In just six years, India evolved from an assembler of low-end iPhones to acquiring the capability to turn out the latest models, with volumes soaring.

The country now aims to repeat that success with chips.

Apple began assembling handsets in India in 2017 with the iPhone SE. By August 2023, its main supplier Foxconn was assembling iPhone 15 models in the country soon after its facilities in China started shipments.

Output of iPhones in India in 2023 more than doubled as it reduced reliance on China, Bloomberg reported.

Canalys estimated the number of iPhones produced in India in 2023 reached 25 million units, around 12 per cent of its total volume. The research outlet forecast the figure could reach 21 per cent by the end of 2025 and expand to higher-end models.

The country’s attraction for smartphone assembly goes far beyond Apple.

In late 2023, Google commenced production of some Pixel smartphones in India starting with its then flagship series.

Figures from Counterpoint Research showed India’s mobile phone production increased by a CAGR of 23 per cent from 2014 to 2022, with 2 billion units produced.

The country’s progress in smartphone production was supported by the government handing out INR450 billion ($5.4 billion) in incentives to 16 domestic and international electronics companies, starting in 2020.

Rising investments
Can that success be repeated in the chip sector?

Prime Minister Narendra Modi has identified the chip sector a key priority for his economic growth plan, claiming investment of INR1.3 trillion in semiconductor manufacturing, with several projects pending.

Its chip ambitions are backed by an INR828 billion programme approved in December 2021 allowing companies to apply for up to 50 per cent of capital costs for eligible chip and display manufacturing projects.

Indian conglomerate Adani Group and Israel-based Tower Semiconductor recently agreed to build a $10 billion chip plant over the next three to five years, targeting production of 40,000 wafers per month in the first phase and 80,000 wafers per month in the second phase.

Last week, Tata Electronics lined up Tokyo Electron to train its workforce on the Japanese company’s chipmaking equipment to be installed at India’s first chip fabrication plant in Dholera, Gujarat. The tie-up covers both front-end fabrication and back-end packaging technologies.

Tata Electronics is investing $11 billion in the facility and also earmarked $3 billion for a chip assembly and test facility in Jagiroad, Assam. This week it signed an MoU with Analog Devices to explore manufacturing chips for network infrastructure and electric vehicles at the two facilities.

Earlier this month, NXP Semiconductors announced plans to invest more than $1 billion in India to boost its R&D efforts.

In March, Japan-based Renesas Electronics agreed to partner with CG Power and Industrial Solutions, a subsidiary of the Murugappa Group, to set up a semiconductor assembly and test facility in Gujarat, with an eventual capacity of 15 million units per day.

In 2023, Micron Technology earmarked $825 million for a new DRAM and NAND assembly and test facility, with the government contributing half of the total project cost and the state of Gujarat covering 20 per cent in the form of incentives. The company said its combined investment and funds from the government entities over the course of two phases will be up to $2.8 billion.

While Foxconn withdrew from a joint venture with Indian conglomerate Vedanta Group in July 2023, after the companies previously agreed to set up plants in a chip joint venture worth $19.5 billion in Gujarat, the contract manufacturer later confirmed plans to add manufacturing capacity with a TWD50 billion ($1.6 billion) investment.

At the end of August, Indian and Singaporean officials added semiconductors to a cooperation agreement, a focus the latter’s Minister for Foreign Affairs Vivian Balakrishnan said would look at “the whole ecosystem of suppliers” rather than solely wafer fabrication.

India is no doubt benefitting from widening US trade sanctions on China, with controls expanding beyond the most advanced chipmaking machinery.

Workforce advantages
Deborah Elms, head of Trade Policy at sustainable global trade advocate organisation Hinrich Foundation, told Mobile World Live (MWL) that, at a time of global disruption, companies are looking for potential alternative manufacturing opportunities. “India’s large population and digital skills for some of the highest value workers makes the country a potentially attractive location.”

Elms argued the country’s success will depends on what sort of chips local companies manufacture, adding it is quite a crowded field and even older chip fabrication requires significant capital investment.

Canalys technology market analyst Sanyam Chaurasia explained to MWL the country’s manufacturing capabilities are currently centred around mature technologies (28nm to 110nm), which are less resource-intensive compared with advanced nodes. India also is positioning itself as a leader in assembly, testing and packaging, “an essential step toward building a robust semiconductor ecosystem for further tech migration to high performance computing nodes”.

He cautioned India’s path to becoming a semiconductor powerhouse faces several obstacles, such as limited access to energy, water and suitable land, as well as high import duties.

“While India boasts a strong engineering workforce and notable design capabilities, it lacks the specialised expertise required for sophisticated semiconductor fabrication. Bridging this skills gap will require long-term investment and will take years to fully resolve,” Chaurasia said.

Elms agreed, noting investors could be deterred by some of the same obstacles that face many companies looking to relocate or expand to India, such as inconsistent regulations between provinces, tax challenges, legal regimes which are exceptionally slow and difficulty in finding suitable sites for development.

India also faces strong competition. Some of the world’s largest chipmakers including TSMC and Samsung are investing billions to build chip plants in the US, Japan and Germany, attracted by a raft of incentives as the countries seek to diversify supply lines, boost domestic output and create national champions.

With half of a dozen projects announced in the past few months, India is certainly off to an aggressive start.