Ambitions Revealed
In the midst of the U.S.-China semiconductor supremacy race, India is revealing its ambition to become a major base for the world semiconductor industry by replacing China. The Indian government has offered significant incentives to global semiconductor companies leading many to decide to invest in production in the country.
With Indian Prime Minister Narendra Modi’s visit to the United States shedding new light on the Indian economy, global semiconductor giants have recently shifted their investments to the Indian market, according to industry sources on July 5.
U.S. memory chipmaker Micron recently agreed to build a memory assembly and testing facility for DRAM and NAND flash in the western Indian state of Gujarat. The plant will cost a total of US$2.75 billion. Micron will break ground for the facility in August and begin to run it at the end of 2024. The Indian central government will pay 50 percent of the total investment and the state of Gujarat will pay 20 percent, attracting investment from Micron, one of the world’s three biggest memory semiconductor companies.
Applied Materials (AMAT), the world’s No. 1 supplier of semiconductor manufacturing equipment, also announced that it will build an engineering center in Bengaluru, India by investing US$400 million over four years. U.S.-based Lam Research will promote a semiconductor engineer training program to train 60,000 engineers in India.
Analog semiconductor specialist Microchip also recently announced a long-term investment of US$300 million in India. Microchip will invest in its existing facilities in Bengaluru and Chennai and a new R&D center in Hyderabad.
Global semiconductor giants are investing in India because of the Indian government’s full support. In order to successfully implement his "Made in India" policy, Prime Minister Modi has pledged that the Indian government will cover half the cost of setting up any new semiconductor fab with state governments contributing an additional 20 percent. The Indian government has set aside US$10 billion (US$13 trillion) in tax incentives as well.
The abundance of IT talent in India has also been encouraging foreign chipmakers to gravitate towards the country. Texas Instruments, Micron, and Intel have already been carrying out semiconductor design activities in India, designing more than 2,000 chips a year. The Information Technology Innovation Foundation (ITIF), a U.S. public policy think tank, said in its recently released “India Semiconductor Readiness Assessment Report” that India has produced 85,000 highly qualified engineers specializing in very large scale integration (VLSI) and embedded system design.
According to the report, India has more than 1,000 colleges and universities and 23 Indian Institutes of Technology (IITs). Engineers will be trained at master’s and doctoral levels at 120 Indian educational institutions over the next five years, forming a talent pool that will make India a “semiconductor talent powerhouse.”
The rapid growth of the consumer electronics, telecommunications and automotive industries in India creates opportunities in the 28-nanometer and beyond maturity process in India, according to the report. According to market research firm Counterpoint Research, the Indian semiconductor market is expected to reach a market value of more than US$64 billion by 2026. The report noted that with a local population of more than 1.4 billion, India has an attractive point in building manufacturing bases and diversifying supply chains thanks to India’s robust domestic market.
India has weaknesses too. The country’s weak infrastructure is cited as the biggest problem. In particular, the semiconductor industry operates 24/7, so securing power and water is essential.
However, the ITIF said, “The Indian federal government has made significant investments in the stability of power supply. Areas such as Dholera in Gujarat and Mysuru in Karnataka, where semiconductor clusters are being established, have seen significant improvements in water, sewerage, ports, airports, roads, and high-speed rail infrastructure in recent years.” India’s power generation capacity of 410 gigawatts (GW) is now the third largest in the world, with at least 172 GW reportedly coming from renewable energy sources.
Some analysts say that as a latecomer, India has a rugged road ahead of it by setting the bar high. “Some analysts say the Indian government is trying to make forays into highly advanced industries which countries such as Taiwan, Japan and the United States are already dominating,” the Financial Times said. India has been building up its capabilities in the semiconductor design industry, but it may face challenges, as it is considering entering semiconductor manufacturing, which is outside the chip design area.