India’s Prospects in the Global Semiconductor Manufacturing Race
SOURCE: Council on Foreign Relations
India’s goal of creating a successful semiconductor ecosystem hit a new milestone recently as the Israel-based International Semiconductor Consortium announced plans to begin construction on India’s first semiconductor fabrication plant as soon as February 2023. Indian conglomerate Vedanta and Taiwanese manufacturer FoxConn also recently invested $19.5 billion to build semiconductor and display production plants in the state of Gujarat and are expected to start construction in the next two and a half years. India has been investing in domestic semiconductor manufacturing to address its own semiconductor consumption and to gain access to one of the world’s most valuable technologies.
India’s goal is to become a world leader in the semiconductor industry. Domestic semiconductor consumption is expected to cross $80 billion in 2026, and policy makers/politicians have signaled the importance of the sector to India’s future, with Prime Minister Narendra Modi saying, “It is our collective aim to establish India as one of the key partners in global semiconductor supply chains.” Despite this attention from the top, however, India is unlikely to overcome its own shortcomings and make up the gap with the world’s major semiconductor manufacturers.
This is not India’s first foray into the semiconductor industry. In the mid-2000s, India was a serious contender as a site for an Intel chip plant, but the plan fell through after the government failed to introduce a semiconductor investment policy in time. India’s bureaucratic dysfunction during the Intel bid process deterred other investors from seriously considering India for many years. In 2019, the Modi administration renewed the country’s semiconductor efforts and launched the India Semiconductor Mission (ISM) as a part of its “Make in India” initiative. The ISM is a $10 billion incentive plan which extends fiscal support of up to 50 percent of a project’s cost to display and semiconductor fabricators. This investment plan is partly what drew attention from the International Semiconductor Consortium and Vedanta-FoxConn. Aside from these existing ventures, at least three other major investments and twenty other expressions of interest have been submitted to the Indian government since 2019.
