India braces up to compete in the ‘Semiconductor’ space
In 2021, Prime Minister Narendra Modi government had approved a Rs 76,000-crore India Semiconductor Mission (ISM) to showcase its commitment to establishing a stronghold in the USD 533 billion semiconductor market.
The Indian Semiconductor market was valued at USD 27,154 million in 2021 and is expected to grow at a healthy CAGR of 16 percent from 2019 to 2026 to reach USD 64,050 million in 2026 representing 22 percent of the total end-equipment revenues.
Karnataka, which introduced its semiconductor policy in 2008-2009, and the International Semiconductor Consortium (ISMC), based in Israel, signed a memorandum of understanding (MoU) earlier this year to invest a total of Rs 22,900 crore in the state to build the first and largest semiconductor chip manufacturing facility in the nation.
The Gujarat government recently announced the ‘Gujarat Semiconductor Policy 2022-2027’ to attract investment in the chip manufacturing sector in Gujarat under ISM.
A few weeks ago, Maharashtra has bagged a stupendous Rs 2.06 lakh-crore investment by Vedanta Group-Foxconn partnership in the sunrise semiconductors chips and display fabrications sector in Pune.
In a joint study by the India Electronics & Semiconductor Association (IESA) and Counterpoint Research, it was found that the cumulative revenue of India’s semiconductor component market will reach USD 300 billion between 2021 and 2026.
As per the report, titled ‘India Semiconductor Market Report, 2019-2026’, the country is on track to become the world’s second-largest market in terms of scale and growing demand for semiconductor components across a variety of industries and applications.
As per the data highlighted in this report, about 80 percent of total semiconductor component revenues come from IT (20 percent), industrial (9 percent), as well as mobile and wearables (51 percent). Apart from these, consumer electronics account for 7 percent of the revenues, followed by telecon (5 percent), automotive (5 percent), and aerospace & defence (3 percent).
The Global Semiconductor Equipment Market stood at USD 101.75 billion in 2021 and is expected to reach USD 142.53 billion in 2027, registering a CAGR of 4.08% during the forecast period. The global semiconductor industry is driven by the simultaneous growth of smartphones and other devices, such as advanced consumer electronics and automotive growth, revealed the recent Mordor Intelligence report.
These industries are driven by technology transitions, such as wireless technologies (5G) and artificial intelligence. Several factors, like a steady rise in demand for high-performance and low-cost semiconductors, drive the market with varying impacts over the short, medium, and long-term periods.
The deployment of 5G is expected to be one of the key factors facilitating this recovery. This is because the expansion of 5G will lead to the expansion of the wireless industry and enable innovations like augmented reality, mission-critical services, fixed wireless access, and the massive internet of things.
Furthermore, with the gradual transitions in the semiconductor industry, such as the miniaturization of nodes and wafer sizes, the demand for increasing wafer sizes for ultra-large-scale integration technology has fostered the growth of semiconductor equipment such as lithography equipment. Moreover, the fab manufacturers are shifting process monitors from bare wafers to production wafers due to the higher cost and inspection challenges faced by wafer miniaturization.
The global demand for 300mm silicon wafers is strong, whereas the demand for 200mm has also seen a surge in recent years. According to SEMI, 200mm fabs are gearing up to add over 600,000 wafers per month across the world during 2017–2022. Such trends are further expected to act as catalysts for the growth of the market studied.
In terms of semiconductor components, processor, memory and connectivity are the key components, contributing to 66 percent of the semiconductor revenue in 2021. Growth drivers include increasing digitalization, dependence on complex electronic systems to process huge amounts of data, and the rise of artificial intelligence.
Mobile and wearables, IT, and industrial are the leading segments in the Indian semiconductor industry, contributing around 80 percent of the revenue in 2021.
Consumer electronics is the fastest-growing segment among all, which is contributing to the market growth. The main driving force for this segment is the growth of smartphones, which is expected to rise with the rise in population. Mobile subscribers are also expected to grow from 5.1 billion in 2018 to 5.8 billion in 2025, as per GSM 2019 Report. Due to the miniaturization trend of mobile devices, there has been a rise in the semiconductor industry, which in return drives the market for the semiconductor equipment market.
In 2021, India’s end equipment market stood at USD 119 billion in terms of revenue. It is expected to grow at a CAGR of 19 PERCENT from 2021 to 2026. The Electronic System Design and Manufacturing (ESDM) sector in India will play a major role in the country’s overall growth, from sourcing components to design manufacturing.
The semiconductor industry in India is on a path to immense growth over the next few years to help India’s economy reach the next stage for both domestic consumption and exports.
While the country is becoming one of the largest consumers of electronic and semiconductor components, most components are imported, offering limited economic opportunities for the country.
Only 9 percent of India’s semiconductor components were locally sourced in 2021. The government’s recent ‘Make in India’ and PLI policies for semiconductors will help transform the landscape in the coming years to drive local sourcing trends. As a result, the local sourcing share is expected to grow to over 17 percent by 2026.
Industrial at 38 percent, automotive at 33 percent and aerospace & defence at 24 percent are the three sectors with the highest share of locally sourced components in 2021. By 2026, their share is expected to grow to 44 percent, 38 percent and 28 percent respectively.
To achieve India’s semiconductor vision, a robust, indigenous technology ecosystem must be developed. The focus must be renewed on incentivizing the design ecosystem in the country in a manner that may have cascading effects to help create a stronger foundation for design-led manufacturing and allied sectors.
