India's Strategic Role in the Global Semiconductor Supply Chain

Baskar Ceri, Global Director of Business Development for Aerospace, Defense & Govt Business Unit of NI, and Shitendra Bhattacharya, Country Head (Sales) - India - Strategic, Enterprise Business in interaction with Asia Business Outlook, share their views on the current Indian semiconductor ecosystem, its advancements, and its prospects.

How has India’s semiconductor industry’s venture and growth impacted the global supply chain?

The investments that have happened in the Semiconductor industry as a whole started way back in the 80s with NI and others. The way it evolved, it has had certain flavours every decade. It began with a focus on software because India was known for their software skill set. Software service design and embedded services were the primary focus. That's when a lot of semiconductor companies set up design centres. Then it started in 2010, and the focus moved to fabrication design, R&D. That was how the evolution happened, and now, the attention is more on manufacturing and fabrication. The semiconductor mission is around manufacturing fabrication to be self-reliant. Our engineering skill set has also evolved since then; we are not only software service-focused or software-centric skills, we are now focused even on engineering system design and manufacturing. So, companies’ investment in India has also evolved in that way. And the entire ecosystem supporting that growth or the evolution of the semiconductor industry has also changed. The good thing is that these things have been occurring across the globe at different times for decades. Companies have learned that bringing new technology into India is easier and faster. 

How important are collaborations? Is India receiving assistance from major tech players in the semiconductor industry?

Unaided Growth is difficult, and partnerships are important. Every company looks at how they can partner to develop the best solution for the market. When India started focusing on chip design, it evolved into emerging tech. There has been a robust startup ecosystem that's been created. The startup ecosystem is now focusing on these specialized teams, and they need help to do this and have to partner with giants. When you look at startups focused on design services, they need to partner with companies that can provide technology for design services and then cater back to these customers. Similarly, when you're looking at people providing manufacturing or foundry services, these are things that startups are involved in and can only happen because of collaborations. It is not possible to be an independent player. If you do not have the right kind of investments and partnerships, Survival is difficult.

How has India's semiconductor industry contributed to technological innovation, and what advancement has it made in semiconductor manufacturing?

The inception point was chip design. India is known to be the hub for chip design, and to date, any semiconductor giant, when they want to invest in chip design, would look at India as one of the centers. So we have created that scheme, then moved into emerging technologies, and later to custom solutions. This phenomenon has created a complete ecosystem of engineering talent. That's the most immense contribution. Today, you hear of multiple multinational companies wanting to invest and expand their teams in India, and they're doing it in various areas. They are looking at all these different areas. The startup ecosystem has grown significantly. Some partnerships are getting developed; for example, instead of companies wanting to invest in their in-house engineers, they are letting startups build these; they could be partnering with them to access technology or funding. If you look at the semiconductor giants, they have their investment arms. Qualcomm Ventures and Intel have their funding accelerator programs. They invest in these organizations to allow them to contribute to their strategy. That ecosystem has developed quite a bit. R&D efforts and collaborations with academia have scaled significantly. If you see the skilled workforce growing, they eventually help in India's production plans. Through partnership and ecosystem development, there has been a significant advancement that has been made.

How is India in the semiconductor industry addressing challenges related to supply chain resilience? And what strategies are in place to ensure a consistent and reliable semiconductor supply to the global markets?

There have been multiple strategies. Diversification is one. COVID has been a big teacher for all organizations. You cannot be centered around any one nation. Diversification is a must. India has always tried to capitalize on that strong emphasis on local manufacturing and electronics. They have done relatively well with efficient inventory management and having contingency plans. Collaboration with many global partners, or partnerships with international companies, has only strengthened over time. One of the key strategies, along with the help of government support, we have been able to build stronger partnerships to minimize unforeseen situations that come up in the future. We are better prepared and more resilient. Data analytics and predictive modeling have also been implemented in various organizations in India, which has helped them with more effective inventory management. Now, there's more planning, so we know exactly how much we require and what will be the forecast for your business. These are the most significant strategy changes that India has done.

How is the need for a skillful workforce being addressed?

There are many educational programs. Collaboration is the name of the industry. For example, our industry partner is co-hosting an event with us, and they have a skill development program they are running, where they are going directly to the universities to educate the students about what is needed for the future. They are helping bring in a transformation in the required skill sets. That can only be done with that kind of support. Industries are partnering with academia to get the suitable skill set for consumption back to themselves and provide it to their customers. For example, at NI, we operate vital academic programs. We partner with universities, and then we run academies through our partners who can skill people on tools required for test measurement, data analysis, and insights necessary for all of these things. Various companies are doing that. India has a limited number of engineering workforce. That's always there. It is about skilling them right, skilling them for the future. Companies and organizations are doing that significantly, and the government is supportive. The Skill India program has many programs that allow skilling in the right sectors. Semiconductor technology is one of the primary hotbeds of skilling right now. And many various industry bodies are enabling these activities.

How likely is the Human Workforce to be replaced by AI in the near future?

The job type will shift, and that shift is happening every 20-30 years. When the industrial revolution occurred, the working methods changed. Then, Industry 3.0 happened later, and PLC programming and digital logic happened. Similarly,  AI will never take away a particular set of jobs. If X percent of jobs will go, X percent of jobs are created in a different skill set. So again, it’s going back to your initial question of skilling, how we skill, and that's the question, what skills do we train our students with? Will it be relevant 20 years from now or 10 years from now? That's a question that we can ask. Jobs are not going to reduce, and it's going to be different. If we look at skills, every skill has a shelf life. Specific skills taught ten years back have probably approached the end of their shelf life now. There are new skills that are needed. These technologies that are coming in will mainly be enablers or complementary skills. It'll make you more efficient and productive, but it will likely not replace customization, which is always needed. There is only up to a certain level that there is a customization that generative AI or machine learning can do. The skills will evolve, and you will find newer skills needed, which humans still have to do. It will never be replaced easily. We’ll need people to figure out the next set of skills they need to learn. You need to learn relevant skills to be relevant, and you need to keep evolving. A shelf life of 10 years may be lower, and each skill has a shelf life of approximately a decade. From today, it might be five years. Maybe tomorrow, it might be two years or three years. And that's the evolution that's going to happen.

How has the growth of India's semiconductor industry positively impacted the country's economic growth in trade balance and overall technological capabilities? And what role does it play in India's broader industrial and technological strategies?

A few points must be addressed. Primarily, there has been a lot of job creation that's happened. Investments have increased, and the amount of money pumped into the country through foreign direct investment by multinational companies, even through local venture capitalists and private equity funds, has grown, especially in the semiconductor industry. But when you look at the semiconductor industry as a technology, it needs to be improved in the value chain. Many adjacent markets can benefit from semiconductor investments. So, those investments have also increased over time. Similarly, job creation, from that standpoint, has had a multiplier effect. We invest in the semiconductor industry because it's the lowest in the value chain. Products are developed on that, that starts expanding, and the economy grows.

Various markets can be found. It could be on data centres, and it could be on our devices, it could be on wearable, it could be on anything. Any technologically advanced product has a semiconductor. Investing in that has a multiplier effect on various other economies. That's another thing: significant impact. And then, if you look at the value addition that's happened, for example, defence in space tech, today, we want to be very self-reliant as a country. That is a big mission. A lot of the critical technologies have been from the semiconductor industry. There has been only one semiconductor complex, which was initially part of ISRO. They could develop and fabricate their semiconductors for space and defence tech use. Today, companies are investing in India to develop semiconductor technologies for the space sector.

They're doing a lot of customization and value addition for addressing these markets. So, that has impacted. It is coming to trade balance. It has resulted in reduced imports significantly. India has the ambition of being one of the largest exporters in the world in a couple of years. There are a lot of export opportunities that start coming, and that changes the GDP for India. When you look at the import-export balance, it shifts the whole game. Semiconductors, being the core fundamental component of any technological development, are a substantial game-changing opportunity for the country when you look at it from all angles: economic trade, skill development, and technical capabilities.

What more can we see in the future regarding technological advancements?

The recent announcement of trying to get a license to import laptops is a significant change. Local manufacturing has to be encouraged, and that’s a massive initiative. Companies are coming forward to establish their manufacturing unit here. That is a significant change that will happen, and the ecosystem around it is necessary for growth. A fabrication plant must be used for more than just discussing semiconductor manufacturing in India. There is a complete ecosystem that has to be set up. Water Purification has to be done. You have to have plants that can purify water, consider the business gets created around that, and job options are created around that. Various things get associated with any investment that's happening.

That is the primary benefit. The initiatives that the government is driving in Digital India have a lot of ancillary benefits that the country can get. We'll see that much more innovation has never challenged India. India has always had one of the most innovative people. We've seen the effects of brain drain. Most global leaders today are Indians, educated in India during their primary days and then moved on to become global leaders. We have seen the other way around happening. Many people want to come back to India because they see that the Indian market is ripe for them to generate a lot of value. India wants to become a strong player and create global competitiveness for anyone to look at India as a market for investment. There has to be innovation, skill, money, there has to be land, there has to be an entire ecosystem. All of these flourish quite a bit to create global competitiveness.