As the semiconductor policy transitions into its second phase, known as Semicon 2.0, the initial phase has already made notable strides by raising awareness about market potential, workforce scalability, and deep engineering talent. This has led to significant investments and policy reforms in semiconductor manufacturing. Now, with the spotlight shifting to execution, it is vital to formulate a robust strategy, effective execution plan, and a passionate commitment to succeed in this highly competitive field. In the coming years, India should strive to establish at least two semiconductor companies among the global top 10 and become self-sufficient in critical infrastructure areas such as power, communications, space, and defense.
To achieve these ambitious goals, India must carefully select the appropriate development model for its semiconductor industry. One approach is to support multinational companies (MNCs) that dominate the global semiconductor market. By backing these large, established firms through subsidies, India can help them strengthen their manufacturing operations and enhance their global competitiveness. It’s important to note that this model, similar to the IT services model, would also open up the Indian market to these global players.
Alternatively, India could adopt a different approach—the Taiwan model—wherein local MSMEs are empowered, creating a strong ecosystem that fuels the global semiconductor industry. This approach has proven successful in Taiwan, where thousands of MSMEs supported the creation of a robust semiconductor ecosystem and massive job creation. Given India’s deep talent pool, particularly in chip design, this model seems culturally aligned with India’s strengths.
The semiconductor industry, traditionally dominated by a few large players, has evolved into a vertically integrated ecosystem over the past 60 years. However, this dominance has led to an imbalance in profitability, forcing smaller companies to depend on government subsidies. For India, a smaller, more agile model that encourages experimentation could be more beneficial. This could involve setting up smaller, captive fabs for specific products or an integrated business model where product companies drive capacity creation, overcoming the issue of low utilization despite significant capital investments.
Another crucial area India should focus on is the establishment of fabless chip companies. Despite having a skilled workforce, India’s chip development efforts are hampered by a lack of experience and substantial monetary investments. While the government’s Design Linked Incentive (DLI) is a promising start, the long-term sustainability of the sector requires more partnerships with private players. Such collaborations would help transition software designs into market-ready products. The MSME sector, with capital investments in the range of ₹50 crore to ₹100 crore, can play a vital role in producing semiconductor equipment, consumables, and materials, contributing significantly to India’s GDP. Global players are keen to partner with Indian companies, creating substantial job opportunities in the process.
Unlike large MNCs that focus on higher profit margins to satisfy investors, MSMEs typically operate on thinner margins, ensuring that their earnings are reinvested into the local economy. Additionally, since semiconductor companies require more software engineers than chip designers, India’s advantage in software scalability is significant. In this regard, NASSCOM’s role could be instrumental in shaping the ‘Indian model’ of semiconductor development, driving innovation and economic growth.
