In today's world, electronics are omnipresent, woven into every aspect of our daily lives. From the simplest baby toys to sophisticated avionics systems of modern aircraft, electronics run the show. At the heart of these intelligent electronic devices is the Integrated Circuit (IC), commonly known as a "chip." These chips are the brains behind the functionality of countless gadgets and systems, enabling them to perform complex tasks with precision and reliability.
Overview of the Indian Electronics industry
The semiconductor sector needs to be understood in the context of the broader electronics industry that it functions within. Currently, the electronics sector contributes about 3.6% to India's GDP and is one of the fastest-growing areas in the Indian economy, boasting a compound annual growth rate (CAGR) of roughly 25%, according to estimates by Frost & Sullivan. This sector's GDP contribution is projected to rise to around 6% by 2027, driven by a favourable policy environment for investments, strong domestic demand, and a significant emphasis on exports.
In this sector of Electronic Systems Design and Manufacturing (ESDM), we must further consider 4 major components:
Electronic Products: These include end products utilized by consumers, ranging from smartphones, tablets and laptops to other computing devices, as well as consumer electronics, medical and industrial electronics, and strategic electronics. Collectively, this segment was valued at approximately USD 100 billion in 2022 and is projected to expand to USD 280 billion by 2027, reflecting an average CAGR of around 26%, according to Frost & Sullivan estimates. This growth is fuelled by robust domestic consumption, driven by India's favourable demographics, and a significant increase in exports, particularly of smartphones. Government incentive programs, such as the Production Linked Incentive (PLI) scheme, have also significantly boosted domestic manufacturing of electronic products in India.
Semiconductors: In 2022, India's semiconductor consumption was approximately USD 30 billion. It is projected to reach USD 100 billion by 2030, with a compound annual growth rate (CAGR) exceeding 20%, according to estimates by the India Electronics and Semiconductor Association (IESA). Unfortunately, all the semiconductors used in India are imported. A significant portion of these semiconductors enter the country as either sub-assemblies or assembled Printed Circuit Boards (PCBAs).
Design of VLSI and Embedded Systems: The world today recognises that India is a hub of exceptional design talent. In fact, from the top 125 semiconductor companies globally, over 100 have a design presence in India. Which is why industry insiders often comment that there is likely no chip in the world that hasn't been influenced by Indian expertise. in the USA, they often joke that the acronym "IC" (for integrated circuit) stands for ‘Indian and Chinese’, reflecting their significant contributions to the global semiconductor industry!
The chip design industry, also known as the VLSI (Very Large Scale Integrated Circuit) design industry, is a rapidly expanding sub-segment of the ESDM sector. India boasts a substantial VLSI design services industry, which includes Global Competency Centres (GCCs) of multinational semiconductor companies, dedicated Offshore Development Centres (ODCs), and small to mid-sized service companies that provide resources for smaller projects for larger firms. These centers are staffed by talented engineers with graduate and post-graduate degrees in Electrical and Communications Engineering, specializing in VLSI. To further develop this talent pool, the Government of India has launched special skill development programs. Alongside the significant growth in VLSI design is the expansion of embedded software development (such as device drivers, board support packages, and OS porting), as well as PCB design. According to IESA-Frost & Sullivan reports, this segment generated approximately USD 35 billion in export revenues in 2023, with a CAGR exceeding 25%.
Exports: The Indian electronics market is predominantly driven by domestic consumption, but exports are on the rise due to several factors. These include strategic trade policies, targeted incentive programs such as the PLI scheme, and increased demand within the country that fosters economies of scale. Coupled with fiscal incentives and advancements in manufacturing efficiency, India has solidified its position as the world's second-largest manufacturing hub for smartphones. In the previous year, our smartphone exports alone totalled approximately USD 15 billion, contributing to a total electronics export value of around USD 30 billion, with a trajectory of rapid growth. India has also integrated its industrial policy with foreign relations, ensuring that aid packages to developing nations prioritize Made-in-India products, including essential goods and electronics.
India has established itself as a pivotal hub for electronics and semiconductor design. Of the many centres of excellence have emerged across the country, Karnataka and Telangana stand out as the primary destinations for those venturing into this specialized field. According to government reports, these two states account for nearly 75-80 percent of India's activities in VLSI and embedded software design. The consumption of semiconductor chips in India reached approximately USD 30 billion last year and is projected to triple to about USD 100 billion by 2030. Historically, India has imported 100% of its semiconductor needs, but the recent announcement by the Tata Group to invest up to USD 11 billion in establishing a semiconductor wafer fab in Gujarat marks a significant milestone towards achieving domestic chip manufacturing capability at a global scale. Additionally, Micron, a US memory giant, is setting up advanced ATMP units in Sanand-Gujarat through Tata Projects, further bolstering India's semiconductor ecosystem. The government has also cleared the establishment of at least two Outsourced Semiconductor Assembly & Test (OSAT) facilities, reinforcing India's position on the global semiconductor map once these facilities become operational.
However, semiconductor manufacturing and packaging involves unprecedented levels of cleanliness and specialized infrastructure, which are relatively new in India. The engineering complexity required for designing such manufacturing facilities is also unparalleled in the country's history. The purity standards for input materials such as gases, chemicals, water, and power are at levels that have never been encountered before.
All electronic assembly and manufacturing operations occur within highly controlled environments known as ‘cleanrooms’. These environments regulate dust levels, temperature, and humidity to meticulous standards. Even minimal contamination from human hair or shed skin cells, which are routine human biological processes, poses a significant risk to the electronics assembly process. Static electricity is also a critical concern. In these electronic assembly facilities, technicians wear gloves, hairnets, overcoats, and anti-static wristbands that ‘earth’ them individually while performing tasks such as soldering on electronic products.
These cleanliness requirements are even more stringent for semiconductor manufacturing and the assembly. Most semiconductor cleanrooms operate at what is known as Class-1000 (equivalent to ISO-6), which means that only a maximum of 1000 airborne particles below 0.5 micrometres are permitted per cubic foot of space. It gets even more rigorous for fully automated production lines where semiconductor fabrication takes place are at Class-100 (ISO-5) which means that only a maximum of 100 airborne particles below 0.5 micrometres are permitted per cubic foot of the space.
India has clearly made substantial strides in the assembly and manufacturing of electronic systems, particularly end products such as phones, televisions, and household appliances. The country hosts all major Electronic Manufacturing Services (EMS) firms, also known as contract manufacturers, including renowned names like Foxconn, Flextronics, Jabil, and Sanmina. Domestically, companies like Dixon Electronics, Syrma-SGS, and Kaynes Technologies are prominent players in the EMS sector. Currently, every single smartphone sold in India is domestically manufactured, and large numbers of smartphones, industrial electronics, and telecom equipment are being exported to various global markets.
Tata Electronics, a subsidiary of the Tata Group, is rapidly establishing itself as a major smartphone manufacturer within India. The government's recent announcement to curtail fully assembled laptop imports aims to replicate the success story of smartphones by bolstering local assembly and manufacturing capabilities in this segment as well. Moreover, nearly all white goods such as refrigerators, washing machines, and air conditioners are already manufactured locally.
These developments are pivotal in boosting India’s manufacturing contribution to the GDP, which currently stands at around 14%. We are confident of shortly achieving our goal to enhance this to 25% through all these changes in policy and expansion of resources.
PVG Menon
Head - Business Development
Advanced Technology Facilities
