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India strives to become the world’s new semiconductor hub

The global chip giants are betting big on India. In September 2022, Foxconn (Taiwan, China) and Vedanta (India) cooperated to establish a semiconductor manufacturing plant in Dholera, Gujarat. With an investment capital of 19.5 billion USD, this project is expected to come into operation in 2024.

Meanwhile, several other chip manufacturing giants from around the world world.

Semiconductor companies such as TSMC and Powerchip (Taiwan), IGSS Ventures and ISMC (Singapore), and Renesas Electronics (Japan) are all said to have plans to build factories in India.

In addition, US companies such as AMD and Intel are also looking to set up their factories in the country through their partners. Micron Technology, an American semiconductor equipment manufacturer, is also planning to invest more than $41 million to build a new manufacturing plant in Hyderabad, Telangana.

According to a survey by the Indian Electronics & Semiconductor Association (IESA) and Counterpoint Research, the country’s semiconductor business will total $300 billion in revenue by 2026.

World - India strives to become the world's new semiconductor hub

In 2014, Prime Minister Narendra Modi’s government announced the Make in India strategy to encourage foreign companies to manufacture their products in India. Photo: NDTV

Seize opportunities

Prime Minister Narendra Modi’s administration is trying to promote India as a favorable location for chip companies at a time when US restrictions are hampering China’s semiconductor ambitions.

According to industry analysts, US-imposed sanctions and trade restrictions are slowing China’s giant leap to becoming a semiconductor superpower, giving India the opportune moment to do so. ambition to become an alternative chip manufacturing center.

Amid growing geopolitical tensions between the US and China, the Indian government has been trying to promote the country as a place where semiconductor companies can invest to avoid any entanglement. political issues that could harm them.

The Indian government is not only looking to attract major chipmakers from China, but is also trying to encourage supporting industries to set up operations there, a government official said, speaking on condition of anonymity.

“Foxconn is reducing capacity in China from 95% to 75%. That 20% difference could flow into India and that’s a significant amount of money,” the official said.

India’s information technology ministry is also in discussions with semiconductor manufacturers to invest in India as chipmaking businesses increasingly turn to the South Asian country.

With the goal of turning India into a manufacturing hub, in 2021, the government of this country announced the invest worth about 10 billion USD to develop areas such as the domestic semiconductor manufacturing ecosystem.

The government also plans to modernize the semiconductor laboratory in Punjab, which has not been able to reach its full potential after a crippling fire in 1989.

Market Outlook

Not only the Indian government but also private companies from abroad are also very optimistic about the potential to become India’s chip manufacturing hub.

“India has huge potential and we have a very good opportunity to develop the manufacturing industry in this country. India is geographically very important from a market access point of view as it is a promising economy with many skilled personnel,” said Anku Jain, Managing Director of MediaTek’s India branch, The world’s fourth largest wireless semiconductor company is headquartered in Taiwan (China).

World - India strives to become the world's new semiconductor hub (Figure 2).

Foxconn and Vedanta have cooperated to establish a semiconductor manufacturing plant in India with an investment of 19.5 billion USD. Photo: Bloomberg

According to Jain, India is an important talent hub, and some reports suggest that 20-25% of the utopian design skills globally come from this country. “This is the right time for India to accelerate the establishment of production facilities or chip factories in the country,” Jain said.

However, private sector players are somewhat more realistic about the challenges that exist in making India a global hub for chip manufacturing.

“The trade restrictions imposed by the US on Chinese semiconductor companies may not directly benefit India right away,” said K Krishna Moorthy, President of India Electronics & Semiconductor Association. immediately, but more importantly, the geopolitical waves are now in our favor. We have seen electronics manufacturers move some facilities to India.”

While optimistic about the prospects of Indian semiconductor production in the current geopolitical context, the companies also pointed out that there are many challenges to overcome.

“Weak infrastructure, skills gap in high-end manufacturing, policy and licensing from relevant authorities” will remain challenges for India in the short term, he said. Parv Sharma, senior analyst at technology market research firm Counterpoint Research.

However, Mr. Sharma believes that cheap labor, young population, large market for local consumption and geopolitical ties will be the factors driving India’s manufacturing growth..

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