In a pivotal moment for India’s technological landscape, Prime Minister Narendra Modi recently stated, "There is an old saying—let the chips fall where they may, meaning, let things be the way they are. But today’s young and aspirational India does not follow this motto. We believe in increasing the chips produced in India." This declaration marks a significant shift in the nation's approach to semiconductor manufacturing, an industry crucial to the modern economy.
The Indian government is taking significant strides to establish the country as a global hub for semiconductor production, recognising the strategic importance of this industry in the modern economy. With the increasing demand for electronic devices and the ongoing global semiconductor shortage, India is positioning itself to enhance its manufacturing capabilities, attract investments, and foster innovation in this critical sector.
One of the cornerstone initiatives of the Indian government is the India Semiconductor Mission, launched in December 2021. This ambitious program aims to create a robust semiconductor ecosystem within the country, focusing on both manufacturing and design capabilities. The mission seeks to attract investments exceeding $10 billion to establish semiconductor fabrication plants, also known as fabs, and assembly, testing, marking, and packaging facilities. By doing so, India aims to reduce its dependency on imports, ensuring a more resilient supply chain.
To further incentivise investment, the government has announced a comprehensive set of financial support measures. This includes offering capital expenditure subsidies to semiconductor companies that set up manufacturing facilities in India. By providing such incentives, the government aims to make India an attractive destination for both domestic and foreign investors. Major global players, including the likes of Intel, TSMC, and Samsung, are already eyeing opportunities in India, encouraged by the favourable policy environment.
In addition to financial incentives, the Indian government is also focusing on developing a skilled workforce to meet the growing demand for talent in the semiconductor sector. This involves collaborating with educational institutions to enhance curriculum and training programs that specialise in semiconductor technology. Initiatives to promote research and development in this field are also being emphasised, with the government investing in innovation hubs and technology parks that facilitate collaboration between academia and industry.
The push for semiconductor production is also part of India’s broader goal to become a leader in advanced manufacturing. To this end, the government is working to create a conducive environment for startups and small and medium enterprises (SMEs) within the semiconductor space. By fostering innovation and entrepreneurship, the government hopes to stimulate local manufacturing and reduce reliance on global supply chains.
Moreover, the Indian government is engaging in international collaborations to bolster its semiconductor capabilities. Partnerships with countries that have established semiconductor ecosystems, such as the United States, Japan, and South Korea, are being pursued. These collaborations are aimed at knowledge transfer, technology sharing, and access to global markets, further enhancing India's position in the semiconductor landscape.
The government’s commitment to semiconductor production is also reflected in its alignment with the Atmanirbhar Bharat (Self-Reliant India) initiative. This initiative seeks to boost domestic manufacturing across various sectors, including electronics and semiconductors, thereby promoting economic self-sufficiency and job creation.
The government is making concerted efforts to develop a vibrant semiconductor manufacturing ecosystem. Through strategic initiatives, financial incentives, workforce development, and international collaborations, India aims to become a key player in the global semiconductor market.
As the world increasingly relies on advanced technologies, India’s focus on semiconductor production not only promises economic growth but also enhances national security and technological sovereignty. With a clear vision and robust strategies in place, India is poised to emerge as a formidable force in the semiconductor industry in the coming years.
India’s Ambitious Plans
In a groundbreaking move, the Indian government approved the establishment of three new semiconductor manufacturing facilities on February 29, 2024. These facilities are part of the broader initiative called “Development of Semiconductors and Display Manufacturing Ecosystems in India,” aimed at making India a global hub for semiconductor manufacturing. The Prime Minister virtually inaugurated the projects on March 13, 2024, with expectations that construction will begin within the next 100 days.
These three units are expected to create around 20,000 direct jobs and an estimated 60,000 indirect jobs, significantly boosting the Indian economy.
The facilities include
Semiconductor Fab in Dholera, Gujarat: A collaboration between Tata Electronics Private Limited (TEPL) and Taiwan's Powerchip Semiconductor Manufacturing Corp (PSMC), this facility will be the first commercial semiconductor fabrication unit in India. With an investment of INR 9,100 billion (approximately US$109.71 billion), it aims to produce 50,000 wafer starts per month, focusing on high-performance computing chips and power management solutions for electric vehicles.
ATMP Unit in Morigaon, Assam: Tata Semiconductor Assembly and Test Pvt Ltd (TSAT) will invest INR 2,700 million (US$325.99 million) to set up this assembly, testing, marking, and packaging unit. The facility will develop indigenous semiconductor packaging technologies and is projected to handle 48 million units per day, serving sectors such as automotive and consumer electronics.
ATMP Unit for Specialised Chips in Sanand, Gujarat: In partnership with Renesas Electronics of Japan and Stars Microelectronics of Thailand, CG Power will establish a unit with an investment of INR 760 million (US$91.63 million). This facility will produce specialised chips for various applications, including industrial and automotive sectors, with a capacity of 15 million units per day.
Economic Implications
The establishment of these semiconductor facilities is expected to have a profound impact on India's economy. According to government estimates, the new units could directly create 20,000 high-tech jobs and indirectly lead to an additional 60,000 positions across various sectors. This job creation is crucial for a country with a young and growing workforce increasingly eager to engage in advanced technology sectors.
Moreover, the Indian government has significantly increased its budget allocation for semiconductor initiatives. The interim 2024 Union Budget saw a 130% increase, bringing the total to INR 690.3 million (US$83.28 million) for semiconductor and display manufacturing support. This funding is designed to incentivise companies to establish fabrication facilities and enhance research and development capabilities within the country.
One of the key features of this initiative is the fiscal incentive program, which offers up to 50% of project costs to companies setting up semiconductor fabs in India. This support extends to display fabs as well, ensuring that India remains competitive in the global market.
Raw Martial Availability
The availability of raw materials for semiconductor chips is crucial in the ever-evolving technology landscape. Semiconductor manufacturing relies on a variety of materials, including silicon, gallium, and indium, as well as rare earth metals like cobalt and tantalum. The supply chain for these materials has faced significant challenges, particularly highlighted by recent global events.
One major factor affecting the availability of raw materials is geopolitical tensions. For instance, countries that are major suppliers of rare earth elements often face trade restrictions or tariffs that can disrupt the supply chain. Additionally, the COVID-19 pandemic exposed vulnerabilities in global logistics, leading to delays and increased costs in material procurement.
Environmental regulations also play a role. The extraction and processing of raw materials can have significant environmental impacts, leading to stricter regulations that can limit production capacity. For example, mining operations must comply with environmental standards, which can delay projects and reduce output.
Furthermore, the rapidly increasing demand for semiconductors, driven by advancements in technologies such as artificial intelligence, 5G, and electric vehicles, has intensified the competition for these materials. As industries scramble to secure supplies, prices for key raw materials have risen, impacting the overall cost of semiconductor production.
To address these challenges, companies are exploring alternative materials and recycling methods to mitigate reliance on traditional sources. Investments in research and development are crucial for discovering new materials that can be used in semiconductor manufacturing, which can help ensure a more sustainable and resilient supply chain.
While the availability of raw materials for semiconductor chips is currently under pressure due to geopolitical, environmental, and market dynamics, ongoing innovation and strategic planning can help mitigate these challenges and secure a stable supply for the future.
Talent Crunch Amidst India's Semiconductor Investment Boom
India’s semiconductor industry is on the cusp of a significant transformation, fuelled by a wave of new investments and the government’s ambitious vision to position the country as a global chip manufacturing hub. Recently, the Indian government approved a staggering $15 billion in investments for the sector, with notable contributions from major players such as the Tata Group.
According to staffing firm Randstad, the semiconductor sector is set to witness a substantial increase in workforce demand, with projections indicating a need for 40,000 to 50,000 employees in 2024 alone. This marks a 25-30% rise compared to the previous year. Over the next five years, the industry anticipates creating between 800,000 to 1 million job openings, highlighting the growing importance of this sector in India's economy.
Yeshab Giri, Chief Commercial Officer of Operational Talent Solutions at Randstad India, emphasised the unprecedented demand for skilled professionals necessary to build the requisite infrastructure, industrial parks, testing systems, and research and development facilities. "The demand for talent in the sector has reached an all-time high," Giri stated, reflecting the urgency of addressing the talent gap.
Hiring trends are shifting significantly, with a marked increase in entry and mid-level positions across key regions such as Gujarat, Bengaluru, Telangana, Tamil Nadu, and Assam. Roles in high demand include sales positions, field application engineers, equipment service engineers, and purchase managers. As the industry continues to expand, there is an expected surge in recruitment for specialised roles in semiconductor chip design, fabrication, and assembly.
On the executive front, there is a consistent demand for VP and director-level positions in areas such as field engineering, operations management, and product innovation. This trend is particularly evident as global companies prepare to enter the Indian market, seeking experienced leaders to guide their operations.
Despite its late entry into the semiconductor arena, the Indian government is aggressively pursuing initiatives such as the India Semiconductor Mission to bolster the country’s standing in the global market. However, the sector faces a critical challenge: a pervasive talent shortage.
In response to this pressing issue, companies are broadening their hiring strategies. They are not only focusing on lateral and campus recruitment but are also looking to attract expatriates for leadership roles, particularly in technology. Murali Mohan, a partner at executive search firm ABC Consultants, noted the competitive salary landscape, stating that entry-level design engineers can expect salaries ranging from Rs 15-20 lakh, while top-tier talent can command upwards of Rs 2.5 crore, excluding additional incentives like restricted stock units and signing bonuses.
"The talent pool is scarce in semiconductor manufacturing and OSAT (Outsourced Semiconductor Assembly and Test), with most hiring concentrated within the 4 to 12 years’ experience range," Mohan remarked, underscoring the urgency for companies to secure skilled professionals.
Several companies are ramping up their hiring efforts. L&T Semiconductor Technologies (LTSCT) is on a mission to build a global team of semiconductor experts, aiming to position India as the first pure-play Integrated Circuit (IC) product multinational corporation focused on designing and delivering smart devices.
"Our hiring strategy for semiconductor talent is ambitious and growth-oriented. We plan to onboard over 350 professionals in India in 2024 and significantly expand our global team in the US, Europe, and Japan," said Sandeep Kumar, CEO of LTSCT. The company is leveraging various recruitment channels, including campus recruitment and lateral hiring, to attract both fresh graduates and seasoned professionals.
Similarly, US chipmaker AMD announced in July 2023 its intention to invest $400 million in India over the next five years, with plans to create 3,000 new engineering roles. The company is actively recruiting engineers from similar high-tech firms, partnering with academic institutions for fresh talent, and utilising employee referrals to fill these positions.
As India strives to establish itself as a dominant player in the semiconductor landscape, addressing the talent shortage will be crucial. With a growing demand for skilled professionals and significant investments pouring into the sector, the coming years could see India emerge as a key player in the global semiconductor supply chain.
The Importance of Semiconductors
Semiconductors are the backbone of contemporary electronics, playing a vital role in devices as varied as smartphones, computers, and even automobiles. As the global reliance on technology grows, so does the demand for semiconductors, which have become essential for advancements across sectors such as communications, healthcare, military systems, transportation, and clean energy.
Semiconductors are an essential component of electronic devices, enabling advances in communications, computing, healthcare, military systems, transportation, clean energy, and countless other applications. The semiconductor industry is characterised by a few dominant players, with Taiwan, South Korea, China, and the United States leading the way in production and innovation.
Taiwan stands out as the world's largest semiconductor manufacturer, with its companies, particularly Taiwan Semiconductor Manufacturing Company (TSMC), paving the way in advanced chip production. TSMC boasts a market capitalisation of over $737 billion and specialises in manufacturing high-performance chips for various applications. However, as the global landscape evolves, India is positioning itself as a burgeoning player in this critical sector.
Semiconductors are fundamental to the functioning of contemporary society, impacting various sectors and driving innovation. Their ability to enhance connectivity, improve efficiency, and enable advanced technologies makes them indispensable in our daily lives. As we move towards a more digital and interconnected future, the importance of semiconductors will only continue to grow, underscoring the need for investment in research, development, and manufacturing to ensure a sustainable and prosperous technological landscape.
Technology made large populations possible; large populations now make technology indispensable, said Joseph Wood Krutch once who was an American author, critic, and naturalist.
By Alok Sharma
(The content of this article reflects the views of writers and contributors, not necessarily those of the publisher and editor. All disputes are subject to the exclusive jurisdiction of competent courts and forums in Delhi/New Delhi only)
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