The Semiconductor Industry Association (SIA) announced global semiconductor industry sales totaled $149.9 billion during the second quarter of 2024, an increase of 18.3% compared to the second quarter of 2023 and 6.5% more than the first quarter of 2024. 

India's Semiconductor Landscape: A Rapid Evolution

The India Electronics and Semiconductor Association predicts that India will consume approximately USD 27 billion worth of semiconductors in 2022, and this figure is expected to surge to USD 70 billion by 2026. This growth reflects the nation's significant progress in the electronic manufacturing sector, with the industry expanding from $30 billion to over $100 billion. Furthermore, the establishment of more than 210 mobile manufacturing units and a substantial increase in electronic manufacturing exports showcase India's strides in the global electronics market.

Israel's Tower Semiconductor and India's Adani Group have announced a joint investment of 839.47 billion rupees ($10 billion) for a semiconductor manufacturing project in Maharashtra. This major initiative reflects India's efforts to become a global chip manufacturing hub, aligning with Prime Minister Narendra Modi’s vision despite earlier challenges.

The Prime Minister, in his address at the 'Semicon India 2023' conclave in Gujarat, declared India's intention to emerge as a global hub for semiconductor and chip-making industry, signaling a strategic move towards self-reliance and technological prowess.

The Need for Semiconductor Manufacturing in India

• Import Reduction: India currently imports all its chips from a handful of countries, namely Taiwan, Singapore, Hong Kong, Thailand, and Vietnam. Establishing semiconductor manufacturing domestically would reduce dependency and fortify India's economic resilience.
• AtmaNirbharta: Domestic semiconductor production aligns with India's vision of self-reliance, diminishing reliance on imports, and fostering a robust export-oriented industry.
• Drivers of ICT Development: To harness the benefits of the fourth industrial revolution, India must grow its Information and Communications Technology (ICT) industry, with semiconductors playing a pivotal role in this advancement.
• National Security and Strategic Autonomy: Semiconductor chips are integral to critical infrastructure, impacting national security and strategic autonomy. By manufacturing these components domestically, India can bolster its strategic independence and mitigate vulnerabilities to supply chain disruptions.

Will India be able to transform into a semiconductor manufacturing hub?

Currently, the world's most advanced semiconductor manufacturing capacity, especially in nodes below 10 nanometers, is concentrated in South Korea (8%) and Taiwan (92%). Achieving semiconductor manufacturing hub status requires overcoming challenges such as the need for skilled labor, huge capital investment, and maintaining clean production environments.

Skilled Labor: Semiconductor production is intricate and demands highly skilled labor. The fabrication process involves 400-1400 complex steps, requiring specialized inputs and equipment. Cleanroom environments are crucial to prevent contamination.

Huge Capital Investment: The rapid evolution of chip designs necessitates continuous investment in acquiring newer technologies. Market leaders like TSMC exemplify this commitment, with plans to invest $100 billion in fabrication plants over the next three years.

Government Initiatives to Drive Semiconductor Manufacturing in India

The Indian government has taken decisive steps to boost semiconductor manufacturing:

• Semicon India Programme: This initiative aims to provide financial support to companies investing in semiconductors, display manufacturing, and the design ecosystem.
• Production-Linked Incentives: A $10 billion incentive plan has been approved to attract electronics manufacturers. It provides fiscal support for semiconductor fabs and display manufacturing, aiming to reduce reliance on Chinese supplies.
• India Semiconductor Mission (ISM): Established as an Independent Business Division, ISM focuses on driving long-term strategies for the semiconductor design ecosystem.
• SEWFAP: The Semiconductor Wafer FAB Acquisition Program assists Indian companies in acquiring semiconductor fabrication facilities outside India.
• Modified Special Incentive Package Scheme (M-SIPS): This scheme offers financial incentives for setting up new semiconductor manufacturing units, providing subsidies of up to 25% of capital expenditure.

Current Landscape and Demand in India Semiconductor Industry

Key Government Initiatives and Industry Collaborations

The 'Make in India' initiative, launched in 2014, aims to establish India as a global manufacturing hub. The Production Linked Incentive (PLI) scheme offers a $1.7 billion incentive package for semiconductor manufacturing facilities. Additional initiatives like Design Linked Incentive (DLI), Chips to Startup (C2S), and SPECS further support the industry.

Initiatives by Various Companies

In July 2023, American semiconductor players, including Micron Technology, Applied Materials, and Lam Research, announced substantial investments in India.

• Micron: Plans to invest up to US$825 million in its semiconductor assembly and test facility in Gujarat.
• Applied Materials: A US$400 million plan to create a campus for collaborative work in developing new chip-making kits.
• Lam Research: A commitment to train 60,000 engineers in India over ten years, contributing to India's semiconductor education and workforce development goals.

India and Japan’s Partnership

Japan, a key player in the global semiconductor industry, is deepening its ties with India through a significant strategic agreement. As the second Quad (Quadrilateral Security Dialogue) partner to formalize such a collaboration following the United States Japan is reinforcing its commitment to advancing the semiconductor sector in India. This partnership was formalized with a key agreement signed between Ashwini Vaishnaw, India’s Union Minister for Electronics and IT, and Yasutoshi Nishimura, Japan’s Minister of Economy, Trade and Industry.

Details of the Agreement:

1. Joint Development of Semiconductor Ecosystem: The agreement outlines a collaborative effort to enhance the semiconductor ecosystem in India. This includes fostering growth in the specialized chips sector and addressing the need for increased talent and semiconductor fabrication plants (fabs) in India.
2. Specialized Chips and Talent Development: The focus on specialized chips reflects a broader trend towards advanced and application-specific semiconductor solutions. To support this, there is an emphasis on developing skilled professionals and establishing semiconductor fabrication plants that are crucial for manufacturing these advanced components.
3. Exchange of Technical Knowledge and Research Collaboration: The collaboration will facilitate the exchange of technical knowledge and promote research initiatives between Indian and Japanese semiconductor industries. This exchange is crucial for staying at the cutting edge of semiconductor technology, fostering innovation, and improving manufacturing processes.

Impact on India’s Semiconductor Sector:

1. Government Support and International Partnerships: India’s semiconductor industry is receiving robust support from the government, which is crucial for its growth. International partnerships like the one with Japan enhance this support by bringing in additional expertise, resources, and investment.
2. Growing Domestic Demand: The increasing demand for semiconductor components in India is driven by a rapidly growing technology sector, including advancements in electronics, automotive, and communications. This domestic demand creates a favorable environment for expanding semiconductor production capabilities.
3. Potential for Remarkable Growth: With these strategic international partnerships, India’s semiconductor industry is positioned for significant growth. The country is expected to play a crucial role in global supply chains, contributing to the advancement of semiconductor technology and reshaping how the industry operates on a global scale.

Strategic Importance: The collaboration with Japan represents a critical step for India in becoming a key player in the global semiconductor arena. By enhancing its semiconductor ecosystem through international cooperation and investment, India is setting itself up to influence global supply chains and technological advancements in the semiconductor industry.

Apple’s decision to manufacture iPhone 16 series in India:

1. Diversification of Supply Chain:
   • Apple aims to reduce its reliance on China for iPhone production by expanding its manufacturing footprint in India, driven by the need to mitigate geopolitical and economic risks.
2. Government Support in India:
   • The move is supported by India’s Production Linked Incentive (PLI) scheme, which provides financial incentives for electronics manufacturing. This makes India an attractive destination for tech companies looking to expand production.
3. Partnerships with Major Suppliers:
   • Apple has partnered with manufacturing giants like Foxconn, Wistron, and Pegatron, which have established large-scale facilities in India to support the production of the iPhone 16 series.
4. Cost Efficiency:
   • Manufacturing in India allows Apple to lower production costs and potentially avoid import tariffs, making the iPhone more competitively priced in the domestic market.
5. Meeting Local Demand:
   • Increased production in India will help Apple meet the growing demand for iPhones in the country, one of the world’s fastest-growing smartphone markets.
6. Alignment with India’s "Make in India" Campaign:
   • Apple’s decision strengthens its commitment to India’s Make in India initiative, which encourages global companies to manufacture products domestically.
7. Supply Chain Risk Reduction:
   • By diversifying production locations, Apple reduces its risk from potential disruptions in China, ensuring a more resilient supply chain.

"China's Semiconductor Surge: Sales Jump 26.6% Amid US Export Restrictions"

In January, China’s semiconductor sales surged by 26.6% year-on-year, significantly outpacing growth in other regions and the global average. This robust increase, highlighted in a recent industry report, suggests that U.S. restrictions on China’s semiconductor industry have not been as effective as intended. According to the Semiconductor Industry Association (SIA), global semiconductor sales reached $47.6 billion in January, marking a 15.2% increase compared to the previous year. Within this global context, sales grew by 20.3% in the Americas, 12.8% in the Asia-Pacific region, but saw declines of 6.4% in Japan and 1.4% in Europe.

The impressive 26.6% growth in China’s semiconductor sector indicates that the U.S. clampdown, which includes restrictions on chip exports and investments, has not hindered China's semiconductor advancements. This growth underscores China’s progress in boosting its chip manufacturing capacity and achieving greater self-reliance in the industry. Data from China’s Ministry of Industry and Information Technology reveals that the country’s production of integrated circuits (ICs) in 2023 increased by 6.9% from the previous year, reaching 351.4 billion units. In contrast, China’s IC imports declined by 10.8% to 479.5 billion units, and the import value dropped by 15.4% to $349.4 billion, as reported by the General Administration of Customs.

This growth in domestic production and reduced dependence on imports reflect China’s successful efforts to develop its semiconductor industry despite international pressures. The rapid advancement highlights China’s commitment to becoming a major player in the global semiconductor market and achieving technological self-sufficiency.

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