Favourable government policies, growing demand, low-cost production capabilities, and strategic linkages with the Western nations have led India to develop itself as a semiconductor hub, according to a recent report by Jefferies.
As per the report, fiscal incentives from the government, low manufacturing costs, a talented design workforce, and rising demand are advantageous factors, helping the sector.
"We believe India has strong potential to replicate its manufacturing success in autos to semis, led by policy support, rising demand, low cost and strategic goodwill with the West" said the report
The report added that the countries aspirations to become a major player in the semiconductor manufacturing is gaining significant momentum, with over USD 18 billion in investments already underway.
These investments are spread across five key projects, including Tata Electronics' USD 11 billion chip fab with Taiwan's PSMC, set to begin operations in 2026.
As per the Jefferies interaction with the government, it added that the Indian government aims to quadruple electronics production to USD 500 billion by 2030.
The report adds that the Indian electronics sector is already witnessing rapid growth, driven by increasing incomes, digital adoption, and a rising demand for electronic products.
In Financial Year (FY) 2024, India's electronics imports reached USD 60 billion, making up 25 per cent of the country's trade deficit, second only to oil.
This has prompted the Indian government to take a bold stance on domestic electronics manufacturing, focusing on boosting production and reducing the import dependency.
The government's significant policy push includes a USD 10 billion incentive program launched in 2021, aimed at covering around 50 percent of the project costs for chip and display fabs, as well as testing facilities. Certain states are offering additional incentives of up to 20 percent, bringing the total fiscal support for these projects to an impressive 70 percent.
The results are already visible: five semiconductor-related projects, involving a total investment of USD 18 billion, are under construction. These projects are expected to create around 80,000 direct and indirect jobs, contributing to the growth of India's semiconductor ecosystem, the report added.
The report adds that India's efforts are focused on expanding the entire semiconductor supply chain, from chemicals and gases to components and equipment.
During an interaction with the credit rating agency, the Minister of Railways and Electronics and IT, Ashwini Vaishnaw, highlighted the government's strong focus on building this complete ecosystem, leveraging India's design capabilities and attracting global players to the market.
The report adds that while India's semiconductor industry is still in the early stages, it is strategically leveraging proven technologies rather than aiming to compete with the world's most advanced nodes. This approach mirrors the success India has seen in the automotive industry.
The report stated that in the 1980s, India faced significant challenges in starting auto manufacturing, but with the right policies and a growing domestic market, the country is now the fourth-largest producer of vehicles and an exporter of automobiles. The same blueprint could apply to the semiconductor sector.
However, the report also mentions the challenges that are hindering the development in the sector such as underdeveloped supply chain, limited manufacturing expertise, and global competition.
(Sources: ANI)
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