India May Rise as Global New Semiconductor Hub amid US-China Conflict
Amidst the ongoing competition between the United States and China for dominance in the semiconductor field, India is emerging as a strong contender aiming to replace China and establish itself as a leading hub for the global semiconductor industry. In order to attract global semiconductor companies, the Indian government has introduced lucrative benefits and incentives, prompting many to opt for investing in manufacturing operations within the country.
According to sources in the industry, global semiconductor giants have recently redirected their investments to the Indian market, in light of Indian Prime Minister Narendra Modi's visit to the United States, which has drawn attention to the Indian economy.
Micron, a prominent American manufacturer of memory chips, has recently made a deal to construct a facility in the western Indian region of Gujarat. This facility will focus on assembling and testing DRAM and NAND flash memory. With a hefty price tag of $2.75 billion, construction is set to commence in August, and operations are expected to commence by the end of 2024. To entice Micron's investment, the Indian central government has agreed to contribute 50% of the total investment, while the state of Gujarat will contribute 20%. This move has attracted the attention of Micron, as it is one of the top three memory semiconductor companies globally.
Applied Materials, the leading provider of equipment for making semiconductors, has revealed its plans to establish an engineering facility in Bengaluru, India. This venture will involve a substantial investment of $400 million over a period of four years. Additionally, Lam Research, a U.S.-based company, will be implementing a program aimed at training 60,000 semiconductor engineers in India.
The company called Microchip, which specializes in analog semiconductors, has also recently declared an enormous financial commitment of $300 million in India. This investment will be directed towards bolstering their existing establishments in Bengaluru and Chennai, as well as establishing a brand-new research and development center in Hyderabad.
Major multinational companies in the semiconductor industry are putting their money into India due to the unwavering backing of the Indian government. Prime Minister Modi, in his ambitious endeavor to propel the "Made in India" initiative, has promised that the government will cover 50% of the expenses in establishing a new semiconductor fabrication facility, with state governments further contributing 20%. Moreover, to facilitate this move, the Indian government has allocated a considerable sum of $10 billion (or 13 trillion in local currency) as tax benefits.
The ample pool of skilled IT professionals in India has also been attracting chip manufacturers from foreign countries. Companies like Texas Instruments, Micron, and Intel are already engaged in semiconductor design operations in India, creating over 2,000 chips annually. The Information Technology Innovation Foundation (ITIF), a think tank focused on public policy in the United States, stated in its newly published "India Semiconductor Readiness Assessment Report" that India has produced an impressive number of 85,000 highly competent engineers who specialize in very large scale integration (VLSI) and embedded system design.
As per the report, India is home to over a thousand colleges and universities along with 23 Indian Institutes of Technology (IITs). In the coming five years, approximately 120 educational institutions in India have proposed to provide training to engineers at advanced levels, including master's and doctoral degrees. This initiative aims to create a vast pool of talented individuals, transforming India into a dominant force in the field of semiconductor expertise.
The booming expansion of the consumer electronics, telecommunications, and automotive sectors in India presents prospects in the advancement of the 28-nanometer and advanced manufacturing processes within the country. As per a report by Counterpoint Research, the semiconductor market in India is projected to exceed a market worth of $64 billion by 2026. The study highlights that India, with its massive population of over 1.4 billion people, possesses a favorable advantage for establishing manufacturing hubs and broadening supply chains due to its thriving domestic market.
India also has its share of disadvantages. The major setback for the country lies in its feeble infrastructure, which is considered the foremost issue. More specifically, the semiconductor sector functions round the clock, making it crucial to ensure a continuous supply of electricity and water.
Nevertheless, according to the ITIF, "The Indian central government has made substantial financial commitments to ensure a reliable power supply. Regions like Dholera in Gujarat and Mysuru in Karnataka, where semiconductor clusters are being developed, have witnessed notable advancements in water management, sewage systems, port facilities, airports, road networks, and high-speed railway infrastructure in recent times." Currently, India has a power generation capacity of 410 gigawatts (GW), making it the third largest globally, with renewable energy sources accounting for at least 172 GW.
Certain experts argue that India faces a challenging journey ahead due to its late entry into the industry. According to the Financial Times, the Indian government aims to make advancements in industries that are already dominated by countries like Taiwan, Japan, and the United States. Although India has been focusing on enhancing its abilities in semiconductor design, it may encounter difficulties as it explores the realm of semiconductor manufacturing, which is distinct from chip design.
