Source: Republic Business via MSN
India has made a significant leap in the global semiconductor manufacturing industry, recently ranking third in the backend manufacturing index. This achievement is a testament to the country’s growing presence in this critical sector, driven by strategic government initiatives and increased investments from major corporations. As the global demand for semiconductors continues to rise, India’s role in this ecosystem is becoming more prominent.
India’s Position in the Industry
Historically, India has been more of a consumer than a producer of semiconductors, relying heavily on imports to meet around 85% of its chip requirements. However, the country’s growing demand for chips across industries such as automotive, telecommunications, and artificial intelligence (AI) has spurred the government to focus on domestic production. India’s semiconductor industry currently forms about 3% of the global market but is poised to grow rapidly with an expected market value of $63 billion by 2026.
India’s ranking in the global semiconductor backend manufacturing index, primarily in chip assembly, testing, and packaging, highlights the nation’s strategic shift towards building a robust semiconductor ecosystem. The backend manufacturing process is a crucial part of the chip supply chain, where raw silicon is turned into a functional semiconductor product ready for use in electronics.
Government Initiatives and Investments
The Indian government has launched several programs to support semiconductor manufacturing, including the ‘Development of Semiconductors and Display Manufacturing Ecosystem’ program, which provides significant financial support. The government is offering up to 50% financial assistance to companies setting up semiconductor fabs and packaging units. In addition, it has secured over ₹1.5 trillion in investments for semiconductor manufacturing.
Key projects include the establishment of semiconductor fabrication plants (fabs) in Dholera, Gujarat, and Morigaon, Assam. These fabs, in collaboration with international partners such as Taiwan’s Powerchip Semiconductor Manufacturing Corp and Japan’s Renesas Electronics Corp, are expected to produce millions of chips annually for industries like electric vehicles and telecommunications.
Challenges and the Way Forward
Despite these advancements, India still faces challenges in becoming a global semiconductor hub. One significant hurdle is the lack of skilled labor required for advanced manufacturing. Although India accounts for 20% of the world’s semiconductor design talent, its workforce is still catching up in terms of expertise in fabrication and assembly processes. To address this, the government plans to train 85,000 professionals, including technicians, engineers, and R&D experts, over the coming years.
Another challenge is India’s focus on older technology nodes like 28 nm, while global leaders such as Taiwan Semiconductor Manufacturing Company (TSMC) are working on cutting-edge 3 nm chips. Nonetheless, India’s focus on building a full-stack ecosystem, from design to packaging, is a step in the right direction. The country’s partnerships with nations like Japan, Taiwan, and the U.S. are also crucial for securing critical resources and building technological capabilities.
Conclusion
India’s third-place ranking in the global backend manufacturing index is a promising sign of its growing influence in the tech industry. This achievement reflects India’s strategic shift from being a consumer to becoming a key player in the global supply chain. With significant investments, such as the ₹1.26 lakh crore dedicated to building fabrication units, the Indian government is laying the foundation for a robust domestic manufacturing ecosystem. Additionally, government initiatives like the ‘Semicon India Program,’ which offers up to 50% financial support for fabs and packaging units, are crucial to attracting international investors and partnerships. Collaborations with global industry giants, including Taiwan, Japan, and the U.S., are further strengthening India’s position.
However, to truly establish itself as a global tech hub, India must overcome several challenges. One of the major hurdles is the development of a highly skilled workforce. Despite India accounting for 20% of the world’s design talent, there is a gap in factory-floor expertise, especially in advanced manufacturing techniques. Moreover, the country needs to move beyond its current focus on older nodes like 28 nm and invest in cutting-edge technologies, such as 3 nm chips, to remain competitive with global leaders like Taiwan and South Korea. Addressing these challenges will be essential for India to sustain this growth, achieve technological autonomy, and secure its position as a leading manufacturer.
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