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Will India Become Leader In Semiconductor Chips? August 16 2023MARKET STRATEGY

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Today, let's discuss one of the most trending topics – "India's Semiconductor Dream." In this video, we'll delve into India's aspirations in this field, explore its current position in the semiconductor industry, and contemplate its future. We'll also examine how the government is supporting this industry's growth and the recent developments that offer hope for India's progress.

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Now, let's learn about semiconductor chips.

Significance of Semiconductor Chips

Semiconductor chips are essential components of electronic devices. They power many everyday electronics such as smartphones, digital cameras, cars, computers, TVs, refrigerators, washing machines, and ATMs. Looking at the bigger picture, semiconductor chips are used in countless products like trains, ATMs, electronic vehicles, medical equipment, batteries, sensors, and light emitters. Essentially, semiconductors form the foundation of today's digital world. With the growth of digital technologies, the semiconductor market is also witnessing significant expansion.

Estimated Market of the Semiconductor Industry

Due to the rising demand for semiconductors in consumer electronics and automobiles, it's projected that India's semiconductor market could reach USD 55 billion by 2026, growing at a CAGR of 20% from 2022 to 2026. This growth is more than 1.5 times the current market size of USD 34 billion in FY 2023.

These statistics indicate that the semiconductor industry is rapidly advancing. India is making continuous efforts to establish its presence in this growing industry. As a result, India, which currently relies heavily on semiconductor chip imports, aspires to become a top leader in the sector.

India's Dependency on Imports

Currently, India heavily depends on imports for semiconductor chips. The country imports approximately USD 24 billion worth of semiconductors, mainly from Taiwan, China, Korea, and Vietnam.

In terms of market share, although Taiwan and South Korea are geographically small, they collectively control nearly 50% of the global chip market. Taiwan is the undisputed global leader in raw semiconductor manufacturing, followed by South Korea. These nations' largest customers are the United States and China. Interestingly, China imports 40% of its chip requirements from these two countries, controlling 5% of the world's semiconductor market. Despite this, China possesses the largest deposit of materials used in chip production.

Conversely, the United States and some European nations are exclusive producers of the hardware used in chip manufacturing.

India's Current Position

Presently, India lacks a significant presence on the global chip manufacturing map. While India has engineering talent, it lacks domestic chip manufacturing capabilities. At the moment, India accounts for only 1% of global semiconductor trade.

However, India has a considerable opportunity, particularly as global companies seek alternatives to China. The Indian government is committed to developing India's semiconductor ecosystem and making the country self-reliant in this sector.

India's Journey into the Semiconductor Industry

With a forward-looking approach, the Indian government is promoting the growth of the semiconductor industry, aiming to reduce imports and support local manufacturing.

To achieve this, in December 2021, the government announced a 76,000 crore rupee incentive plan to attract foreign companies to establish a chip manufacturing ecosystem in India.

The government also declared a 50% financial assistance scheme for technology companies to promote the setup of semiconductor manufacturing plants in India. This incentive provides companies with subsidized rates for land, energy, electricity, and more.

The government's efforts to develop the semiconductor industry include initiatives such as the National Policy on Electronics, the Production Linked Incentive (PLI) scheme, and the Semicon India Programme.

Recent developments at Semicon India 2023 provide hope that India's semiconductor dream is on the verge of realization.

Key Announcements at Semicon India 2023

US-based chipmaker Micron announced a USD 2.7 billion investment in India to develop a new assembly and test facility in Gujarat. This center will manufacture DRAM and NAND products, catering to domestic and international markets. This move is expected to create over 5,000 direct jobs and more than 15,000 indirect jobs in India.

Another US-based company, Advanced Micro Devices (AMD), known for semiconductor manufacturing, plans to invest USD 400 million in its Bangalore plant over the next five years. This investment aims to open a research center, potentially creating around 3,000 engineering jobs.

Furthermore, Anil Agarwal, Chairman of Vedanta, revealed that they have partnered with a prominent international company for a semiconductor manufacturing plant. A collaboration is underway, indicating Vedanta's strong entry into this field.

Taiwan-based company Foxconn is partnering with Taiwan Semiconductor Manufacturing Company (TSMC) to establish semiconductor fabrication units in India.

Previously, Foxconn and Vedanta had formed a joint venture to set up a semiconductor manufacturing unit in Gujarat. However, Foxconn withdrew from the project later on.

Notably, Japan also intends to partner with India in the semiconductor field, aiming to invest USD 35.9 billion in India by 2027.

In addition, the American company Silicon Power Group announced a USD 121.73 million investment in Orissa to establish a facility for manufacturing 150-millimeter silicon carbide, a crucial component for making semiconductors.

Conclusion

Looking at these investments, it's clear that India is making significant strides towards becoming a hub for semiconductor manufacturing.

In the coming years, India's semiconductor industry is poised for robust growth, driven by emerging technologies like 5G and Artificial Intelligence, as well as the increasing demand in the electric vehicle industry. The semiconductor industry will also play a significant role in the global economy.

This sector presents a lucrative investment opportunity, as evidenced by the list of semiconductor stocks. Tata Elxsi Ltd, ASM Technologies Ltd, Dixon Technologies (India) Ltd, SPEL Semiconductor Ltd, Moschip Technologies Ltd, Ruttonsha International Rectifier Ltd, HCL Technologies Ltd, MIC Electronics Ltd, Surana Telecom and Power Ltd, Vedanta Ltd, and Solex Energy Ltd are among the potential beneficiaries of the industry's growth.

With this, we conclude our video. Thank you for staying with us! Join us again next week for another exciting video. Until then, goodbye!



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