India’s semiconductor industry faces supply chain and limited talent challenges: Jefferies Report

NEW DELHI: India’s semiconductor industry is growing but faces significant challenges such as an underdeveloped supply chain, a shortage of specialized manufacturing talent, global competition, and rapidly evolving technology, according to a report by Jefferies.

The report highlighted that while India has several key advantages, including a strong engineering talent pool and government support, it must overcome hurdles to establish a competitive semiconductor ecosystem.

It said, “The industry also needs to navigate through the challenges of an undeveloped supply chain, limited specialized manufacturing talent, stiff global competition, and rapidly evolving technology.”

One of the biggest challenges is the limited availability of key raw materials like silicon wafers, high-purity gases, specialty chemicals, and ultrapure water, which are essential for chip manufacturing.

While India has a well-developed chemical and gas manufacturing sector, particularly in regions like Dahej in Gujarat, companies still need to enhance their capabilities to produce semiconductor-grade raw materials. The government has prioritized the development of the full semiconductor supply chain, including chemicals, gases, and equipment, to reduce dependency on imports.

India is home to nearly 20 per cent of the global semiconductor design workforce, demonstrating its strength in chip design. However, there is a gap in specialized skills required for semiconductor fabrication and testing.

To address this, the report stated that companies are working on skill development, and the government is collaborating with industries and universities to create courses tailored to semiconductor manufacturing, assembly, and testing.

The report also pointed out that India faces tough competition from well-established semiconductor hubs such as China, Singapore, Malaysia, South Korea, and Taiwan, which have spent decades building their ecosystems.

With the rising strategic importance of semiconductors and the increasing focus on supply chain security, many countries are offering subsidies and incentives to attract chip manufacturers.

India has taken steps to attract investments by offering large incentives, which have helped initiate semiconductor manufacturing projects.

However, setting up advanced fabrication facilities comes with risks, including initial production challenges, quality control issues, and achieving economies of scale. The success of India’s semiconductor industry will depend on securing long-term demand for chips, both domestically and in export markets.

Another major challenge is keeping up with rapid technological advancements. While India is still in the process of setting up its first fabrication facility, global semiconductor companies are continuously pushing the limits of chip miniaturization. As a late entrant, India may have to make significant capital investments to remain competitive.

Despite these challenges, India’s semiconductor industry has the potential to grow with strong government support, industry collaborations, and investments in research and development. Establishing a complete semiconductor ecosystem will be crucial for India to become a major player in the global chip industry. (ANI)