#20 Deeptech Insights - Unlocking the Potential: Exploring India's Booming Semiconductor Industry for Global Growth Opportunities
DeepTech Innovations Unlocked: This Week Our Expert News Analysis for Smarter Business and Investment Decisions
By Suraj Nair, DeepScience and Technology Investments at Ankur Capital - External Contributor
What is going on?
India is set to announce its first semiconductor fabrication facility (FAB) soon. In early 2021, Government of India asked for proposals to set up fab facilities in the country before unveiling the Program for Development of Semiconductors and Display Manufacturing Ecosystem in December 2021. The program has a total outlay of more than $10 billion. It offers 50% fiscal support on project cost for setting up semiconductor and display fabs, as well as 50% fiscal support on capital expenditure for setting up compound semiconductor, silicon photonics and sensor fabs. There is also an added Design Linked Incentive scheme with support for 50% of the expenditure.
What does it mean?
India has traditionally been a destination for innovation in the semiconductor market, with a very high quality engineering ecosystem in the country. Companies such as NVIDIA and Qualcomm have always seen a huge inflow of quality engineers from the country. Setting up a semiconductor fabrication plant, or ‘fab’, involves huge upfront investment (upwards of $1 billion), large operating expenses as well as vast quantities of water for the production-linked activities. This has pushed the Indian semiconductor industry to focus on only the R&D and design of very large scale integration (VLSI) products, embedded software and electronic design automation (EDA). The Indian semiconductor design market was valued at $27 billion in 2021 with more than 2000 chips designed annually.
However, rising geopolitical pressures and high import costs is forcing the country to think of domestic manufacturing of semiconductors. India can also be an alternative to the global markets reeling under inflation and price pressures as the country can provide quality R&D, designing as well as affordable manufacturing opportunities.
Why does it matter?
💸For markets: new business opportunities.
The semiconductor market size in India is expected to cross $55 billion by 2026 (8- 10% of the global market) driven by rising demand in smartphones and wearables, automotive components and computing and data storage. While most of the demand is currently met by imports, setting up of the manufacturing facilities can help in reducing the burden on imports and make India self-sufficient in the semiconductor chips market. Venture capital investments in India in this industry have traditionally been low, however globally close to $6 billion were invested into the sector in 2022, signaling a major push towards developing the next generation of products and services in the semiconductor industry.
Currently, there are more than 20 startups working in the semiconductor industry in India, predominantly working towards development of new chip designs. The startups are working towards Outsourced Semiconductor Assembly and Test (OSAT) and Assembly, Test, Marking, and Packaging (ATMP), which are then delivered to ATMP houses that assemble the chips and create electronic systems. Combined design, OSAT, and ATMP represent over 50 per cent of semiconductor supply chain revenue. Technology startups are emerging with their innovative technologies building semiconductor Fabless Accelerator Labs for power electronic transistors or chip design, IP design, design services, and chip design tools.
🧑🏿🤝🧑🏻For society: Meeting the growing demand for automotives, computation & data storage, and wireless communication.
Analysis by Mckinsey suggests that the semiconductor industry will be worth $1 trillion by the end of this decade. Around 70% of this demand will come from three major sectors: automotives including e-mobility and autonomous driving, computation and data storage for AI and machine learning applications as well as wireless communications through smartphone expansion and 5G network penetration. Meeting this huge demand will require setting up mega-factories which can produce semiconductor chips. While countries such as Japan have a thriving semiconductor manufacturing ecosystem, the growing demand presents opportunities for countries such as India to enter the race and build the next generation of semiconductor manufacturing ecosystem, not just based on silicon, but also target other materials such as Gallium Nitride.
🔮What’s next?
The National Nanofabrication Centre (NNfC) at the Centre for Nano Science and Engineering (CeNSE) is a CMOS/MEMS/NEMS- capable research facility located at the Indian Institute of Science (IISc), Bangalore. At the 2nd Semicon India Future Design Roadshow at IISc, the Ministry of State for Electronics and Information Technology (MeITY) announced the setting up of an industry led India Semiconductor Research Center which will be situated along with the current semiconductor laboratory in the Institute. The ministry also announced the launch of the ChipIN Centre at the Centre for Development of Advanced Computing (C-DAC), Bengaluru. This knowledge base coupled with manufacturing capabilities can place India in a unique formidable position over the next few years in the global semiconductor market.
Note: Read more about Ankur Capital and our work in deep science technologies here Ankur Capital.
✨ That’s all for today. Thanks for reading ! Stay tuned for our next article coming end of this week.
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