Is India the Next Semiconductor and Electronics Manufacturing Hub?

Article By : Chip 1 Exchange

India is poised to become a major player in global electronics and semiconductor manufacturing.

Recently, Chip 1 Media spent some time with Ashok Abishek, director of Quantumsoftech, to talk about India’s semiconductor and electronics industry. This article breaks down the points shared during this insightful episode and expounds further on them. Watch the full interview here.

Make in India, Made in India

In 2014, Prime Minister Narendra Modi launched the “Make in India. Made in India” initiative to stimulate the Indian economy.

Make in India: an initiative to attract foreign investments to start looking at India as a viable manufacturing hub by easing trade barriers in foreign policies. This initiative opens up the possibility of creating more jobs for a very heavily populated country like India, developing economic areas meant to serve for the development of these industries and hopefully strengthen the Rupee against the US dollar.

Made in India: another similar initiative aimed towards local products to give Indian-made items more competitive legs against their foreign counterparts. A campaign meant to bolster manufacturing in-house rather than outsourcing to other countries like China or Vietnam. This encouraged domestic manufacturers to maximize the country’s available local talent and resources to manufacture world-class products.

Because of these initiatives starting before the pandemic, many electronics companies have been pushing to manufacture locally – including the robust mobile and electric vehicle (EV) markets. This includes manufacturing for the short term and developing newer products locally. This means more electronic companies have been setting up R&D centers alongside manufacturing sites to boost future developed products.

Through government incentive programs, and with geopolitical tensions between the US and China still relatively high, more and more companies are looking to diversify their production locations, India becoming a popular choice for some. India is highly competent not just on the hardware side but also on the software, thus allowing for this rapidly growing Indian ecosystem.

How did India handle the chip shortage?

The chip shortage crippled various electronic manufacturers worldwide as supply became tighter and pandemic-related restrictions further pinched an already tight supply chain. Thus, with a sudden surge in demand for personal electronic devices, Indian prices increased. Many manufacturing sites were shut down for three to four months due to COVID restrictions. Various sectors experienced mass unemployment, a familiar scene across the rest of the world as an effect of this global pandemic. Similar to what happened to the rest of the world, students and professionals alike were suddenly thrust into the world of remote learning, collaboration, and communication.

To boost an ailing economy suffering from a pandemic, the Indian government rolled out a Production Linked Incentive (PLI) scheme in May 2021, targeting large-scale electronics manufacturers to boost and attract investments in mobile phone manufacturing and specified electronic components. This scheme provides 4-6% incentives on incremental sales of goods manufactured within India to eligible manufacturers for five years. This includes Indian sectors with surging demand such as solar, semiconductors/electronics, and automotive.

The growing Indian mobile market

Many companies such as Foxconn, Oppo, and Vivo, to name a few, have already started to manufacture in India. Online selling platform Flipkart also recently released its mobile phone variant –  the MarQ M3. Worldwide mobile giant Apple is already producing their popular iPhone 11 and iPhone 12 models through a Foxconn plant and the iPhone SE through Wistron facilities in India. Apple has already begun its trial production for the flagship iPhone 13 in the Foxconn plant near Chennai. Overall, India is considered the 2nd largest mobile handset manufacturer globally.

Major Indian mobile phone players such as Micromax and LAVA experienced significant price increases due to the chip shortage. But even more prominent mobile phone manufacturers had to delay releases of new variants as the pinched supply persisted across the world. Migration into 5G also affects the release of newer 4G models and has made any 3G model obsolete. As India prepares for its rollout by the end of this year, the need for 5G phones will be a lot higher. Another government-initiated PLI scheme for design-led manufacturing is also being planned, hoping to invigorate a robust ecosystem for 5G upon its rollout. If all these initiatives pay off, Indian consumers may enjoy 5G services by 2023. Indian telecoms firm Reliance Jio recently confirmed that they had completed their 5G coverage planning for 1,000 cities across India.

Overall, the mobile market being manufactured in India lists many international names such as Apple, Samsung, Google, Sony, HTC, and Nokia – to name a few, have joined the long list of several Indian and Chinese mobile phone manufacturers. Although Chinese brands still dominate the mobile space, these are becoming more and more “Made in India” due to the government’s push to diversify the nation’s manufacturing capacity.

The EV push in India

The Indian automotive industry has also been heavily pushing its drive towards electric vehicles. EV reporter shares that 3.29M electric vehicles were sold in 2021, a 168% increase over the previous year’s sales of 1.22M units sold. The Indian government is aiming to have a complete EV migration by 2024. The market is seeing growth in the Indian ecosystem as they boast a CAGR growth of 33.7% from 2014 to 2022 and is even seen to grow to 36% by 2025. The Indian automotive industry is currently the 5th largest globally and is being forecasted to break into the 3rd by the year 2030.

Manufacturers such as Foxconn have now started developing their EV solutions and will be manufactured in India. Local India car makers Mahindra and Tata Motors are both already manufacturing electric vehicles themselves. South Korean company Hyundai, the 2nd largest automobile manufacturer in India, invests $530M to launch six EV models in India by 2028. Oppo, a known mobile phone manufacturer, is also planning to release its line of electric vehicles by 2024, to be joined by RealMe and OnePlus. All are currently planning and developing their capacity to make this a reality.

As fuel costs are skyrocketing due to the ongoing Russia-Ukraine war, having an infrastructure ready to embrace electric vehicles is in dire need. However, fully rolling out without an EV- ready society is not without its challenges. Charging time, as an example, requires a considerable amount of time as it currently takes 3-4 hours to charge an electric vehicle up.

This means long-distance driving is not viable unless several charging stations are scattered throughout the roadways. Battery issues and charging infrastructures are prerequisites for India’s migration to EV a success. Nonetheless, the Indian government is headstrong in meeting this target with subsidies and tax incentives for consumers purchasing an electric vehicle.

A promising future

India is poised to become a major player in worldwide manufacturing. Ashok cited the capacity  for Indian talent to handle both software and hardware development, competitive labor prices And government support is a significant factor that will help India bolster their economy even more. Indian talent is now leaving less and less and no longer contributing to the Indian Brain Drain. Companies, including their lively startup ecosystem, have since been able to provide competitive salaries and attract vital talent to stay within India.

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