Electronics demand, policy support driving India's semiconductor play: BCG

The growing consumption of electronics in India, coupled with government support through incentives, and a shift in global semiconductor supply chains, are creating a strong opportunity for the country to build a domestic chip ecosystem, Boston Consulting Group (BCG) Managing Director and Partner Ankush Wadhera has said.

On the AI safety debate he said recent discussions around responsible AI development are important "to keep things in check", but does not see them slowing development or casting a shadow on the semiconductor sector demand.

"The recent discussions, conversations are good speed-breakers but they are not stop signs, so I don't see this stopping," he told PTI.

 

Wadhera expects the AI boom to continue driving demand for GPUs, compute and memory, and argues that the semiconductor-AI linkage will grow, not weaken.

He said a combination of multiple factors are driving investments beyond fabs and assembly units into the wider semiconductor value chain here, and described this "as the best time to be in semiconductor sector in India".

"We have one-fifth of the world's population, the world is getting increasingly digitalised, anything that we consume, has chips in it, somebody has to make these chips. So if you're going to consume as much as one-fifth of the world's chips, why should we not make them in India," he said.

Wadhera said India has made significant progress in building domestic semiconductor capacity, with many projects announced, and several facilities now into commercial production.

"In the current global scenario, India is as safe a haven as can be for anyone... So I think the fact that geopolitically we are a great place to be, if you look at the number of FTAs (free trade agreements) that we have around us, all the bilateral relations that we enjoy, and not just in terms of what is documented, but the soft power that we have become, I think that is a very strong tailwind for this supply chain-critical sector," he said.

He observed that strong domestic demand, coupled with the government's policy framework, is driving significant action in the semiconductor sector.

Wadhera credited ISM 1.0 for creating initial momentum, and noted that ISM 2.0 further expanded incentives, attracting global players as well as Indian companies to the sector.

As more fabs and OSATs move towards production, he said, this is expected to spur investment across the wider semiconductor ecosystem, including equipment, materials, gases, water, substrates and services.

Wadhera expects AI development to continue, and said rising demand for computing and data processing will drive semiconductor demand, particularly for GPUs and memory, with the AI-semiconductor link set to grow rapidly.

"It is, of course, important that we keep development in check so that it continues to work in the favour of human development, and not against it. And I think that's what the speed breakers have been about. If you talk about the relation between AI and semiconductors, that's only going to continue to grow and accelerate... the more compute power we need, the more data processing we want to do, the stronger the chips will become, the GPUs," he said.

India has stepped up efforts to establish a larger presence in the global semiconductor value chain, with the government seeking to move beyond chip assembly and testing, and build capabilities spanning design, fabrication, equipment and materials. Under the second phase of the semiconductor programme, the government has committed Rs 1.27 lakh crore to expand the domestic ecosystem and attract global investments.

As per government estimates nearly Rs 1 lakh crore in investor interest has been seen under the second phase of the semiconductor scheme. This month saw a slew of big-ticket announcements, including Applied Materials' USD 5 billion India plan through 2035, Lam Research's proposed Rs 10,000-crore investment, Tata Electronics' 363-acre vendor park at Dholera and Fujifilm's Rs 800-crore semiconductor materials plant.

Electronics and IT Minister Ashwini Vaishnaw recently said India wants its semiconductor capabilities to reach into everyday products such as cars, televisions and refrigerators, as well as critical power infrastructure in the coming years.

The minister said initial questions surrounding the nation's chip strategy have dissolved into massive global confidence, as evidenced by five semiconductor units in commercial production and several top CEOs finalising Indian partners and sites for expansion.

Vaishnaw had exuded confidence that youth-driven startups in India will produce homegrown Qualcomms and Intels, in the coming years.