India's semiconductor industry is experiencing growth but is hindered by significant challenges, as outlined in a recent Jefferies report.

The key issues identified include an underdeveloped supply chain, a shortage of specialized manufacturing talent, and intense global competition. Despite these obstacles, India benefits from a strong engineering talent pool and government support aimed at fostering a competitive semiconductor ecosystem.

One major challenge is the limited availability of essential raw materials for chip manufacturing, such as silicon wafers, high-purity gases, speciality chemicals, and ultra-pure water.

Although India possesses a robust chemical and gas manufacturing sector, particularly in regions like Dahej in Gujarat, there is a pressing need to enhance capabilities for producing semiconductor-grade materials. The Indian government has prioritized the development of a comprehensive semiconductor supply chain to reduce reliance on imports.

India currently accounts for nearly 20% of the global semiconductor design workforce, showcasing its strengths in chip design. However, there remains a significant skills gap in semiconductor fabrication and testing.

To address this issue, companies are focusing on skill development initiatives, while the government collaborates with educational institutions to create relevant courses.

The report highlights that India faces stiff competition from established semiconductor hubs like China, Singapore, Malaysia, South Korea, and Taiwan, which have spent decades developing their ecosystems.

As the strategic importance of semiconductors grows globally, many countries are offering subsidies and incentives to attract chip manufacturers. In response, India has introduced substantial incentives to attract investments in semiconductor manufacturing projects.

However, setting up advanced fabrication facilities poses risks such as initial production challenges and quality control issues. The success of India's semiconductor industry will depend on securing long-term demand for chips both domestically and in export markets.

Additionally, keeping pace with rapid technological advancements is crucial; as global companies continue to innovate in chip miniaturization, India must invest significantly to remain competitive.

Despite these challenges, the potential for growth in India's semiconductor industry is significant with ongoing government support, industry collaborations, and investment in research and development. Establishing a complete semiconductor ecosystem will be vital for India to emerge as a major player in the global chip market.

ANI