India to invest $30 bn into semiconductor supply chain, tech sector

India is planning to spend $30 billion to overhaul its tech sector and develop a semiconductor supply chain in view of the projected rise in demand for the crucial component during the coming years.

The investment is meant to boost domestic production of semiconductors, display, advanced chemicals, networking and telecom equipment, batteries and electronics, Gourangalal Das, Indian envoy to Taiwan, says in a recent interview with Nikkei. Notably, India has launched production-linked incentive (PLI) schemes to encourage domestic manufacturing of these products.

Emphasising that India’s chip demand is growing at nearly twice the global rate each year, Das says, “By 2030, India semiconductor demand will reach $110 billion. So by that time, it will be over 10% of global demand.”

"We need some assurance that our demand for semiconductors is not held hostage to the vagaries of supply chains — something that we saw during the pandemic," he adds.

Das said that India's $30 billion investment plan is primarily focussed on developing a complete supply chain ecosystem. Around $10 billion of this planned investment will go toward two chip facilities and two display plants. About $7 billion will be allocated to the electronics industry, including manufacturing giants like iPhone assemblers Foxconn and Pegatron. The remaining $13 billion will be reserved for "affiliated services like telecom, networking, solar photovoltaic, advanced chemistry and battery cells," he adds.

The Indian diplomat stated that the country is planning to focus on more “mature” chips, unlike the U.S. and the European Union, which are planning to invite chip producers with the latest technologies at their disposal. This mature category of chips include the ones developed on the relatively less advanced 65-nanometer to 28-nanometer production technologies and are have a wider usage across segments as connectivity chips, display drivers, controller chips for electronics products, and electric vehicles.

Along with the massive domestic market, India also has a substantial pool of engineers, which will help the country attract foreign investors and overhaul the local electronics industry, Das says.

He added that India is open to collaborations with Taiwanese tech players who have semiconductor, display and electronics manufacturing expertise. Taiwan happens to be a crucial location in semiconductor manufacturing, with several significant players in the segment based there.

As for India, the one early entrant is iPhone assembler Foxconn, which has partnered with Indian mineral conglomerate Vedanta to build a semiconductor plant in the country.

Das also talked about the young tech talent in the country, which can supplement the overhaul plan for the tech industry. The country has a huge pool of "young talent" and is still enjoying a "demographic dividend" that could last till 2050 even as many East Asian countries are already facing population declines, he adds.

Das underlined that India has a number of key advantages even though it lacks a chip supply chain like the U.S., EU or Japan. In addition to its large number of engineers, there are natural resources for metals, gas and chemicals that are crucial for semiconductor manufacturing.

"Even though India has not gone into the semiconductor [industry] in a big way, it has all the associated industrial capabilities, which can be tweaked a little bit or upgraded a little bit to meet the demands," Das says.