Semi-Conductor Sector in India
Source: CNBC
GS III: Indian Economy
Overview
- News in Brief
- Indian Semi-conductor Industry
- The Challenges
Why in News?
At an event attended by Prime Minister Narendra Modi, the heads of some of the biggest semiconductor companies in the United States praised India’s technology industry as the world’s fifth-largest economy tries to establish itself as a worldwide chip powerhouse.
News in Brief
- The gathering featuring some of the largest chip companies in the world emphasizes India’s desire to compete with nations like the United States, Taiwan, and South Korea as a major semiconductor powerhouse.
- The Indian government has recently granted approval for Micron Technology Inc’s proposal to establish a semiconductor manufacturing plant in India.
- The undertaking involves a substantial investment of $2.75 billion, signaling the company’s strong commitment to expanding its operations in the region.
- In a revised scheme, the Ministry of Electronics and Information Technology (MeitY) has decided to restrict financial support for all chip production to a maximum of 50%.
- It is an effort to promote fair competition and ensure equitable distribution of resources in the industry.
Indian Semi-conductor Industry
- It is projected that in the year 2022, Indian consumers of chips will have to turn to foreign markets for their needs, as more than 90% of the Indian semiconductor market worth $27 billion will be sourced from outside the country.
- This trend is not unique to India, as other major markets, such as the US and EU, also heavily rely on imports for their semiconductor requirements.
- Taiwan and China have emerged as important sources for these markets, as they have a large concentration of semiconductor manufacturing facilities.
The Market
- The Indian semiconductor market is set to experience an impressive growth trajectory in the coming years.
- This increase in growth is expected to be driven by the rising semiconductor content across various industries like consumer
Photo by Vishnu Mohanan on Unsplash electronics, electric vehicles, and automobiles.
- Furthermore, the demand for smartphones is also set to soar, with an estimated one billion units expected to be sold in the country by 2026.
- The proliferation of 5G technology and the growing usage of IoT devices will also propel the adoption of smart devices.
- As a result, the Indian semiconductor industry is predicted to grow at a CAGR of 20% between 2022 and 2026, reaching a staggering USD 55 billion.
- These trends are not limited to India alone, as the global demand for semiconductors is also expected to see a significant uptick in the coming years due to technological advancements.
- India’s huge domestic market and other factors such as the chip market in India are looking promising, with the country’s large domestic market and various incentives being contributing factors to these incentives as reasons for optimism on the country’s chip market.
The Challenges
- India may be appealing in the packaging and testing of semiconductors, for example.
- India may have a comparatively unskilled labor force but large capital investment is needed for this.
- Companies that actually manufacture semiconductors, there haven’t been good technology partners for those trying to set up shop in India.
- For instance, Vedanta and Foxconn reportedly relied on technology from European semiconductor firm STMicroelectronics.
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