Chennai: The finance minister announced the launch of ISM 2.0, giving impetus to build domestic capabilities in the semiconductor equipment, chemicals and gases market, estimated to be around $400 billion by 2030, according to IESA and SEMI India, an industry body.
This comes at a time of global supply bottlenecks due to increasing AI workloads. As capex and specific equipment are shifted towards high bandwidth memory and advanced DRAM for training and inference of AI, straining global original equipment makers (OEMs), experts say this presents a rare opportunity for India to build an ecosystem, both by encouraging global players to source more from Indian MSMEs and creating domestic champions in the longer-term. Raja Manickam, founder and chief executive of fabless startup iVP Semi and industry veteran, said in the initial stages, the incentives should encourage global OEMS source more from India. “The demand for new wafer fabs is extremely high because of AI. This does not happen every 10 years, so now is the time, and all these companies are looking to source more components as well…All the equipment suppliers are now booked for the next two to three years…So that is why India has a golden opportunity to get into the game.” “A lot of these companies are also trying to avoid sourcing in China, and so we should be very smart about bringing them to India if we rightly incentivise,” he added further. It could be the right time for India as the demand and lead times for chip equipment are longer, but only if the AI demands hold up, says Sanjay Kumar, VP at AT-Kearney and former senior director, US Department of Commerce, CHIPS Program office.
“To capitalise on this, India needs to quickly ramp up. Indian internal consumption is not going to match major hubs like Taiwan and Korea, so the production should target export markets, which only global OEMs are able to qualify for and export to.
For global players, there has to be either a cost benefit compared to China or Taiwan or the quality has to be better. Infrastructure and logistics challenges need to be addressed,” he said.
In the long-term viability depends on AI demands, he adds. In the next 5-7 years, India can build competitive strength in the low to mid complexity segments such as sub-fab equipment vacuum systems, automation systems for wafer handling, precision mechanics and advanced packaging equipment, says Ashok Chandak, president of IESA and SEMI India. “These segments are scalable, exportable and already see interest from global OEMs looking to diversify tier-2 and tier-3 suppliers,” he said.
India should target around 10% of the $400 million global market by 2032, he said, adding the domestic market for equipment could reach $5 billion by 2030. The focus on equipment, materials, and IP is not an alternative to advanced fabs, but a necessary foundation for their long-term viability. “By building upstream strength in equipment and materials, India creates a sustainable foundation that captures long-term value and ensures the viability of future advanced fabs,” Chandak added.Industry analysts point out the efforts of a few global OEMS already sourcing and, in some cases, integrating final equipment in India. They argue domestic sourcing is proven and cost-effective, but stressed the need to support existing MSMEs to supply for semiconductor precision.
