New ITIF Brief Assesses India’s Readiness for Success in the Semiconductor Industry

WASHINGTON—India already brings many strengths to the global semiconductor production ecosystem, but it can become an even- stronger global player if it addresses investment barriers such as the business environment, customs and tariffs, taxation, and infrastructure, according to a new brief released today by the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy.

In January 2023, India and the United States announced a groundbreaking joint initiative, the Critical and Emerging Technology (iCET) partnership, to strengthen strategic technology partnerships and defense industrial cooperation between the two countries. The initiative intends to foster growth and innovation across the countries’ respective semiconductor ecosystems. To assess India’s readiness in the semiconductor industry, ITIF was selected to author the brief.

Indian policymakers—at both the federal and state levels—are to be commended for recognizing that regulatory, tax, customs, and infrastructure environments are important considerations in attracting globally mobile high-tech investment. The Indian officials ITIF visited appropriately expressed the view that India’s approach to industry has evolved from “red tape” to “red carpet” in the fiercely contested global competition to attract high-value-added, globally mobile semiconductor industry (and broader high-tech) investment. That’s certainly the right perspective, though it needs to be continually matched by action and practice for India to fulfill its semiconductor ambitions.

The brief—acting as the first piece to a larger report coming in the Fall of 2023—identifies near-term industry opportunities and suggests long-term strategic development for the U.S. and Indian semiconductor ecosystems. The brief offers four insights into how the Indian government is tackling the development of its semiconductor industry:

• India represents a capable, dynamic, rapidly evolving economy ready to expand upon its strengths in the semiconductor design space into the more manufacturing-oriented facets of semiconductor production: fabs and assembly, test, and packaging (ATP).
• Indian policymakers—at the federal and state levels—are eager to attract such investment and are willing to actively engage the industry to understand its needs, challenges, and obstacles and to respond with innovative incentives, policies, and infrastructure investments, as needed, to address them.
• While India’s highly generous investment incentives are geared, appropriately, to attract initial investors as proof points for the country’s capabilities in semiconductor fabrication and ATP, it’s important to remember the longer-term goal is for the business environment to transform so that it can enable India’s sustainable, long-term competitiveness in this sector.
• Indian policymakers should seek more than just one fab or one ATP site.To become a globally competitive player in all facets of semiconductor production, India must successfully address the impediments identified here.

“India and the United States enjoy a tremendous opportunity to learn from one another as they seek to strengthen the competitiveness of their semiconductor sectors and deepen their partnerships in global semiconductor supply chains,” said Stephen Ezell, vice president of global innovation policy at ITIF and author of the brief. “The U.S. CHIPS Program Office at the Department of Commerce should invite their Indian counterparts from the India Semiconductor Mission for a capacity-building trip to Washington, DC, and explore avenues to jointly collaborate on strengthening their respective sectors.”

Read the brief.