How much is India's semiconductor market worth now, and what will it be in 5 years?

India’s semiconductor component market will see its cumulative revenues climb to $300 billion during 2021-2026, according to the ‘India Semiconductor Market Report, 2019-2026’, a joint research by the India Electronics & Semiconductor Association (IESA) and Counterpoint Research. IESA is the premier industry body representing the ESDM and intelligent electronics industry in India. It acts as a trusted knowledge partner to the central and state governments, helping devise policies and incentives for the industry to attract investments into India.

The comprehensive research on India’s semiconductor market focuses on the bottom-up modelling unit as well as revenue demand for semiconductor components covering the entire Bill of Materials (BoM) of multiple end-device and equipment categories across seven major sectors in India – mobile and wearables, IT, automotive, industrial, telecom, aerospace and defence, and consumer electronics – from domestic consumption, and export perspective. The report provides detailed recommendations, potential policies and a framework for building a robust domestic semiconductor ecosystem to boost local production and sourcing.

Ubiquitous chip
IESA CEO and President, Krishna Moorthy, said: “Before the end of this decade, there will be nothing that will not be touched by electronics and the ubiquitous ‘chip’. Be it fighting carbon emissions, renewable energy, food safety, or healthcare, the semiconductor chip will be all-pervasive. Imagine this – all children all over India get educated in virtual classrooms by the country’s best teachers. The chip makes it possible. Again, imagine everyone in the country gets quality healthcare and diagnostics done remotely. Medicines are delivered by drones at your doorstep, even in the farthest villages of India. The chip will make it possible, and we will see this in front of our eyes very soon. Let us make India the semiconductor nation.”

India is poised to be the second largest market in the world from the perspective of scale and growing demand for semiconductor components across several industries and applications. This demand is being pushed by the increasing pace of digital transformation among the country’s consumers, enterprises and public sector through the adoption of new technologies, from advanced connectivity to content consumption to the cloud. These cover smartphones, PCs, wearables, cloud data centers, Industry 4.0 applications, IoT, smart mobility, and advanced telecom and public utility infrastructure.

Mobile and wearables, IT and industrial sectors alone contributed to almost 80% of the semiconductor revenues in India in 2021. Commenting on the mobile and wearables industry, Tarun Pathak, Research Director at Counterpoint Research, said: “Mobile and wearables sector was the biggest contributor to India’s semiconductor industry in 2021. Mobile devices have become a primary tool for internet connectivity given that broadband and laptop/PC penetration remains low.

"In the last five years, the ‘consumer digital transformation’ has accelerated with the availability of cheap mobile Internet, and mobile devices have connected a big part of the Indian population. Also, the gradual shift from feature phones to smartphones has been generating increased proportions of advanced logic processors, memory, integrated controllers, sensors and other components. This will continue to drive the value of the semiconductor content in smartphones, which is still an under-penetrated segment in India, aided by the rise of wearables such as smartwatch and TWS.”

Commenting on potential opportunity in the mid-to-long term, Neil Shah, VP, Counterpoint Research, said: “The next big boom for semiconductor components will come from across sectors. However, the telecom sector with the advent of 5G and fiber network rollout will be a key catalyst in boosting the semiconductor components consumption. This consumption will not only come from the advanced semiconductor-heavy 5G and FTTH network infrastructure equipment, which will contribute to more than 14% of the total semiconductor consumption in 2026, but also from the highly capable AI-driven 5G endpoints, from smartphones, tablets, PCs, connected cars, industrial robotics to private networks.

"Also, ongoing efforts to embrace cleaner and greener vehicles (electric vehicles) will provide an impetus for the automobile industry to adopt advanced technologies, which in turn will boost the demand for semiconductor components in India. Consumer electronics, industrial, and mobile and wearables will be the other key industries for the growth of the semiconductor market in India. Further, this semiconductor demand will not only be driven by domestic consumption but also by the growing share of exports.”

ESDM has major role
In 2021, India’s end equipment market stood at $119 billion in terms of revenue. It is expected to grow at a CAGR of 19% from 2021 to 2026. The Electronic System Design and Manufacturing (ESDM) sector in India will play a major role in the country’s overall growth, from sourcing components to design manufacturing. The semiconductor industry in India is on a path to immense growth over the next few years to help India’s economy reach the next stage for both domestic consumption and exports.

While the country is becoming one of the largest consumers of electronic and semiconductor components, most components are imported, offering limited economic opportunities for the country. Currently, only 9% of this semiconductor requirement is met locally.

The demand for semiconductors is growing astronomically worldwide. However, multiple factors, including the pandemic and global geopolitical events, have heavily impacted the manufacturing of the components. This research is aimed at analyzing the market situation, manufacturing supply chain, and prospects for India as a premier manufacturing destination not only for finished goods but also for semiconductor components.

While the local production is currently low, India has immense potential to become a leading semiconductor component supplier in the coming years, provided the talent pool and resources are utilized correctly. The government’s initiatives, from ‘Make in India’ to Production Linked Incentive (PLI), will help accelerate this journey but will need some additional reforms to increase local manufacturing and sourcing of semiconductor components. If this is done, the semiconductor market can be a major contributor to economic growth, and India’s push to become a $5-trillion economy.

Sunil G. Acharya, VP, IESA, said: “Semiconductors will be inside everything intelligent. India is becoming a tech-centered growth story with advancing technologies and innovation being integral to democratizing access. The semiconductor study will play a major role in India’s growth. A large, young population, combined with an increased focus on digitalization, advancing skill levels, growing manufacturing and foreign investment traction will take India’s semiconductor industry to the next level in the coming years.”

Commenting on the current stage of local manufacturing, Ms. Shivani Parashar, Research Analyst, Counterpoint Research, said: “To achieve India’s semiconductor vision, a robust and indigenous technology ecosystem will be required to build on the existing policy foundation through PLI-like schemes. Renewed focus is needed for incentivizing the country’s design ecosystem in a manner that helps create a stronger foundation for design-led manufacturing and allied sectors, be it for local consumption or exports. This strategy will transform the landscape in the coming years to drive local sourcing trends. The share of local sourcing is expected to grow to over 17% by 2026. This translates into a six-fold rise in potential locally-sourced semiconductor revenues.”

Anurag Awasthi, IESA VP (Public Policy, Government and Corporate Relations), noted: “From safety razors to space shuttles, everything will be powered by the chip. Let us ensure our chips are not down in the world of tomorrow! Keeping this as an aim, MeitY is working further towards making India one of the next technology powerhouses, especially in a pandemic-struck world where there has been a realization of the need for more flexible and diverse supply chain ecosystems. The government is keen to leverage India’s existing strengths in mobile manufacturing, software and start-up hubs for other critical industries in the ESDM sector.”

Ms. Priya Joseph, Research Analyst at Counterpoint Research added: “Government policies, including PLI, New Electronics Policy, 2019, Electronics Manufacturing Clusters, and Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS), are all being equipped to boost domestic design, manufacturing and assembly. To help drive more initiatives under the themes of Make in India and Digital India, the government, in its last budget, pushed the total allocation to $936.2 million.

"This step not only aims to incentivize India-based manufacturing, but also catalyze investments in the sector to support job creation, ease of doing business, import reduction and export promotion.”