What can the entry of Reliance Industries in chip manufacturing mean for India?

Reliance Industries has begun exploring a foray into semiconductor manufacturing, a move that could address its supply chain needs and cater to growing chip demand in India, according to a Reuters report.

Several Indian companies, including Tata Elxsi Ltd, ASM Technologies Ltd, Dixon Technologies (India) Ltd, SPEL Semiconductor Ltd, Moschip Technologies Ltd, and HCL Technologies Ltd, are actively investing in the booming semiconductor industry of India.

Are these moves enough to make India a major player in the semiconductor industry?

India is poised to become a significant player in the global semiconductor industry if it capitalises on the increasing demand for semiconductors and strategic initiatives by both the government and private sector entities.

India, like the US and the European Union, relies heavily on semiconductor imports from China and Taiwan, leading to supply chain vulnerabilities. Factors such as the rapid adoption of 5G technology, the surge in cryptocurrency mining, and government-led digitisation efforts have driven semiconductor demand to new heights. Additionally, the industry is increasingly focused on building resilient systems to mitigate unforeseen disruptions, a lesson that major economies learnt during the pandemic.

The strained relations between the US and China have further emphasised the need for diversified semiconductor supply sources, making India an attractive destination for semiconductor manufacturing.

The Indian semiconductor market, valued at approximately $23.2 billion, is projected to reach $80.3 billion by 2028, with a compound annual growth rate (CAGR) of 17.10 per cent during this period. Financial resources are not a hindrance, with major players like Reliance Industries expressing interest in semiconductor manufacturing.

Given India’s booming and stable economy, foreign entities are planning to invest in India. Consequently, Taiwanese contract manufacturer Foxconn and French-Italian semiconductor firm STMicroelectronics were collaborating to establish a semiconductor plant in India, according to media reports.

Micron Technology announced, in July, that it is building a new assembly and test facility in Gujarat, addressing domestic and international market demands. Micron said that it would invest up to $825 million over the two phases of the project and would also create up to 5,000 new direct Micron jobs and 15,000 community jobs over the next several years.

Sahasra Semiconductor, part of India's Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), is set to commence commercial production of the first made-in-India memory chips in October this year.

Major US semiconductor chip design company Advanced Micro Devices (AMD) had plans to invest up to $400 million in India, with a focus on establishing its largest design facility in Bengaluru.

The government is actively supporting semiconductor manufacturing, with initiatives such as the modernisation of the Semiconductor Laboratory (SCL, Mohali) and the Odisha Semiconductor Manufacturing & Fabless Policy.

In July, media reports said that the HCL Group is considering entering the semiconductor sector and has proposed establishing an assembly, testing, marking, and packaging (ATMP) unit, with an estimated project cost of $200-300 million.

Additionally, the Centre for Development of Advanced Computing (C-DAC), in July, approved five applicants under the Design-Linked Incentive (DLI) Scheme, part of the Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India, offering financial incentives and design infrastructure support for semiconductor development over five years.

India possesses an exceptional pool of talent and finds itself at a pivotal juncture for rapid and efficient manufacturing growth. India’s intellectual prowess, determination, and formidable capabilities position it favourably to ascend as a premier global center for research and development. The country maintains a steadfast commitment to fortifying the semiconductor sector, a strategic move poised to catalyse the booming landscape of electronics manufacturing and innovation within the country.