Macro Moves

Semiconductor Industry in India: The Future is Here

Created on 17 Aug 2022

Wraps up in 5 Min

Read by 2k people

Updated on 11 Sep 2022

"Everyone in the semiconductor industry, everyone in the technology industry, would benefit from more diversity in the business" - Lisa Su. 

By 2025, the semiconductor industry in India is expected to grow by USD 400 billion. That is because the demand for semiconductor goods is increasing with each passing day.

The two main factors that contribute to the growth in the semiconductor industry include the availability of talent and rising demand. According to the Indian semiconductor association, the market size of the semiconductor industry grew by a CAGR of 29.4% from 2015 - 2020.

With the concept of the Internet of Things (IoT) picking up pace, there is sustainable demand for semiconductors in the future. Department of Electronics and Information Technology (DeitY) statistics reveal that India designs around 2000 chips every year.

Keep reading to know more about the recent growth and the future of the semiconductor industry in India. 

What is Semiconductor & What is Its Significance? 

In simple terms, a semiconductor is an integrated circuit or a microchip. At its core, the semiconductor functions to conduct electricity within the two respective materials and offer insulation to the other two materials. A semiconductor has the properties of both conductor and insulator; it is an important part of electronics.

In today's world, most electronic items contain semiconductors as a vital element. Some of the most common devices include medical equipment, watches, mobiles, computers, laptops, and much more. Having semiconductors in electronic devices will help the device to be faster, highly efficient, and cheaper.

Semiconductor chips are the most integral part of the semiconductor and are necessary for modern electronics. Numerous household gadgets, ECG machines, automobiles, etc., use these chips today.

What was the Impact of Covid-19 on the Semiconductor Industry?

The pandemic of 2020 boosted the growth of the semiconductor industry in India. The changing needs of customer habits led to increased demand for electronic devices.

During the Covid-19 crisis, there was a steep rise in distance learning, entertainment, remote work, gaming, and Internet shopping. It was the main reason the demand for the semiconductor outperformed the production.

The automobile industries had to witness a great fall when the pandemic began. However, the need for chips for laptops, smartphones, and tablets saw a tremendous rise in the same year.

Many semiconductor companies had to face an imbalance between the growth and supply of the products. The largest fabricators decided to expand their capacity by introducing new fabrication facilities and satisfying the rising demands.

The industry shifted the production of items that were in high demand. And that is why the industry was able to minimise the negative effect of the pandemic.

As a result, the semiconductor industry saw a massive growth of 28-36% in 2021. Even though the pandemic decreased demand and supply for automobile makers, it proved to be a turning point for computer chips.

The demand for new and innovative next-generation products also began. Different semiconductor companies decided to invest in state-of-the-art technologies to build next-gen products. The strategic and systemic approach of the industry helped it to emerge stronger after the Covid-19 crisis. 

Back in 2019, there were nearly 300 billion chips sold in the world. That is around 40 chips per person on the planet.


Future Of Semiconductor Industry in India

India strives to be the global hub for semiconductor manufacturing, design, and technology development. The country's consumption of semiconductors will hit USD 80 million by 2026. Besides this, stats reveal that the market will grow by USD 110 million by the end of 2030.

There are multiple companies in India's semiconductor market, which we can categorise as fable firms and foundries. The fable firms significantly focus on the design aspect of the semiconductors. In contrast, the foundries pay extra attention to semiconductor manufacturing.

Even though India is taking steps to be the global leader in the semiconductor industry, some challenges hinder its growth. Below is the list of the top challenges faced by the semiconductor industry in India. 

Requirement of High Investments 

When it comes to manufacturing semiconductors or displays, there is a significant requirement for investment. As a technology-intensive and complex sector, it has high risk and high capital investments associated with it. India needs to gather adequate resources to cope with the rapid technological advances.

Minimal Fiscal Support from the Government

To increase investments, the Indian government should prioritise increasing fiscal support in this sector. There is minimal support at this time, making it hard to set up manufacturing capacities in the semiconductor industry.

Low Availability of Fabrication Capacities 

India has been dealing with a lack of fabrication (fab) capacities recently. Even though the country has adequate chip design talent, there is no proper chip fab capacity.
DRDO and ISRO have their fab foundries. However, they are merely for their requirements and are not equipped with the latest technologies. Hence, it is imperative to overcome the low availability of fab capacity to remain ahead in the global semiconductor industry. 

Inefficient Resources

Chip fabs demand a lot of things, including clean water, large allotments of land, a stable power supply, and, most importantly, a highly skilled workforce. It is challenging for India to gather all these resources and become a global leader.
Therefore, India must take the necessary and appropriate measures to ensure that it becomes a key player in the semiconductor industry.

The Bottom Line

There is no doubt that there is a high need for semiconductors in the future. The global demand for semiconductors is rising each year, which leads to a boost in the semiconductor industry in India. To meet the rising demands of the global world, India needs to put robust policy mechanisms in place.

According to a saying by Masayoshi Son, "People usually compare the computer to the head of the human being. I would say that hardware is the bone of the head, the skull. The semiconductor is the brain within the head. The software is the wisdom. And data is the knowledge."

This quote reveals the importance of semiconductors in the market. Thus, India must overcome the barriers and focus on becoming the leader in the semiconductor sector. The advantages of being the forerunner in the semiconductor industry are endless. Thus, India needs to create useful strategies that help it to meet the global supply requirements of semiconductors.

We hope the article helped you to understand the semiconductor industry. Do share your valuable thoughts in the comment section below. 

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