India’s proposed Rs 1.27 lakh crore Semicon 2.0 policy and the upcoming Mobile Phone Manufacturing Scheme (MPMS) are expected to position India as a global hub for electronics manufacturing. Brokerage firm Motilal Oswal said, “these initiatives will enhance supply chain resilience, boost technological innovation, and position India as a global hub for electronics manufacturing.”
Vrinda Kapoor, founder and CEO of Bharat Semi and 3rdiTech told Motilal Oswal that she believes that the new policies could help India reduce its dependence on imports and gradually narrow the gap with manufacturing leaders such as China and Taiwan. However,she added that India still has a long way to go before it can attract complete global supply chains.
“With India’s strong talent pool and investments in R&D, investments will start happening in semiconductor materials, specialty gases, module manufacturing, PCBs and other critical supply chain components,” Kapoor said.
What is Semicon 2.0? Policy Widens Focus Beyond Chip Manufacturing
Semicon 2.0 proposes incentives to develop the entire semiconductor ecosystem. It focuses not only for fabrication and packaging like the first phase but also for semiconductor materials, specialty gases, printed circuit boards (PCBs), modules and other key supply chain components.
The policy also introduces a dedicated research and development (R&D) pillar to support next-generation technologies such as advanced packaging and emerging fabrication technologies. It is also expected to encourage the creation of Indian electronics brands.
Local manufacturing key to India’s semiconductor push
The brokerage said India’s semiconductor ambitions cannot succeed unless every part of the value chain develops simultaneously.
Motilal Oswal said domestic fabrication plants need local chip design companies, while fabless firms require manufacturing, packaging and module ecosystems to commercialise their products.
Module manufacturing and PCB production is the biggest near-term investment opportunities because India still imports a large share of electronic modules despite assembling finished products domestically.
Recent government incentives have already encouraged companies such as Dixon Technologies and Kaynes Technology to expand module manufacturing, while opportunities are also emerging in PCBs, interconnects and other upstream components.
Focus should remain on mature chips
Motilal Oswal pointed out that India should first strengthen production of mature or legacy semiconductor nodes instead of directly competing with Taiwan and China in cutting-edge chip manufacturing.
Chips manufactured using 28-nanometre and larger process technologies continue to power automobiles, consumer appliances, laptops, surveillance equipment and industrial products.
Kapoor said India should build the foundation of its semiconductor ecosystem before targeting advanced manufacturing technologies. She added that India’s engineering talent could help shorten the development timeline, but moving too quickly would require significantly higher investments.
R&D and skilled talent remain critical
Motilal Oswal described the dedicated R&D pillar as one of the biggest additions under Semicon 2.0 because it extends support beyond academic institutions to private semiconductor companies.
The framework aims to help fabless startups commercialise products by providing funding support and improving market access.
Kapoor, however, said financial incentives alone would not make India globally competitive.
“India’s success will depend on building a deep pool of specialized talent across chip design, product architecture, validation and commercialization,” she said.
She added that multinational investments and joint ventures would play a key role in transferring technology and developing skilled manpower.
India will continue to rely on global technology
Despite India’s strength in semiconductor design, the country will continue to depend on global technology in both software and hardware for the foreseeable future, Motilal Oswal said.
Chip design software is dominated by Cadence and Synopsys, while advanced chip manufacturing equipment such as lithography systems is expected to remain import-dependent over the next five years because of high technological barriers.
Motilal Oswal said India can gradually strengthen the software-hardware ecosystem through sustained investment and closer collaboration between domestic semiconductor and software companies.
Memory chip prices may stay elevated
Motilal Oswal expects global memory chip prices to remain high for the next two to three years.
It said smartphone makers had squeezed supplier margins in previous years, discouraging memory manufacturers from expanding capacity. Since semiconductor fabrication plants typically take three to four years to become operational, companies such as Samsung, SK Hynix and Micron are still some years away from adding enough production capacity.
As a result, supply-demand balance in the memory market is unlikely to improve significantly in the near term.
Defence sector offers major localisation opportunity
Kapoor said defence electronics and surveillance systems offer one of the biggest opportunities for semiconductor localisation in India.
She said restrictions on Chinese surveillance equipment have already opened opportunities for Indian companies developing imaging sensors, vision processors and other semiconductor components.
Similar opportunities exist in avionics, communication systems, radar electronics and electronic warfare platforms, where national security priorities are driving demand for domestically developed technology.
Motilal Oswal positive on EMS sector
Motilal Oswal said the government’s initiatives are expected to improve supply chain resilience, encourage technological innovation and strengthen India’s position as a global electronics manufacturing hub.
The brokerage believes the Mobile Phone Manufacturing Scheme will improve customer stickiness and support margin expansion for electronics manufacturers, particularly Dixon Technologies.
It expects companies such as Dixon Technologies and Amber Enterprises to benefit from the upcoming scheme and has retained Dixon Technologies, Cyient DLM and Syrma SGS as its top picks in the electronics manufacturing services (EMS) sector.
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