Rising Semiconductor Demand in India’s AI Era

The semiconductor industry in India is witnessing growth. A recent report predicts that the demand for semiconductors in the country will increase by 28 per cent by the end of 2026. This growth aligns closely with the global expected demand of 29 per cent. The surge in demand is primarily driven by advancements in artificial intelligence (AI) and machine learning (ML).

Current Market Trends

The Capgemini Research Institute indicates that a majority of Indian downstream organisations are anticipating a rise in demand for various types of semiconductors. Specifically, 96 per cent of these organisations expect increased demand for AI chips. This figure surpasses the global average of 88 per cent. Custom silicon chips, or application-specific integrated circuits (ASICs), are also in high demand, with 96 per cent of Indian firms expecting an uptick compared to 81 per cent globally.

Types of Chips in Demand

Memory-intensive chips, such as high-bandwidth memory (HBM) and GDDR6, are also expected to see growth. Approximately 82 per cent of Indian firms anticipate an increase in demand for these chips, compared to 79 per cent of global organisations. This trend marks the importance of specialised chips in supporting AI applications.

Current Usage of Custom Silicon Chips

Currently, 54 per cent of Indian downstream organisations are utilising custom silicon chips in their products. This figure is almost on par with the global average of 56 per cent. The adoption of custom chips signifies a shift towards tailored solutions that meet specific industry needs.

Key Innovations Desired

Indian downstream organisations have expressed specific needs for technological innovations. Enhanced security is the most desired innovation, with 50 per cent of respondents prioritising it. Other important innovations include the availability of comprehensive application programming interfaces (APIs), software development kits (SDKs), and enhanced customisation options.

Future Outlook

Looking ahead, 52 per cent of Indian firms are optimistic about the semiconductor industry’s ability to innovate at a pace that meets future demands. This confidence is crucial for sustaining growth in a rapidly evolving technological landscape.

Implications for the Industry

The anticipated growth in semiconductor demand will have far-reaching implications. It will drive investment in research and development. It will also influence supply chain dynamics and production processes. The focus on AI and custom silicon will likely reshape the competitive landscape of the semiconductor industry in India.

Questions for UPSC:

1. Critically analyse the impact of artificial intelligence on the semiconductor industry in India.
2. What are the key factors driving the demand for custom silicon chips in the Indian market? Explain.
3. What is the significance of memory-intensive chips in the context of modern technology? Discuss.
4. With suitable examples, comment on the role of innovation in sustaining growth in the semiconductor sector.

Answer Hints:

1. Critically analyse the impact of artificial intelligence on the semiconductor industry in India.

1. AI advancements are driving demand for specialized chips, particularly AI and custom silicon chips.
2. Indian firms show a higher expectation for AI chip demand (96%) compared to the global average (88%).
3. AI’s integration into products necessitates increased computing power, influencing semiconductor design and production.
4. Investment in R&D for AI-related semiconductor technologies is expected to grow .
5. Enhanced security and custom solutions are becoming critical as AI applications proliferate in various sectors.

2. What are the key factors driving the demand for custom silicon chips in the Indian market? Explain.

1. High customization needs for specific applications in industries such as AI and machine learning.
2. Increased efficiency and performance of custom ASICs compared to general-purpose chips.
3. Growing adoption of AI technologies across sectors, boosting the requirement for tailored solutions.
4. Competitive advantage gained through proprietary technology and optimized performance.
5. Significant support from government initiatives to encourage semiconductor manufacturing in India.

3. What is the significance of memory-intensive chips in the context of modern technology? Discuss.

1. Memory-intensive chips, like HBM and GDDR6, are crucial for high-performance computing tasks, especially in AI.
2. They enable faster data processing and reduced latency, essential for real-time applications.
3. Demand for these chips is rising as industries increasingly rely on data-intensive applications.
4. Memory chips play a vital role in enhancing overall system performance and efficiency.
5. They support advancements in gaming, graphics, and AI, driving innovation across multiple technology sectors.

4. With suitable examples, comment on the role of innovation in sustaining growth in the semiconductor sector.

1. Continuous innovation in chip design leads to enhanced performance and energy efficiency, e.g., advanced GPU technologies.
2. Development of AI-optimized chips demonstrates how innovation meets specific industry needs, encouraging growth.
3. Companies investing in R&D for next-gen semiconductors, like NVIDIA with AI chips, set industry benchmarks.
4. Innovations in manufacturing processes, such as 3D chip stacking, improve production efficiency and reduce costs.
5. Collaboration between tech firms and research institutes accelerates innovation, ensuring the industry stays competitive.