Can India Surge Ahead of China in Semiconductors?

In chip designing India is on par with China in terms of capability and the number of people participating in the ecosystem.

Both China and India are pushing to become self-reliant in the semiconductor space as they recognise the strategic importance of semiconductor manufacturing for technological advancement as well as economic growth. However, China is way ahead with USD 200 billion in investments in the last 20 years. Hence a comparison between these two countries displays a significant contrast; however, this scenario is poised to undergo a transformation in the near future.

Indian Union Minister Rajeev Chandrasekhar is of the opinion that despite spending billions of dollars in the last 20 years on semiconductors, China has failed. India, with investments of around USD 10 billion, can surge ahead of China in the coming years. “We will be in a position to achieve what even bigger countries—who have spent 10 times more money—have not been able to achieve in over 20 years. We have a big opportunity, at least in semiconductors, to surge ahead of China,” he told TOI.  

While the Minister does sound ambitious, the reality is India has a long way to go to catch up with China, but the tide is slowly turning. Despite numerous challenges, and setbacks, India is making progress and hence, it won’t be completely fair to write off the minister’s claims altogether as well. 

Playing to its strengths 

In June 2021, China’s daily chip production reached almost 1 billion units, showcasing its formidable manufacturing capacity. Drawing a manufacturing comparison at this juncture would not be equitable. But, India is on par with China when it comes to chip designing, according to Shashwath TR, chief executive and co-founder of Mindgrove Technologies. 

“When it comes to chip designing, India is on par with China in terms of capability and the number of people participating in the ecosystem. However, until recently, the two countries were structurally different in that while several Chinese design houses have their own chip designs, Indian players mainly provide design services. This has begun to change and will change further,” Shashwath told AIM.

India holds a significant position for international semiconductor firms due to its abundant pool of skilled semiconductor design engineers, constituting around 20% of the global workforce engaged in both collaborative global projects and independent work. Chip makers such as Intel, Qualcomm and Micron have already set up R&D hubs in the country, however, as a result, they also retain much of the Intellectual Property (IP) on the designs. 

To build an ecosystem required to support the industry, chip designing is a good starting point. A thriving chip ecosystem requires design competency and India already has an edge. Through a Design Linked Incentive (DLI) scheme, the Indian government plans to nurture and facilitate the growth of domestic companies involved in semiconductor design. 

As of now, more than 30 semiconductor design startups have been founded in India as part of this initiative, with five of them already benefiting from government support. The increasing number of designs corresponds to a growing pool of IPs attributed to India. Nevertheless, the country must enhance its IP laws to effectively accommodate and foster the research and innovation underway within its borders.

ATPs are important too

Recently, US-based chip manufacturer Micron became the first taker of the Government of India’s Production Linked Incentive (PLI) scheme- a USD 10 billion corpus aimed at promoting and incentivising the manufacturing of semiconductor chips and display fabs within the country. Micron is in the process of setting up an assembly testing and packaging (ATP) facility in Gujarat, India. While the quest to have fabs drags on, Shashwath believes assembly, testing and packaging (ATP) is a field in which India has capability due to our robust electronics manufacturing service (EMS) industry. 

“It is also a very valuable part of the supply chain. Establishing ATP facilities in the country will curtail supply delays and give us a significant edge in the delivery of finished products. Several players are setting up ATMP services, which should be encouraged much more. ATMP is also one of the highest job generators in this value chain. Once the ATMP plants are operational and settled, silicon foundries will follow. They are usually the last to get set up because the economics of the foundry are very hard to solve,” he added.

China too started its semiconductor journey by focusing on ATP and  Outsourced Semiconductor Assembly and Test (OSAT) facilities. Currently, China accounts for 38% of the global global share in the ATMP/OSAT business. Hence, a focus on ATP/ OSAT could be the right direction for India. Chandrasekhar too believes that once Micron comes, other companies will look at India favourably. 

“India’s demographic advantage and expanding domestic market offer lucrative prospects for both local and international semiconductor companies. India’s semiconductor journey is marked by rapid growth, positioning it for a competitive and impactful role alongside China,” Krishna Rangasayee, CEO and Founder, SiMa.ai, told AIM.

Long way to go

While India’s goal isn’t necessarily to directly compete with China but rather to achieve self-reliance, it’s evident that India has a considerable journey ahead to match China’s current position. It’s worth highlighting that China itself isn’t completely self-sufficient and has faced setbacks due to multiple US sanctions. However, for India to surpass China, it must address several challenges that lie ahead.

For instance, “Schemes and strategic investment in this regard would be of utmost help in the case of standards compliance. Given that we are effectively creating a new ecosystem in India, existing regulatory frameworks need to be constantly reviewed and tweaked appropriately to ensure that they do not curtail the growth and competitiveness of the semiconductor ecosystem,” Shashwath said.

Rangasayee too believes China’s investment and commitment to the semiconductor domain through R&D, a robust manufacturing infrastructure and a skilled labour force make them a major global player. The developments in this regard at India’s end have been promising. Besides the DLI scheme, Indian Prime Minister Narendra Modi, while speaking at the Semicon India 2023 event, said that around 300 colleges will start providing semiconductor education to its students. 

Hence collaboration, investment in innovation, skill honing, and business-friendly policies are India’s winning cards. “The journey might have its challenges, but with the right moves, we’re looking at a thriving Indian semiconductor landscape that can rival the best,” Rangasayee said.

Pritam Bordoloi
I have a keen interest in creative writing and artificial intelligence. As a journalist, I deep dive into the world of technology and analyse how it’s restructuring business models and reshaping society.

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