On September 27, India’s Prime Minister Narendra Modi met the Tata Sons and Taiwan-based Powerchip Semiconductor Manufacturing Company (PSMC) management staff to debate the prospects of semiconductor manufacturing initiatives in India. Just a few days earlier than that, throughout his go to to the US, Modi urged prime tech firms within the U.S. to discover India as a vacation spot for manufacturing and innovation. Throughout Modi’s go to, India and the US additionally reached an settlement to work collectively on establishing a semiconductor fabrication plant in India.

Earlier in August, in his Independence Day speech, Modi known as for India to change into a world chief in semiconductor manufacturing. On the Semicon India 2024 summit, Modi reiterated India’s aspirations to change into a semiconductor hub. Clearly, India is making systematic efforts to determine itself as a frontrunner within the semiconductor sector. 

The favorable geoeconomic atmosphere marked by de-risking as a result of China-U.S. commerce tensions and sturdy home demand for digital merchandise presents India with a superb alternative to cooperate with overseas companions to change into a key node within the world semiconductor provide chain.

Modi’s go to to Singapore from September 4 to five turns into vital on this context. His first journey to the Southeast Asian area in his third time period, which additionally included a cease in Brunei, introduced substantive positive aspects. The go to noticed the elevation of the India-Singapore relationship to a complete strategic partnership, together with the signing of 4 agreements in semiconductors, digital applied sciences, well being cooperation, and talent growth. The spotlight of the go to was a Memorandum of Understanding (MoU) between the 2 sides within the semiconductor sector, which goals to bolster cooperation between India and Singapore. It might assist strengthen India’s burgeoning semiconductor trade by facilitating the entry of Singaporean semiconductor firms and associated provide chains in India.

Regardless of being a small city-state, Singapore is without doubt one of the main gamers within the world semiconductor trade. In accordance with the Singapore authorities, the semiconductor trade contributes round 7-8 % to the nation’s GDP. Singapore’s semiconductor trade accounts for 11 % of the worldwide semiconductor market, 5 % of world wafer fabrication capability, and 20 % of world semiconductor tools manufacturing. 

Furthermore, Singapore’s well-established semiconductor ecosystem consists of a number of famend firms – 9 of the world’s prime 15 semiconductor firms function in Singapore – and as per the Singaporean authorities, these firms are eager to take part within the progress of India’s semiconductor trade. 

The Singapore authorities’s business-friendly insurance policies facilitate investments within the semiconductor trade, leading to a thriving job market within the manufacturing sector in an in any other case service-dependent economic system. Subsequently, amid the China-U.S. competitors, Singapore has been perceived as a secure guess for de-risking and bettering provide chain resilience. 

Nevertheless, the rising price of manufacturing is forcing semiconductor firms to maneuver up within the worth chain and diversify labor-intensive operations out of Singapore. As an example, the UTAC Group, a semiconductor take a look at and meeting companies supplier, has moved its handbook and technologically dated operations from Singapore to Thailand. Notably, semiconductor firms in Singapore face extreme land and labor limitations, and their enlargement in India – with plentiful land and expert labor – can ameliorate this downside. 

India’s newest try and change into a key node within the semiconductor manufacturing ecosystem started within the post-pandemic interval. Provide chain disruptions as a result of COVID-19 pandemic and China-U.S. commerce tensions turned the Indian authorities’s consideration again to growing a semiconductor manufacturing ecosystem within the nation after a number of failed makes an attempt prior to now. What was totally different on this try was that it aimed toward concurrently constructing all of the important levels of the semiconductor provide chain. The Indian authorities outlined this in December 2021, when it laid down a $10 billion complete program – comprising 4 schemes protecting totally different levels of the semiconductor provide chain – to develop the semiconductor manufacturing ecosystem in India. 

This system intends to lure overseas firms by offering capital subsidies (from each central and provincial governments) to make investments in India’s semiconductor manufacturing trade. The provincial governments have additionally positively obtained this program. The Maharashtra state authorities accredited a $10 billion semiconductor fabrication unit by the Adani Group and an Israeli agency, Tower Semiconductor. A number of overseas firms (Micron, PSMC, Kaynes, and so forth.) have invested in numerous levels of the semiconductor provide chain, both alone or as a three way partnership with an Indian agency. 

Moreover, the federal government additionally established an impartial division often called India Semiconductor Mission (ISM) to bolster India’s semiconductor ecosystem. In March 2024, Modi claimed that ISM is poised to see enormous progress within the subsequent 5 years. 

In March 2024, the federal government made some revisions to the unique program for the semiconductor trade. The modified program goals to offer a 50 % subsidy for all node sizes, in comparison with a 50 % subsidy for modern nodes (28 nm or decrease) and 30-40 % for trailing-edge nodes (above 28 nm as much as 65 nm) within the authentic program. Additional, the modification paves the best way for upfront capital disbursal – earlier than manufacturing begins – in comparison with capital disbursal solely as soon as the manufacturing begins. By way of these modifications, the Indian authorities has acknowledged that it desires to start out its semiconductor journey from the decrease finish (trailing-edge nodes) and climb up (modern nodes), reflecting the federal government’s seriousness in attracting overseas investments. 

India can be partnering with different main semiconductor powers to develop the trade at dwelling by attracting overseas investments. In March 2023, India signed an MoU with the US on establishing a semiconductor provide chain. Comparable agreements have been signed with the European Union and Japan. 

India’s journey to change into a semiconductor hub will seemingly face stern manpower challenges, amongst others. A latest report asserted that India is anticipated to face a scarcity of 250,000-300,000 professionals throughout the varied verticals of the semiconductor trade by 2027. The India Electronics and Semiconductor Affiliation (IESA) plans to ship a few of its workforce to Singapore for semiconductor coaching. Nevertheless, the flexibility of the federal government to equip overseas industries with a talented workforce in massive numbers stays to be seen. 

The MoUs with Singapore, Taiwan, and the U.S. can enable India to leverage investments that it has made within the semiconductor trade together with sturdy home demand for digital and electrical merchandise. The federal government’s capability to create a business-friendly atmosphere for semiconductor firms will decide the tempo of India’s journey to change into a world chief in semiconductor manufacturing.