The recent signing of a Memorandum of Understanding (MoU) between India and the United States marks a significant step towards the realization of India’s aspiration to become a hub for electronic goods. This event took place during the 5th India-USA Commercial Dialogue in 2023.
Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors
India has made numerous strides towards improving its position in the global semiconductor market. Some of the significant initiatives include the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and the allocation of Rs 76,000 crore by the Union Cabinet in 2021 to support the development of a ‘semiconductors and display manufacturing ecosystem’.
Major Manufacturers of Semiconductor-chips
Top manufacturers in the semiconductor industry include countries like Taiwan, South Korea, Japan, United States, and China, with Taiwan and South Korea accounting for about 80% of the global foundry base for chips.
India-US Pact on Semiconductor
The India-US pact on semiconductors aims to establish a collaborative mechanism between the two governments to enhance semiconductor supply chain resiliency and diversification. This collaboration aligns with the U.S’s CHIPS and Science Act and India’s Semiconductor Mission.
Significance of the Deal
The pact is expected to open up commercial opportunities for India by strengthening cooperation in the semiconductor sector and facilitating the development of innovation ecosystems. It could propel India into a more central role in the global electronics supply chain, and potentially alleviate the crunch in semiconductors supply that has been ongoing since the Covid-19 pandemic.
Challenges Faced by India in Semiconductor Manufacturing
Despite the potential benefits, India faces several challenges in semiconductor and display manufacturing. High capital investment, long gestation and payback periods, rapid technology shifts, and significant sustained investments characterize this sector. The country also grapples with a lack of fabrication capacities, expensive fab setup, resource inefficiency, and minimal fiscal support from the government.
India’s Position in the Global Semiconductor Market
Currently, India imports all its chips, with the market estimated to reach USD 100 billion by 2025, up from USD 24 billion. Consumption of semiconductors in India is projected to cross USD 80 billion by 2026 and reach USD 110 billion by 2030. The introduction of incentives for design companies and the Design Linked Incentive (DLI) Scheme aim to boost domestic chip manufacturing.
Top 5 Countries Producing Semiconductors
The highest producing countries in the semiconductor industry are Taiwan, South Korea, Japan, United States, and China. Notably, the world’s most advanced chipmaker, TSMC, resides in Taiwan.
The Path Ahead
Given these developments, India seems poised to realize its ambition of becoming an electronics hub and ensuring a balanced supply-demand ratio in the semiconductor industry. This progress is likely to eliminate delays for buyers awaiting their electronic goods.
