India aims to become a dominant force in the semiconductor industry, but it cannot achieve this goal independently.

• The semiconductor manufacturing industry in India is in its infancy, but it aims to become a dominant force in the chip industry.
• To further develop the sector, the South Asian nation must continue to depend on Taiwan, China, and the U.S.
• Although India may be able to run fast and catch up, China will be running faster, according to Rishi Bhatnagar, chair of the Institution of Engineering and Technology's future tech panel.

India aims to become a global semiconductor leader as it strives for self-sufficiency in manufacturing, with its fifth-largest economy.

Narendra Modi, the Indian Prime Minister, has set ambitious goals to drive the country's semiconductor industry, with the latest and most significant objective being to increase the value of the electronics sector from $155 billion to $500 billion by 2030.

While the announcement garnered attention, industry experts speaking to CNBC have differing opinions on the target's feasibility. Nevertheless, they all concur that India cannot accomplish this objective independently.

Although the pace of growth appears to be rapid and there is momentum, India is only beginning to develop the semiconductor industry from scratch, according to Eri Ikeda, an assistant professor at the Department of Management Studies at the Indian Institute of Technology Delhi.

According to Trendforce, Taiwan currently holds the largest market share in the global chip industry, with approximately 44% of the market, while China follows closely behind with 28%. South Korea, the U.S., and Japan have smaller percentages of 12%, 6%, and 2%, respectively.

Taiwan's Powerchip Semiconductor Manufacturing Corporation will assist India's Tata Electronics in constructing the country's first 12-inch wafer fab in Gujarat. Additionally, American chipmaker is set to produce the first India-made semiconductor chip in 2025. Last week, U.S. chipmaker and Tata Group signed an agreement to investigate building semiconductor products in India. These instances demonstrate the importance of collaboration.

Lessons from China

Analysts suggest that India can be a viable alternative to China for companies seeking to diversify their supply chains, but they caution that India must first develop its semiconductor manufacturing industry, which is currently at a very early stage.

In financial year 2024, China regained its position as India's top trading partner, with bilateral trade between the two countries reaching $118.4 billion. According to data from the Ministry of External Affairs, India's imports of telecom and smartphone parts from China amounted to $4.2 billion.

Although India may be able to run fast and catch up, China will be running faster, according to Rishi Bhatnagar, chair of the Institution of Engineering and Technology's future tech panel. He emphasized that collaboration between the two countries is paramount.

Ikeda stated in an interview with CNBC that even China is catching up with the technological advancements of others and is building and scaling up its semiconductor industry by importing large amounts of equipment from the U.S. and Japan.

Cozying up to the U.S.

Despite continuing to depend heavily on Taiwan and China for chips, India aims to maintain its collaboration with the U.S. to counterbalance China, according to industry experts, as reported by CNBC.

The U.S. Department of State has announced a partnership with the India Semiconductor Mission and India's electronics and IT government body to enhance the global semiconductor value chain.

The Biden administration's decision to impose new export controls on critical technologies, including quantum computing and semiconductor goods, is likely to hinder Beijing's advancements in AI and computing.

Bhatnagar suggested that India could aid the U.S. in diversifying its chip sources and reducing its dependence on Taiwan.

Bhatnagar stated that when two democracies engage in dialogue, it is a distinct kind of conversation. He emphasized the importance of acknowledging and accepting this fact as global circumstances evolve.

This week, Modi met with Jensen Huang and Sundar Pichai, among other tech CEOs at a roundtable in New York after attending the annual Quad meeting. Huang stated that "this is India's moment" and pledged to partner with the country, according to Hindustan Times. GlobalFoundries' Thomas Caulfield and 's Lisa Su were also present at the meeting.

Rewritten: The "chip war" between the U.S. and China can be strengthened by India's semiconductor focus, which can ultimately benefit the country.

Ikeda stated that India is open to utilizing both U.S. and Chinese investments for its industrial development, which could potentially result in competition with them if it becomes successful.

She stated that there are numerous obstacles preventing India from competing with China in the semiconductor industry, particularly in terms of infrastructure and funding.

Piyush Goyal, India's minister of commerce and industry, stated in an interview with CNBC's Tanvir Gill that the government is promoting the semiconductor industry in a significant manner. The ecosystem is being developed to support the growth of foundries in the country, which will eventually lead to the production of more chips.

India's upper hand

Despite not yet being a semiconductor powerhouse, India has several advantages that could help it achieve that status.

Companies are drawn to India due to its low labor costs, making it an appealing option for diversifying supply chains away from China.

In New Delhi, skilled workers receive a monthly minimum wage of 21,215 Indian rupees ($253.85), while in Beijing, workers earn 2,420 yuan ($344.30) during the same period. However, the minimum wage varies across states and provinces in both countries.

Ikeda stated that if India improves its technological advancement and offers cheaper and high-quality products to meet global demand, it will gain a competitive edge over China.

India, the world's most populous country, is predicted to become the second-largest economy by 2075, and has already attracted investors like tech giants Apple and Google. Analysts predict these companies will further increase production in India.

According to Tarun Pathak, research director at Counterpoint Research, India is currently exporting more items from India than they are selling domestically. This is due to its large domestic market and status as a young nation, which gives India a competitive edge.

The country's optimism is expected to be sustained in the next decade as it continues to advance in modernizing its transportation infrastructure.

In the interim budget in February, Finance Minister Nirmala Sitharaman predicted that capital expenditure would increase by 11.1% to 11.11 trillion Indian rupees ($133.9 billion) in the fiscal year 2025, with the majority of the spending directed towards constructing railways and airports.

"Chips are small items that can be transported by planes in large quantities, so the semiconductor industry doesn't need many large ships and cargos," Bhatnagar stated.

India could be a solution for companies seeking to reduce costs and meet demand as the need for chips continues to rise.

According to Samir Kapadia, CEO of India Index and managing principal at Vogel Group, it is not wise to bet against India because it has the right infrastructure, economics, stability, and workforce to achieve its goals.