India’s semiconductor ecosystem to see gradual value creation
A new report by 360 ONE Capital predicts India's semiconductor demand to hit $117 billion by 2030, driven by massive investments and ecosystem growth.
The landscape of India’s semiconductor industry is poised for a transformative journey over the next three to five years. According to a recent research report by 360 ONE Capital, the sector is expected to transition through critical phases, including project commissioning, customer qualification, and yield stabilisation. While immediate gains might be subtle, the long-term trajectory suggests a massive shift in India's technological capabilities.
A Massive Surge in Demand
The scale of growth projected for the Indian semiconductor market is staggering. Analysts predict that demand will climb from approximately USD 56 billion in 2025 to over USD 117 billion by 2030. This represents a compound annual growth rate (CAGR) of roughly 16 per cent.
This growth is being fueled by significant capital inflows. Currently, twelve approved projects under the India Semiconductor Mission (ISM) represent investments exceeding USD 18 billion. Looking further ahead, the broader ISM 2.0 ecosystem has the potential to catalyse more than USD 35 billion in additional investment.
Near-Term Opportunities: The Ecosystem Enablers
While the ultimate goal is direct fabrication (fab) and Outsourced Semiconductor Assembly and Test (OSAT) economics, the report suggests that the immediate earnings opportunities lie elsewhere. The near-term value capture is expected to be strongest among the enablers that build and support the industry. Key sectors poised for growth include:
- Construction and Utilities: Building the specialized infrastructure required for chip plants.
- Engineering and Automation: Providing the technical expertise and automated systems for precision manufacturing.
- Electronics Manufacturing and Components: Supporting the broader supply chain.
- Specialized Inputs: Companies providing gases, chemicals, testing services, and equipment support.
The Road to Commercial Viability
The report emphasizes that the industry is currently in a phase where capacity is being built ahead of proven demand and supplier depth. Therefore, the focus must shift from mere announcements to successful execution. The industry's success will depend on several critical milestones:
- Yield Improvement: Achieving competitive yields is essential for profitability.
- Customer Qualification: Ensuring that manufactured chips meet the stringent standards of global clients.
- Volume Ramp-up: Transitioning from pilot stages to large-scale, commercial production.
- Localisation: Increasing the use of local suppliers for recurring inputs and higher-value packaging.
"The critical question is no longer whether factories can be constructed. It is whether they can achieve competitive yields, qualify with global customers and operate at scale," the report noted.
A Long-Term Investment Horizon
Investors and industry players are advised to view the semiconductor opportunity through a long-term lens. Rather than looking for immediate earnings cycles, the report suggests that the theme should be evaluated over a 10 to 15-year horizon to truly capture the potential of India's growing technological prowess.