India's Semiconductor Market

India’s semiconductor industry is witnessing rapid growth and is expected to continue its upward trajectory, driven by several key trends and emerging opportunities.

Market Size and Growth

• India's Semiconductor Consumption Market was valued at USD 52 billion in 2024-25 and is expected to reach USD 103.4 billion by 2030, with a CAGR of 13%.
• Mobile handsets, IT, and industrial applications account for approximately 70% of the revenue, while automotive and industrial electronics offer significant scope for growth.

India's Import Surge

• India’s imports of Integrated Circuits (ICs), memory chips, and amplifiers have surged dramatically over the past few years, with China being a dominant supplier for nearly one-third of these imports. The figures highlight India’s growing dependence on semiconductor imports:
  • IC imports surged by 2,000% from FY16–24.
  • Memory chip imports grew by 4,500%.
  • Amplifier imports rose by 4,800%.

Key Opportunities for India

1. Large Market Potential:
   • India has become the second-largest market for 5G smartphones, holding a 13% market share, behind only China (32%). This surge in mobile usage and digital connectivity fuels demand for more advanced semiconductors.
2. Surging Domestic Demand:
   • The rapid adoption of 5G technology, along with an increased demand for mobile devices, computers, and digital technologies, is expected to accelerate demand for semiconductors.
   • The rollout of AI applications and IoT solutions also drives the need for more advanced semiconductor technologies.
3. Global Partnerships and Support:
   • India’s collaborations with semiconductor leaders from countries like the US and Japan will facilitate technology transfer and bolster India’s manufacturing capabilities.
   • The Semicon India Programme and other initiatives strengthen India’s semiconductor ecosystem, attracting global investments.

India Semiconductor Mission (ISM)

Overview:
The India Semiconductor Mission (ISM), approved in 2021, aims to make India a global semiconductor manufacturing hub and reduce dependence on imports.

• Objective: The mission focuses on:
  • Setting up chip manufacturing fabs.
  • Establishing packaging and testing units (ATMP/OSAT).
  • Supporting chip design startups.
  • Building a skilled workforce in semiconductor technology.
  • Attracting global semiconductor investments.

Key Schemes under ISM:

• Semiconductor Fabs Scheme: Provides up to 50% fiscal support for wafer fabrication (fabs) units.
• Display Fabs Scheme: Provides up to 50% support for AMOLED/LCD display fabs.
• Compound Semiconductors & ATMP/OSAT Scheme: Provides support for compound semiconductors, MEMS/sensors, and downstream packaging/testing facilities.
• Design Linked Incentive (DLI) Scheme: Promotes semiconductor design startups and MSMEs, offering financial support up to Rs 15 crore per company.

Other Key Initiatives to Promote India’s Semiconductor Industry

1. Production Linked Incentive (PLI) Scheme:
   • The PLI scheme aims to boost domestic manufacturing of electronics and IT hardware, reducing India’s dependency on imports and increasing exports.
2. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS):
   • This scheme strengthens India’s component and semiconductor manufacturing ecosystem by incentivizing manufacturers.
3. Electronics Manufacturing Clusters (EMC & EMC 2.0):
   • These initiatives develop the necessary infrastructure and ecosystem for electronics manufacturing, aiding semiconductor production.
4. Public Procurement (Preference to Make in India) Order, 2017:
   • This order ensures that government procurement prioritizes domestically manufactured electronics, providing a boost to the local semiconductor market.
5. Tax Reforms:
   • India has introduced tariff rationalization, customs duty exemptions, and other tax incentives to encourage semiconductor manufacturing.
6. FDI Policy:
   • The government allows 100% FDI in electronics manufacturing, fostering foreign investments in the sector.

Key Challenges to India’s Semiconductor Industry

Despite the promising growth trajectory, several challenges remain:

1. Infrastructure & Innovation Challenges:
   • Semiconductor fabrication requires complex infrastructure and technology, with 500–1,500 steps in the cleanroom process. India’s current semiconductor R&D capabilities are limited, and the country is still heavily reliant on imported components and intellectual property (IP).
2. Skilled Workforce Gap:
   • The semiconductor industry faces a severe skilled labor shortage, with India needing an estimated 250,000 to 350,000 more workers by 2027 to meet demand in the sector.
3. Technology & Global Competition:
   • Taiwan and South Korea dominate global semiconductor production (comprising 80% of chip foundries). Additionally, companies like ASML (Netherlands) control advanced lithography technologies, and Nvidia and ARM lead in chip design.
4. Environmental & Regulatory Challenges:
   • Semiconductor manufacturing involves the use of hazardous chemicals and toxic metals, which pose environmental risks. The sector also faces high energy consumption, which raises operational costs.
5. Complex Regulations:
   • India's semiconductor industry is hindered by complex regulatory frameworks, IP issues, and policy uncertainties, which increase operational risks for semiconductor manufacturers.

Steps India Should Take to Strengthen its Semiconductor Industry

1. Skill Development:
   • Establish specialized training programs in chip design, fabrication, and testing to bridge the skills gap and build a robust talent pool.
2. Boost R&D and Indigenous IP:
   • Increase investment in R&D, support indigenous product design, and develop intellectual property that will enable Indian startups and smaller companies to compete globally.
3. Incentives & Policy Support:
   • Strengthen government initiatives like the India Semiconductor Mission (ISM) and state-level policies (e.g., UP Semiconductor Policy 2024) to attract investments and promote semiconductor manufacturing.
4. Chip Diplomacy & Niche Focus:
   • Promote international collaboration (referred to as "chip diplomacy") with global semiconductor leaders, focusing on niche technologies like MEMS and sensors, which could give India a competitive edge in specialized segments.
5. Private Sector Participation & Strategic Opportunities:
   • Encourage private sector investments and collaborations, like the Tata-PSMC fab in Gujarat, to expand India’s semiconductor manufacturing capabilities.
6. Leverage Geopolitical Shifts:
   • Use the US-China trade tensions and other geopolitical shifts to position India as an alternative global hub for semiconductor manufacturing.

Conclusion

India’s semiconductor sector is poised for rapid growth, fueled by domestic demand, global collaborations, and government support through initiatives like ISM, PLI, and SEMICON India. However, addressing the challenges related to infrastructure, skill development, and technology will be key to establishing India as a global semiconductor hub. By strengthening its manufacturing capabilities, R&D investments, and policy frameworks, India can significantly enhance its position in the global semiconductor supply chain and contribute to a more self-reliant economy