The Union Cabinet has approved a Memorandum of Cooperation (MoC) signed in July 2023 between India and Japan for Semiconductor Supply Chain Partnership.
The MoC, which is to be signed soon, lays the foundation for both Government-to-Government (G2G) and Business-to-Business (B2B) collaboration to explore opportunities for bolstering a resilient semiconductor supply chain, capitalising on each other’s strengths.
Semiconductors are a strategic technological asset in today’s globalised world. From car batteries, laptops, smartphones, household appliances, gaming consoles to everything in between, semiconductors are the fulcrum that powers today’s electronic world. A world without semiconductors would be drastically different.
India realises the tremendous importance of semiconductors and it also knows that becoming self-reliant in this sphere is now more important than ever. So, India is building international partnerships to create alternate microchip supply chains and to secure supplies for itself.
The India-Japan Digital Partnership (IJDP) was first launched during Prime Minister Narendra Modi’s visit to Japan in October 2018. The two countries agreed to further existing areas of cooperation focusing more on “Digital ICT Technologies”. Japan has become the second Quad partner after the US to sign an agreement with India for the joint development of the semiconductor ecosystem and maintain the resilience of its global supply chain.
A partnership with India would be beneficial for Japan, which has seen its share of the global semiconductor market fall from 50 per cent in the late 1980s to about 10 per cent now. Japan’s plan is to triple sales of chips made in the country to 15 trillion yen by 2030 by encouraging investment and offering various forms of support.
Partnering with India will help Japan tap into a large pool of microchip design and intellectual labour. Remember, a large portion of semiconductor design engineers globally are either Indian or Indian-origin. Also, chipmaking firms such as Intel and NVIDIA already have large facilities in India replete with talent. Japan, on the other hand, has a fast-ageing population and low birthrate. Japan faces a labour crunch, which is why teaming up with India to build resilient semiconductor supply chains is so crucial for Tokyo.
India’s low labour costs are another major advantage for the semiconductor industry. The cost of manufacturing semiconductors in India is significantly lower than in other countries, such as the United States and China. Add to that, the Modi government is actively providing funding for research and development, tax breaks for domestic production, and other incentives to attract foreign investment.
In fact, in 2021, the government launched the India Semiconductor Mission — a $10 billion initiative to build a vibrant semiconductor ecosystem that focuses on chip design, chip manufacturing and testing and packaging of semiconductors. The goal is to make India a $100 billion semiconductor market by 2025.
India’s semiconductor scene is buzzing with a lot of activity. Recently, India’s Semiconductor R&D Committee had submitted a report recommending the creation of the India Semiconductor Research Center (ISRC) at a cost of $8 billion over the next five years. The Ministry of Electronics and IT (MeitY) will start setting up India Semiconductor Research Centre (ISRC) from next year. Over the next four to five years, the ISRC aims to become a global leader in semiconductor research and innovation.
The rise of India’s semiconductor industry will have a profound impact on the country’s job market. With a slew of semiconductor fabrication units and research and development centres proposed for India, along with those already allocated, the nation is projected to witness a remarkable influx of at least one lakh semiconductor design engineers in the next five years. As a whole, the semiconductor industry in India is set to generate a demand for a staggering 12 lakh jobs.
Microchip Companies from Around the World Turn to India
Global manufacturers form a key component of India’s semiconductor mission, and attracting them to set up factories in the country remains a top focus.
American chipmaker Advanced Micro Devices (AMD) is going ahead with its $400 million investment to build its largest design centre at Bangalore and will use the Indian workforce across every aspect of its global portfolio as it sees the semiconductor engagement in the country expanding rapidly.
Micron Technology will invest more than $800 million in the establishment of a fresh semiconductor assembly and testing facility in Gujarat. Micron’s venture in Sanand represents a monumental milestone, supported by an estimated investment of $2.75 billion. The company is set to erect one of India’s most extensive Assembly, Testing, Marking, and Packaging (ATMP) facilities at Sanand GIDC, offering direct employment opportunities for 5,000 individuals and an additional 15,000 professionals indirectly.
A few days ago, the Indian Institute of Science (IISc), Bengaluru, and the American electronic design automation company Synopsys launched the India Semiconductor Workforce Development Programme (ISWDP). The programme aims to address the workforce shortage in the semiconductor sector. ISWDP will address varying complexities in the semiconductor industry, with key aspects including 2D/3D process and device simulations, semiconductor device fabrication, calibration, and training on experiment design and simulation.
Meanwhile, Foxconn Technology Group is collaborating with STMicroelectronics NV to submit a joint bid for constructing a semiconductor manufacturing plant in India. Foxconn’s $8 billion investment in India is expected to increase fivefold in the coming three years.
Another American semiconductor manufacturer, Qualcomm is partnering with India’s Tata Sons to enter the semiconductor packaging manufacturing sector. Tata Sons is set to establish a semiconductor facility under India’s Rs 76,000-crore semiconductor incentive scheme. As part of this collaboration, Qualcomm is prepared to source chips from local fabs should suppliers establish bases in India.
Having a semiconductor industry of its own will help India reduce its reliance on Taiwan, which faces a real threat of being invaded by China. An event of such proportions would throw the global semiconductor industry in disarray and deal a strategic blow to all countries, more so if Taiwanese semiconductor facilities fall into China’s hands.
India wants to get ahead of that curve, and so do countries like Japan and the United States. The plan is to not have semiconductor supply chains centred in or around China. India is among the very few countries that has design and innovation expertise, as well as a large labour force than can do wonders when given the right skill training.
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