path to overcome challenges. United determination and shared responsibilities among various stakeholders at one forum will be instrumental in bringing forth the force. Thus, it will be able to gain further momentum in the development of economy and technology, keeping before them a promising future. Much promise lies for the journey ahead and is at merely its startup phase of India's foray into the semiconductor industry.

The global manufacturing landscape has undergone significant changes in recent years. Multinational companies like Apple are implementing strategies to reduce their reliance on China, which remains their primary manufacturing hub. In response to the COVID-19 pandemic and US-China tensions, many companies have adopted a "China plus one" (C+1) strategy. This approach involves diversifying manufacturing operations to other countries while maintaining some production in China.

- Gautam Bose, Research Officer, State Bank Academy, Gurugram