Can India Go Beyond Assembling Smartphones By Hosting Taiwanese Companies?

The semiconductor imports surged 65.2 per cent in 2021-22 and the market is expected to grow to $63 billion by 2026, compared to $20 billion in 2020

India is scrambling to boost the domestic manufacturing of semiconductors. Regarding this, India hosted a delegation of Taiwanese officials including Powerchip Semiconductor Manufacturing Corporation (PSMC), which is the world’s sixth largest semiconductor manufacturer to set up manufacturing plants in India.

The development comes at a time when the Indian government has been pushing for domestic companies to boost the production of smartphones and set up semiconductors units, also known as fabs in the country. India, despite being the second-largest smartphone hub globally after China, is heavily reliant on its other Asian counterparts such as Taiwan, South Korea, and Japan along with the US for the import of semiconductors, while China being its biggest importer.

Semiconductors are crucial for the manufacturing of electronic products such as smartphones, tablets, laptops and auto parts among other things. As per government data, the semiconductor imports surged 65.2 per cent in 2021-22 and the market is expected to grow to $63 billion by 2026, compared to $20 billion in 2020. In 2020-21, the electronic goods’ production has surged to $74.7 billion compared to $37 billion in 2015-16, at a CAGR of 17.9 per cent.

Over the past few years, the government has been trying a slew of measures to boost semiconductor production and smartphone production within the country.

India’s Push For Semiconductor Export

Last year, the government launched the production-linked incentive (PLI) scheme worth Rs 76,000 crore for semiconductors, in order to aid chip manufacturing for smartphones and the automobile sector in India. The decision to roll out the scheme was taken as an effect of the global chip shortage which not only disrupted the supply chain but also halted the manufacturing of automobiles and smartphones. In India, the early-budget smartphones bore the maximum brunt of the global chip shortage.

By July this year, the government has received 23 applications for availing of the scheme in this regard. Anil Agrawal-led Vedanta Group in partnership with Taiwanese semiconductor maker Foxconn became the first Indian company to announce an investment of $15 billion for setting up semiconductor fabs in India under the PLI scheme.

Apart from big companies, other domestic companies are also investing in the manufacturing of chips. For example, Polymatech a semiconductor manufacturing facility will be investing $1 billion to expand its chipset manufacturing facility in Tamil Nadu.

Notably, in the June quarter of this year, domestic smartphone manufacturing registered a 7 per cent year-on-year (y-o-y) growth accounting for 48 million shipments, as per Counterpoint Research.

While Oppo manufactured 21.6 per cent of smartphones in India, Vivo manufactured 11.7 per cent of smartphones in India under the PLI scheme. Moreover, the government has also approved applications of Samsung, Foxconn, Pegatron, Rising Star, and Wistron for the production of smartphones in the country under the PLI scheme, as per a report by Economic Times.

An Effort To Revive Semiconductor Laboratory

It was in 1989 that India’s only public sector chip manufacturing facility, Semiconductor Complex Ltd, was destroyed by fire. Established in 1984 and based out of Chandigarh, SCL is responsible for the design and manufacture of very large-scale integration (VLSI) devices. Realizing the significance of semiconductor production within the country, the government has been trying to revive SCL for the past few years. In March, this year, the Parliamentary Standing Committee on Communications and Information Technology submitted a detailed report to the IT Ministry to modernize SCL. The upgradation will be handled by India Semiconductor Mission (ISM), as per reports.

Soon to be launched India Semiconductor Mission (ISM) is a specialized and independent Business Division within the Digital India Corporation that aims to build a vibrant semiconductor and display ecosystem to enable India’s emergence as a global hub for electronics manufacturing and design.

Notably, in its four-day tour, a delegation of Taiwanese officials including PSMC visited the Dholera smart city in Gujarat and the Semi-Conductor Laboratory (SCL) at Mohali for setting up semiconductor manufacturing units, as per a report by Hindustan Times.

Reviving Domestic Smartphone Brands

Domestic smartphone brands such as Micromax, Intex, Lava, and Karbonn are also likely to get leverage to make a comeback through India’s semiconductor mission and PLI scheme.

Before Chinese manufacturers’ hostile takeover of the domestic market, Micromax and Lava were leading mobile phone brands in the country. But now the market share of these domestic phone makers has been dismal. As per a Counterpoint Research report, Micromax holds a 0.5 per cent market share, Lava holds a 0.4 per cent, whereas both Intex and Karbonn have zero market share. In the feature phone market in the first quarter of 2022, Lava held a 15.9 per cent market share, whereas Micromax held a 3.8 per cent market share.

Micromax and Lava are amongst those domestic companies which have filed applications under the PLI scheme for semiconductor production. Apart from them, other domestic brands include Lava, Dixon, Infopower, Syrma, Orbic, Neolync, Optiemus, Netweb, VVDN, Smile Electronics, Panache Digilife, HLBS, RDP, Workstations, and Coconics according to a report by The Economic Times.

The government is aiming for a total production worth Rs 1.60 lakh crore, through the PLI scheme in the next four years. Of this, the domestic companies have proposed production worth Rs 25,000 crore.

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