Unleashing India's Semiconductor Powerhouse

India's Semiconductor Aspiration

India has a significant opportunity to achieve self-dependence in the semiconductor industry and establish a strong position in designing, developing, and manufacturing semiconductors. The government's supportive policies aim to create a favourable environment for both domestic and global players. The demand for semiconductors in India is expected to contribute to the growth of the overall $1.2 trillion global semiconductor and electronics parts manufacturing industry. Recent findings of lithium reserves bodes well for the upcoming industry 

Government Focus: Projects and PLI Incentives

Finance Minister Nirmala Sitharaman has been actively involved in the government's focus on the semiconductor industry. During a business conference in Tokyo, Minister Sitharaman highlighted India as an attractive destination for foreign investment, emphasising relaxed restrictions and a commitment to renewable energy and environmental goals.

In the budget for FY24, prepared under Minister Sitharaman's guidance, the government took into account the country's requirements over the next 25 years, with the aim of positioning India as a developed nation by 2047. As part of its efforts to boost domestic manufacturing, the government initially earmarked incentives worth ₹1.97 lakh crore under various production-linked incentive (PLI) schemes.

In addition, India has taken significant steps to improve the ease of doing business in the semiconductor sector. The country has abolished thousands of compliances, implemented transparent taxation, and digitized regulatory processes to create a seamless and efficient business environment.

COVID-19 Impact: Increased Focus on Semiconductors

During the Covid-19 pandemic, the semiconductor industry in India experienced both challenges and opportunities. The changing consumer habits, such as the increased reliance on distance learning, remote work, and online shopping, drove up the demand for electronic devices. This surge in demand for laptops, smartphones, and tablets outweighed the decline in the automotive sector, leading to significant growth of 28-36% in the semiconductor industry in 2021. Semiconductor companies adapted by prioritizing the production of high-demand items and expanding their manufacturing capabilities. This strategic approach helped the industry navigate the pandemic and emerge stronger while also fostering innovation and the development of next-generation products.

On a fascinating note, in 2019, approximately 300 billion chips were sold worldwide, equating to roughly 40 chips per person on the planet.

Market Size and Potential of Indian Startups

According to the 18th annual global semiconductor industry survey conducted by KPMG and the Global Semiconductor Alliance (GSA), which captured insights from 151 semiconductor executives regarding their outlook for the industry in 2023 and beyond, 81% of companies anticipate revenue growth in the upcoming year, with 50% expecting growth of over 10%. Although these figures are lower compared to the previous year's survey (95% and 68%, respectively), they are still promising considering the current economic conditions and concerns surrounding industry inventory levels.

Industry leaders are somewhat less optimistic about revenue growth, with 64% forecasting growth and 19% predicting growth exceeding 10%. These percentages have also decreased significantly from the previous year's survey (97% and 49%, respectively).

The semiconductor industry's significance has been suffering from recent supply shortages, emphasizing the critical role of tiny chips in the global economy. Indian startups hold significant potential within the semiconductor industry. The market size is expected to expand, driven by demand for semiconductors in computer and peripheral equipment, network and communications equipment manufacturing, and the automotive industry.

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