India Emerging Semiconductor Manufacturing Hub With Mega Projects & Investments: Jefferies Report

New Delhi, Mar 17 (KNN) India is developing itself as a semiconductor hub due to favourable government policies, growing demand, low-cost production capabilities, and strategic linkages with Western nations, according to a recent report by Jefferies.

The report highlights fiscal incentives from the government, low manufacturing costs, a talented design workforce, and rising demand as advantageous factors helping the sector.

"We believe India has strong potential to replicate its manufacturing success in autos to semis, led by policy support, rising demand, low cost and strategic goodwill with the West," said the report.

It added that the country's aspirations to become a major player in semiconductor manufacturing are gaining significant momentum, with over USD 18 billion in investments already underway.

These investments span five key projects, including Tata Electronics' USD 11 billion chip fab with Taiwan's PSMC, set to begin operations in 2026. According to Jefferies' interaction with the government, India aims to quadruple electronics production to USD 500 billion by 2030.

The report notes that the Indian electronics sector is already experiencing rapid growth, driven by increasing incomes, digital adoption, and rising demand for electronic products.

In Financial Year 2024, India's electronics imports reached USD 60 billion, accounting for 25 percent of the country's trade deficit, second only to oil.

This has prompted the Indian government to take a bold stance on domestic electronics manufacturing, focusing on boosting production and reducing import dependency.

The government's significant policy push includes a USD 10 billion incentive program launched in 2021, aimed at covering around 50 percent of project costs for chip and display fabs, as well as testing facilities.

Certain states are offering additional incentives of up to 20 percent, bringing total fiscal support for these projects to an impressive 70 percent.

The results are already visible with five semiconductor-related projects involving a total investment of USD 18 billion under construction.

These projects are expected to create around 80,000 direct and indirect jobs, contributing to the growth of India's semiconductor ecosystem.

The report adds that India's efforts are focused on expanding the entire semiconductor supply chain, from chemicals and gases to components and equipment.

During an interaction with the credit rating agency, Minister of Railways and Electronics and IT, Ashwini Vaishnaw, highlighted the government's strong focus on building this complete ecosystem, leveraging India's design capabilities and attracting global players to the market.

While India's semiconductor industry is still in the early stages, it is strategically leveraging proven technologies rather than aiming to compete with the world's most advanced nodes. This approach mirrors the success India has seen in the automotive industry.

The report stated that in the 1980s, India faced significant challenges in starting auto manufacturing, but with the right policies and a growing domestic market, the country is now the fourth-largest producer of vehicles and an exporter of automobiles. The same blueprint could apply to the semiconductor sector.

However, the report also mentions challenges hindering development in the sector, such as an underdeveloped supply chain, limited manufacturing expertise, and global competition.

(KNN Bureau)