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India-EU sign MoU on semiconductors: Paving the way for global dominance

07 December 20235 mins read by Angel One
This article delves into the strategic implications of the India-EU MOU on Semiconductors and India's bold initiatives in the semiconductor landscape.
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In the fast-evolving landscape of global technology, semiconductors play a pivotal role as the backbone of modern industries. The recent Memorandum of Understanding (MOU) between the Government of the Republic of India and the European Commission marks a significant milestone in fostering international collaboration in the semiconductor ecosystem. This article explores the key elements of the MOU and its potential impact on Indian companies, coupled with India’s proactive measures to bolster its semiconductor prowess.

Strengthening Global Collaboration

In an era where the semiconductor supply chain spans across borders, the need for international cooperation is paramount. The MOU between India and the EU underscores a commitment to deepening collaboration on semiconductors, supply chain resilience, and innovation. Recognizing the global nature of the semiconductor sector, both parties aim to coordinate policies strategically, as outlined in the EU-India Trade and Technology Council (TTC).

MOU Highlights

The MOU outlines a framework for bilateral collaboration, with a focus on enhancing the resilience of semiconductor supply chains. One key aspect is the inclusion of the semiconductor ecosystem as a sector for cooperation under the EU-India TTC Working Group on Strategic Technologies. The Working Group serves as a platform for exchanges, research and development initiatives, and transparency measures related to subsidies in the semiconductor sector.

Indian Government’s Semiconductor Initiatives

  • Simultaneously, the Indian government has been actively steering initiatives to establish the country as a semiconductor manufacturing powerhouse. The ‘Make in India’ initiative, coupled with the Production Linked Incentive (PLI) and Design Linked Incentive (DLI) schemes, has attracted substantial investments.
  • The Ministry of Electronics and Information Technology (MeitY) has introduced a comprehensive program for advancing India’s semiconductor and display manufacturing ecosystem. This initiative includes fiscal support, offering 50% of the project cost under the Scheme for Setting up of Semiconductor Fabs and the Scheme for Setting up Display Fabs.
  • The government plans to collaborate with state governments to establish High-Tech Clusters, aiming to approve applications for two greenfield Semiconductor Fabs and two Display Fabs. Additionally, the Union Cabinet has approved the modernization of the Semi-conductor Laboratory (SCL) in Mohali, exploring joint ventures for a cutting-edge facility.
  • The establishment of the “India Semiconductor Mission (ISM)” underscores India’s commitment to long-term growth, led by global experts overseeing the implementation of schemes for semiconductor and display facilities. The proactive government approach, exemplified by Micron Technology Inc.’s $2.75 billion investment approval, highlights the industry’s rapid expansion, necessitating an estimated 1.5 million skilled professionals by 2026-2027 to sustain semiconductor production.
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  • The recent discovery of 5.9 million tonnes of Lithium reserves in Jammu and Kashmir is a game-changer for India’s semiconductor manufacturing capabilities. Lithium, a crucial component in semiconductor production, positions India to secure a significant role in the global Lithium market, offering broader advancements in various scientific and technological fields.

Industry Outlook and Reports

The semiconductor industry, a key player in the global electronics sector, continues to witness robust growth. The Semiconductor Industry Association (SIA) reported the industry generated revenues of $40.7 billion in May 2023 globally, up 1.7% from April 2023. From the previous year until September 2022, the global semiconductor industry was valued at $500-$600 billion and complements the global electronics industry worth approximately $3 trillion. According to the Strategic Investment Research Unit (SIRU), the Indian semiconductor market has been estimated to be worth $23.2 billion and will continue to expand at a compound annual growth rate (CAGR) of 17.10% to reach $80.3 billion by 2028.

Key players in the Indian semiconductor market include Broadcom India Private Limited, Tata Elxsi Limited, NXP Semiconductors India Private Limited, CG Power and others.

Reports from McKinsey suggest that the global semiconductor industry is on track to become a trillion-dollar industry by 2030, with sustained annual growth ranging from 6% to 8%. Against this backdrop, the India-EU MOU positions both regions strategically to tap into the exponential growth of the semiconductor industry.

Conclusion

The MOU between India and the EU sets the stage for enhanced collaboration in the semiconductor sector, emphasizing the importance of resilience and innovation in the global supply chain. As India makes significant strides in semiconductor initiatives, the stage is set for the country to emerge as a formidable force in the semiconductor landscape. With proactive government measures and strategic international collaborations, India is poised to play a defining role in the future of semiconductors.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.

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