India can emerge as next chip hub if it overcomes fundamental constraints

Even though India is a key player in the sector, the scramble to set up scalable semiconductor fabrication units is still ongoing and remains an uphill task.

September 24, 2021 1:50 PM
Maruti Suzuki, Mahindra & mahindra, March auto salesFor representational purposes

In the transition to Industry 4.0, driven by the interplay of tech innovations, electronic chips lie at the heart of the digital transformation endeavor. During the past few years, there has been a spurt in the demand for electronics products, since today almost every other sector utilizes smart chips and electronic sensors. With the eventual mainstreaming of technologies such as AI, IoT, Machine Learning, Virtual Reality etc, the electronics industry ecosystem in India will grow manifold.

Vast Potential

India has made giant strides in semiconductors and embedded design along with electronics manufacturing and has the potential to become a world-class Innovation driver and manufacturing hub. Through a holistic mix of right incentives, multi-level stakeholder engagement, enabling policy mechanisms, liberalized frameworks and a conducive environment, there’s nothing that can hold India back from becoming a hotspot of electronics manufacturing. More than 90% of global semiconductor companies have their R&D centers in India, and as per the Department of Electronics and Information Technology, more than 2,000 chips are designed every year.

Multiple companies are operational in India in the domain of chip design and in building and assembling microprocessors and subsystems that cater to the government’s requirements. While there’s no dearth of dedicated and talented workforce in India, or that of tech capability and know-how, there are gaps that need to be plugged, and challenges that need to be overcome. Even though India is a key player in the sector, the scramble to set up scalable semiconductor fabrication units is still ongoing and remains an uphill task.

Roadblocks Ahead

While India has made significant progress in electronics component making and chip design, there’s a lot that needs to be done in order to become a semiconductor manufacturing hub. There are intrinsic limitations that needs to be overcome and challenges that need to be tackled head-on with a concrete strategy, critical support, concerted action and realistic, forward-looking policies.

Foremost prerequisite for semiconductor manufacturing is state-of-the-art infrastructure and circumventing resource crunch to ensure availability of abundant supply of fresh water and uninterrupted electric power.

By the virtue of being a late entrant in semiconductor manufacturing, India risks losing not only initial tactical edge but also cost-effectiveness that makes countries such as Vietnam and China popular manufacturing hubs. Other than the infrastructure impediments, the capex and opex for running a fabrication unit is exorbitant and would dissuade medium scale enterprises. Only with the recently declared government incentives, subsidies and other benefits can Indian players enter the fray, focus on capacity enhancement, and compete with the world’s best. Being up to date in tech and adopting advancements at mass scale is another crucial requirement that springs in. Semiconductor manufacturing requires replacing tech within a span of 3-4 years, which means companies are constantly at their heels to adopt recent innovations and discard what’s become obsolete.

Right Incentives

The government’s push towards creation of a robust, indigenous tech ecosystem and bootstrapped incubation is a step in the right direction. Along with the slew of incentives underlined in the 2019 National Policy on Electronics (NPE) and production-linked incentive (PLI) for sectors that utilize electronics, the sector can get rid of any structural redundancies and register spectacular growth in the future.

What’s needed to propel it further is to incubate fresh talent, infuse more vibrancy and scout for ingenious ideas. Fostering greater industry-academia collaboration and outreach would allow both to be in sync with latest trends and help them align their forces for the larger goal of national progress and fast-paced industrial growth.

In the post Covid era, the momentum that electronics demand has picked up will continue. India is on the cusp of 5G rollout that’s poised to be a game-changer across sectors, unleashing mega transformation and boosting demand for semiconductors. As per estimates, Indian smartphone makers would export phones worth more than $100 billion by 2025. To fully tap into this enormous opportunity, academia-industry connect, a conducive framework and concerted action needs to be reiterated.

Through a glocal approach (global orientation, but with a local focus and firm-footing), creative spark, harnessing pre-existing capability and focusing on innovation, India can rapidly expand its electronics design and manufacturing. Prioritizing semiconductor manufacturing, promoting local talent and startups, enhancing transparency, streamlining processes and constantly undertaking tech innovations, is the need of the hour and the pathway for India to become a hub of chip manufacturing and design.

Author: Sanjay Gupta, Vice President & India Managing Director, NXP Semiconductors

Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or its employees.

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