India's ambition to establish itself as a hub for semiconductor manufacturing is coming to fruition, backed by significant investments and strategic partnerships. With global reliance on semiconductors intensifying, the Indian government is ramping up efforts to bolster local production capabilities. Industry experts anticipate up to $30 billion worth of investment will flow to the semiconductor sector over the next three to five years. This shift not only aims to make India self-sufficient but also enhances its standing within global supply chains.
On September 4, 2024, the Maharashtra government greenlit four major projects collectively valued at Rs 1.17 lakh crore. A key component of this initiative is the semiconductor manufacturing facility to be established by Israel's Tower Semiconductor and India's Adani Group. Located in Panvel, Raigad district, the project will first kick off with a phase one investment of approximately Rs 58,763 crore, followed by Rs 25,184 crore during the second phase. When completed, it is projected to create around 15,000 jobs.
Prabhu Ram, Vice President at CyberMedia Research (CMR), highlights the importance of these investments, stating, "India's strategic investments aim to bolster its local manufacturing capabilities and promote its position within global supply chains. By ramping up production rates, India is poised to become a significant player in the semiconductor industry."
During Prime Minister Narendra Modi's recent visit to Singapore, both nations announced collaboration agreements, focusing on leveraging their complementary strengths. The partnership includes plans for government-led exchanges aimed at strengthening ecosystem development, workforce enhancement, and supply chain resilience.
At home, the Indian government is pushing forward too. The Union Cabinet has approved Kaynes Semicon Pvt Ltd's proposal to set up another semiconductor unit in Sanand, Gujarat. This facility carries an investment of Rs 3,300 crore and aims to produce up to 60 lakh chips per day. The groundwork for three major semi-conducting projects was laid by PM Modi back in March, with expectations for the semiconductor market to surge to $64 billion by 2026—a marked tripling from its size just three years ago.
All these developments come against the backdrop of India's broader economic ambitions. The economy has shown resilient growth patterns, with the recently released Q1 GDP numbers for FY25 indicating growth at 6.7%. Though this is lower than the 8.2% recorded the previous year, it’s still remarkable for the fastest-growing major economy globally.
Experts have analyzed the uneven growth across various sectors too. The agricultural sector, for example, only grew by 2% due to adverse climatic conditions, which had overshadowed government spending and investment efforts elsewhere. On the up side, the secondary sector is seeing solid growth, with manufacturing and construction activities stepping up significantly.
Private final consumption expenditure revealed notable improvement, by growing 7.4% during FY25, up from 3.9% just three months prior. This trend bodes well for local businesses and brands as the festival seasons approach, fueling expectations for heightened consumer spending.
Structural reforms also play key roles, particularly those focused on improving irrigation and addressing food inflation. Such measures could ease pressures on the agricultural sector and, in turn, influence interest rates favorably. A stable economic environment encourages private investments, ensuring growth encourages more investments across sectors.
The ambitious reforms aim to maintain the momentum toward achieving India's status as 'Viksit Bharat' (Developed India) by 2047. PM Modi has been vocal about the competition to deliver structural changes and reforms, especially concerning food inflation which continues to be concerning for many citizens. Highlighting the importance of government policy reform, analysts believe focusing on tech-driven advancements and workforce training will fill any gaps as India pushes for modernization.
Looking forward, the semiconductor strategy, alongside other economic initiatives, is expected to carve out opportunities for job creation, technological advancement, and sustainable economic growth. With these investments and strategic directions, India is surely on its way to creating protective barriers within its supply chains and ensuring resilience against global fluctuations.
So, as time rolls on, all eyes will be on these developments. Each investment, relationship, and sectorial change is part of India’s larger plan to position itself firmly on the global stage as not just another player but perhaps as the leader.
