India’s semiconductor moment will catapult its capabilities in global supply chains

As global industries seek to diversify their semiconductor supply chains, opportunity is staring India in the face. Although the Indian government may not have failed previously to make the country an attractive location for chip design and fabrication in the past, it is determined to make it happen now.

HFS believes India’s efforts could benefit global manufacturers and enterprise customers. However, to achieve this, India will need the help of its robust services industry.

Private and public partnerships are forming to educate, design, and drive semiconductor manufacturing and development in India

As India’s semiconductor ecosystem stands at an inflection point, Accenture organized an event—“Semicon Futurecast 2024—to explore the state of the ecosystem today, its challenges, and its opportunities. The event brought together  leaders from across the industry, academia, and government to discuss, collaborate, and partner. The commitment of all parties is crucial to turning India’s aspirations into actionable outcomes and delivering results that will benefit the country and its global customers.

This event leveraged the need for global companies to expand their supply chains while pursuing a China + 1 strategy. India, like many other Southeast Asian countries, is seeking both direct foreign investment and commercial investments from its most significant industries and private investors. This accelerates a strategy under which some firms already see results as India quickly emerges as a manufacturing hub across multiple industrial and high-tech sectors.

Semiconductor supply chain diversification presents a golden opportunity for India

Aggressively building a semiconductor manufacturing base is essential for India. Semiconductors are the engine driving modern technology, including nearly all of the technology products consumers and businesses use. Investing in the semiconductor industry brings chip suppliers closer to the OEMs and ODMs that will embed and ship finished products to global customers.

Investing in semiconductor capabilities is critical to keep pace with the genAI age

In the age of generative AI, the importance of semiconductors continues to explode. Supply chain disruptions during COVID-19 created shortages and led governments and enterprises to pursue a China + 1 strategy for manufacturing options. As HFS noted, political tensions between China and Taiwan, home to the world’s most advanced semiconductor manufacturing facilities, are a global concern. As companies look to diversify supply chains in a volatile geopolitical environment, India is one of the countries that stands to gain.

In 2021, the Indian government approved incentive schemes for display fabs, semiconductor fabs, chip packaging, and design with an initial overlay of Rs 76,000 crore (US $10.2 billion) to boost manufacturing in India. Under the plan, India’s government extended fiscal support for up to 50% of a project’s cost to eligible display and semiconductor fabricators.

The past few years have seen several companies investing in manufacturing setups in India. India’s Tata Group announced plans for semiconductor plants in the states of Gujarat and Assam. American chip maker Micron’s semiconductor plant in Sanand, Gujarat, is expected to be operational by the end of 2024. Increased demand for smaller chips is also expected in India, with domestic demand set to provide a solid demand base. The demand for semiconductor chips in India is poised for dramatic growth, with 60% of it, in value terms, expected to come from chips smaller than 10 nanometers (nm) by 2032, up from about 25% currently.

For global enterprises, investing in India’s emerging ecosystem helps reduce their supply chain geographic dependency. Government incentives help reduce input costs in a capital-intensive industry. They can also form joint ventures with local partners to ensure they have a foothold in a growing market.

The road ahead won’t be easy—building semiconductor assets is complex and will require partnerships with many companies not currently present in India

While semiconductors represent a great growth opportunity for India, there are numerous challenges to overcome for India to truly succeed. These include:

• Implementation: Establishing extensive, state-of-the-art semiconductor facilities is capital-intensive. It takes at least a few years for a plant to become operational, unlike chip development, which evolves at a much faster pace, and demand, which can be unpredictable. In addition, sourcing materials from numerous countries, dealing with logistical hurdles, and ensuring that announced plans come to fruition aren’t foregone conclusions.
• A complex supply chain: A variety of chip types are needed for a wide array of products, and the supply chain for each is likely to be different. The supply chain for semiconductors is inherently complex, with raw materials, manufacturing equipment, facilities, and talent from different parts of the world all needing to work together. With geopolitical tensions rising and supply chains constantly being upended, many challenges exist for semiconductor companies.
• Talent: The semiconductor industry is a niche field with many categories—chip design and development, fabrication, testing and assembly, and distribution. Each category requires specialized talent. Graduates entering the workforce must be well-equipped to learn the skills needed to deliver quickly. This requires greater collaboration between academia, government, and industry to ensure a steady supply of qualified workers to support an expanding industry.
• Demand: Creating demand for the chips manufactured in India will be challenging. Government incentives will help, but the companies must be globally competitive. The type of chips needed and their uses continue to evolve constantly. It will be vital for the Indian economy to continue growing and provide a solid demand base on which companies can rely.

Enterprises in the semiconductor space can take several steps to address these challenges. First, they must partner with local firms and work with the government to take advantage of offered incentives. Second, global semiconductor firms, including Intel, Qualcomm, TSMC, etc., can contribute to the knowledge needed to produce cutting-edge chips. Third, developing talent is essential. The government and its enterprise partners must invest in specialized training programs and collaborate with academic institutions to build a talent pipeline.

Accenture banks on acquisitions; looks to grow semiconductor practice in India

Accenture aims to be a leading player in this segment. At Semicon Futurecast, it showcased its M&A activity, adding to its capabilities and growing its list of clients. Several acquisitions are boosting its relevance in semiconductor design, a subcategory with the most significant supply chain potential. These acquisitions are helping Accenture grow its client base and capabilities:

• Excelmax Technologies (July 2024) is a semiconductor-based design services provider based in Bangalore, India. It provides custom silicon solutions used in consumer devices, data centers, AI, and computational platforms, enabling edge AI deployments to clients in the automotive, telecommunications, and high-tech industries.
• Cientra (July 2024) is a silicon design and engineering services company offering custom silicon solutions for global clients. Founded in 2015, Cientra is headquartered in New Jersey, U.S., with offices in Frankfurt, Germany, and Bangalore, Hyderabad and New Delhi, India. The company brings consulting expertise in embedded IoT and application-specific integrated circuit design and verification capabilities, which augments Accenture’s silicon design experience and further enhances its ability to help clients accelerate semiconductor innovation required to support growing data computing needs.

Accenture’s acquisitions and ambitions to grow its services in India signal that it sees demand coming from enterprise customers looking for custom solutions in the semiconductor field. It is not alone; Infosys and HCLTech both have a vested interest in this space and have many assets that can ensure diversification of solutions and support.

The Bottom Line: India is working to become a trusted alternative to China for enterprises looking to diversify their semiconductor supply chains.

India’s semiconductor push presents a strategic opportunity for manufacturers to diversify their supply chains and tap into a rapidly growing market. Enterprises must act now—partner locally, leverage government incentives, and build talent pipelines—to navigate the complexities and gain a foothold in this emerging ecosystem. Semiconductor companies globally should look to take advantage of the government incentives on offer to diversify their supply chains, and for other enterprises, the growing semiconductor ecosystem is an added advantage for companies with set-ups in India.