The semiconductor industry plays a massive role in driving economic progress in today’s tech-driven world. India with its ever-growing digital economy and a population of over 1.4 billion is in a great position to reinforce its status as a major player in the global landscape. Although India’s semiconductor ecosystem is still in the initial stages – currently forming only 3% of the overall market – the country is at a crucial point to seize the rising demand for chips across fields such as electronics, automotive, telecommunications, and AI.

Traditionally, India has been more of a consumer than a producer in the semiconductor space. A big chunk of its chip requirements – around 85% – is met by relying on imports from global markets. This heavy dependence brings about many security risks and blocks India’s chances of being tech independent. Recognising the need for domestic semiconductor manufacturing, the Indian government has embarked on an ambitious journey to establish the country as a global leader in chip production.

Market trends and drivers

The rising need for IoT, AI integration and wireless communication products is pushing the chip market. AI has turned into a game-changer. It is helping bring silicon chipsets into the automotive world while other areas such as big data analytics, facial recognition and machine learning are reshaping data setups. This enables semiconductor makers to create better components. AI, IoT, and wireless gadgets together are sparking huge global demand for fresh ideas in telecom. For example, take the single system on a chip (SoC) tech. It allows for flexible integration. Plus, IoT-enabled chipsets back many wireless communication systems, which broadens the reach of the semiconductor market.

On another note, the consumer electronics segment is growing exponentially. This growth stems from growing disposable income of consumers and their desire for fancier consumer goods. To keep up with the increasing demand, top companies such as Samsung and Apple are investing more money into research and development. In the previous year, Samsung Electronics made waves by announcing it would invest US$ 230 billion to set up the largest semiconductor manufacturing hub near Seoul, South Korea.

Segment insights

The semiconductor market can be split into two main segments: components and applications. While looking at components, the memory devices segment is likely to show the highest growth rate, according to Fortune Business insights. This is due to new technologies that are using negative AND (NAND) flash chips and dynamic random-access memory (DRAM), especially in areas like gaming, cloud computing and virtual reality (VR). Also, logic devices – such as application-specific signal processors (ASSPs) and application-specific integrated circuits (ASICs) – are poised to grow, as per the report of Fortune Business insights.

For applications, the networking and communications segment is expected to lead the way. The big reason is that more people want smartphones and smart devices these days. Additionally, data centres are in line to grab a big chunk of the market. It is all about e-commerce platforms growing and cloud computing taking off. Consumer electronics will still matter a lot, while the automotive sector should see moderate growth as cars get smarter.

Regional insights

The semiconductor supply chain is notably concentrated in specific regions. The US is a leader in chip design, contributing around 64% to the global market. In contrast, manufacturing and assembly activities are primarily located in Asia. Over the last 30 years, there has been a significant shift in manufacturing capacity towards Taiwan, South Korea, and China, which now hold over 85% of the global foundry market. This regional concentration has led to challenges in balancing supply and demand, especially exacerbated by the COVID-19 pandemic, highlighting the need for diversified and resilient supply chain strategies.

The Asia-Pacific (APAC) semiconductor market hit US$ 287.79 billion in 2023 and showed the best growth worldwide. This region is well set up to provide raw material and manufactured parts, thus maintaining a strong position in chip production. North America is buzzing with growth, mostly because of big investments in research and development. The European market also seems ready for steady growth due to investments in the telecommunications and automotive industries. Meanwhile, the Middle East and Africa are also gearing up for growth due to their demand for industrial electronics and high-end computing gadgets.

Current state of semiconductor manufacturing in India

The Indian semiconductor industry is now at its inflection point, with changes driven by initiatives from the government, strategic partnerships, and a robust local market. This change has the potential to place India on the independent semiconductor manufacturing map, reduce its dependency on imports, and improve its standing in the global electronics industry. Today, India manufactures less than a percent of the world's semiconductors and, for the majority, it is reliant on imports. The present semiconductor fabrication plants and assembly facilities are few, with little capacity, and are for niche markets. But the silver lining is that the Indian market for semiconductors is expected to cross US$ 100.2 billion by 2032 from US$ 34.3 billion in 2023.

Herein will lie increased demand via smartphones, consumer electronics, development in automotive technologies, automation, and healthcare. The government has put such programs as the Semiconductor Mission, PLI program, and Special Economic Zones in place to encourage investment, create manufacturing capacity, and build an enabling ecosystem for the growth of the industry.

Key companies committed to this cause are Tata Electronics, HCL Technologies, Dixon Technologies, and ASM Technologies. HCL Technologies is entering the field of semiconductor design and has recently opened a design centre in Hyderabad. Another company is Dixon Technologies which has entered an agreement with a Taiwanese company Foxconn to help set up a semiconductor assembly as well as testing plant in the country. An illustration here is an agreement between Tata Electronics and Taiwan's Powerchip Semiconductor Manufacturing Corp (PSMC).

Nevertheless, the industry faces hurdles such as a shortage of labour, limited access to finance and the need for a stable supply chain. These challenges also present opportunities for growth. If India focuses more on improving education and training, creating an investment environment, and developing a supply chain network, it can effectively address these challenges and become a major player in semiconductor manufacturing.

The data analysis would suggest that an opportunity exists in the memory device market because of the demand for high-capacity memory solutions for smartphones and other tech devices. It is growing due to the consumer electronics segment of the Indian semiconductor industry led by smartphones and smart home devices. Cities in western India such as Mumbai and Pune have been growing as centres for the design of chips and semiconductors and are drawing in investments and promoting innovation. The experts have anticipated growth in the semiconductor market at the pace of around 20.1% annually, thereby touching above the mark of US$ 100.2 billion by the closure of 2032. The Indian government has allocated US$ 10 billion towards its Semiconductor Mission to drive investments and propel India towards becoming a leading player in chip manufacturing. Looking ahead, import projections suggest they will surge past US$ 100 billion by 2025, with the aim to reach US$ 80 billion in exports by 2030, hoping that India will secure around 10% of semiconductor production by then. The industry finds itself at a moment brimming with opportunities, driven by government initiatives, partnerships, and a growing domestic market.

Future outlook

The Indian semiconductor market is forecasted to grow and reach US$ 100.2 billion by 2032 driven by the rise in consumer electronics, automotive applications, and government initiatives to attain self-reliance in semiconductor manufacturing. The opportunities arise in new growth vectors like artificial intelligence, 5G, Internet of Things, and emerging fields such as quantum computing. These remain the promising sectors in innovation and development, and hence strategic investments and collaboration with stakeholders is essential. The policy framework needs to be set, the infrastructure needs to be provided, and an enabling environment has to be created for both local and foreign players within the market if such potential is to be realized.

In the meantime, the industry front-runners have to seek out partnerships and focus on research and development, while academic institutions will align their curricula with the needs of the industry. A robust semiconductor ecosystem is critical to the development of India's economy and technology, which forms the core of the electronics and automobile industries. Given that, it is worth mentioning that when a semiconductor ecosystem gets established, it gradually reduces the import dependency and transforms India into a global leader. Therefore, the government, industry, and academia must come together on one platform and act in a much more determined manner to help India meet such growing semiconductor requirements. This kind of shared commitment will be crucial for the future of the industry as a whole; it will breed innovation and create a competitive edge on the global stage for the semiconductor industry.