Chipping in

Sometime in 2025, semiconductor chips will start rolling off the factory of Micron Technology in Sanand, Gujarat. The company is a global leader in the production of computer memory and data storage, and its Gujarat facility is a full-fledged Assembly, Testing, Marking, and Packaging (ATMP) facility for semiconductor chips – and one of the first in India. The Tata Group is building a similar facility in Jagiroad, Assam. Currently, India's only chip-manufacturing facility is at the Semi-Conductor Laboratory (SCL) in Chandigarh. Bolstered by government policy and incentive schemes, more semiconductor-manufacturing facilities are being planned in India, with the Tata Group planning two in Gujarat.

The setting up of these large manufacturing facilities (Time to chip in) signals a transformation that's about to happen in India's semiconductor industry – from being an importer of semiconductor chips to a manufacturer.

India's chip imports rose by 92% over the past three years, according to a 2024 report by the Information Technology and Innovation Foundation (ITIF), an S&T policy think tank based in the United States. About 70% of India's electronics are imported from China (including Hong Kong), and another 13% from Singapore (bit.ly/ITIF). However, chip shortages during the COVID-19 pandemic exposed problems in the global semiconductor supply chains and made it clear that relying exclusively on overseas suppliers was a poor strategy. Since semiconductor is a strategically important industry, many countries are pushing for self-reliance in the production of chips.

The U.S. and the European Union have each recently passed legislation for making huge public investments in establishing new chip-production facilities. The Indian government, too, has announced a series of policies and mechanisms to provide a boost to the semiconductor industry, benefiting large chip manufacturers as well as young start-ups engaged in chip design.

For example, the Ministry of Electronics and Information Technology (MeitY) has started a Design Linked Incentive (DLI) Scheme to offer financial incentives as well as design infrastructure support across various stages of development and deployment of semiconductor design. Recently, it selected 12 start-ups to receive support. The DLI scheme is part of the overall  ₹1,000 crore ($10 billion) incentive scheme for the semiconductor ecosystem rolled out by the government in December 2021.

In addition to government support, availability of venture capital has also increased. Several science and deep tech-focused venture capital funds, such as Ankur Capital, Speciale Invest, Yali Capital and 8X Ventures, have invested in semiconductor start-ups. This is vastly different from 10 years ago when barely any local risk capital was available for such start-ups. "When a local VC is ready to write the money and ready to take the risk, there is definitely a change," says Ganapathy Subramaniam, Founding Managing Partner of Yali Capital. "There is a momentum now. It is... much better than 10 years back."

India's competitive advantage is its access to a talent pool skilled in all aspects of chip design. Large chip design multinationals such as Texas Instruments, Intel and AMD have run their design and R&D centres in India from the 1990s. India is now home to 20% of the world's chip-design talent, according to the ITIF report. With favourable policies, infrastructure and funding, some of these engineers are now expected to start their own companies.

Experienced professionals from large corporations are also providing support to young entrepreneurs in the area. For example, the Atal Incubation Center T-Hub (AIC T-Hub) in Hyderabad, which runs cohorts for semiconductor start-ups every year, is tapping into this network of corporates in many ways. "We have four offerings for them," says Rajesh Kumar Adla, CEO of AIC T-Hub. "One, if you have a venture arm, please invest; if you want to co-innovate, please co-innovate along with the start-up; if their product is useful for your business, or if you want a product, please become their customer; and lastly, if you love them over a period of time, please acquire them," he adds.

See also:

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