Entry Barriers, Scaling Challenges Stall India’s Semiconductor Push

Setting foot into the semiconductor and electronics manufacturing space in India is a daunting task for startups. While the thought of putting a plan in action through support and mentorship may seem ideal, the road is paved with challenges that demand both time and significant financial resources. 

According to Ashok Chandak, president of the India Electronics and Semiconductor Association (IESA), the steep barriers to entry make the industry less enticing for many aspiring entrepreneurs.

Barrier of Entry

In an exclusive interaction with AIM, Chandak explained that even if one chooses to do it at a lower scale, several crores are required to build a design and prototype. “There is always a barrier of entry, and that is why you don’t see the semiconductor startups in terms of the quantum of numbers as you would see in any other sector.”

“It’s time-consuming and money-consuming because if you do cutting edge technology, you need 50-100 sub-million dollars to do complete testing, wafer and all those things,” he added.

Despite this, the semiconductor investment market is experiencing a significant surge. Bank investors and venture capitalists are actively seeking to invest in semiconductor startups. 

“Three to five years ago, nobody was bothered, and there were very few initiatives available for the startup funding. But, now, this is beginning to change,” Chandak further said. He acknowledged that several startups are getting funding in the range of $10, $20, and $50 million and expects it to progress. 

Indian startups in the semiconductor space might take time to build and scale, but the route of collaboration and partnerships remains indispensable. 

“India is far behind on the manufacturing curve in particular. We have no technology. Let’s accept that…We do not have enough technology or process know-how from a manufacturing perspective. So, what do we depend on? Global cooperation,” Chandak explained. 

Collaboration and Innovation

With such a challenge at play, the only viable option for startups to scale is either through 100% subsidiary, joint ventures, or technology transfer. IESA has, in fact, already partnered with a number of industrial bodies globally, including the Singapore Semiconductor Industry Association (SSIA), Semiconductor Industry Association, USA (SIA), and Japan and Korea through the Japan External Trade Organisation (JETRO) and Korea Trade-Investment Promotion Agency (KOTRA), respectively. 

India’s semiconductor goals have been nothing short of ambitious. The country is aggressively pursuing the possibility of becoming the semiconductor hub of the world. This year alone, the central government approved four semiconductor manufacturing units under the Semicon India Programme, including Tata Electronics Private Limited’s investment of ₹91,526 crores to set up a semiconductor fab facility. 

This year, Tata Electronics’ ₹ 27,000-crore investment, CG Power’s ₹7,000-crore investment, and Kaynes Technology’s ₹ 3,307-crore OSAT facility were approved.

The Role of IESA

IESA was established almost two decades ago to primarily focus on the electronics and semiconductor sector, overseeing the complete ecosystem from materials to design, testing, manufacturing and product creation. The trade body has, in fact, been scaling electronics startups in India. 

“We were part of the initial think tank that gave input to the government of India and the ministry from 2008 and 2012 onwards,” Chandak further said.

“IESA has made a lot of efforts to bring the electronics and semiconductor sector into the limelight of not only the industries, the government, the academia but also the global landscape.” 

The body has supported several states, including Karnataka, Gujarat, Madhya Pradesh, Telangana, Kerala and Maharashtra, and is in talks to advance their next steps with Uttar Pradesh. 

Manufacturing Nation of the World

Chandak highlighted how India is steadily progressing towards becoming a global semiconductor hub, driven by its strong design ecosystem. Notably, 20% of the world’s design engineers are Indians.

While manufacturing has historically lagged, initiatives such as the production-linked incentive (PLI) scheme and the India Semiconductor Mission have approved projects worth ₹1.5 lakh crore, signalling a transformative shift. 

Chandak reinforced India’s position in the semiconductor space while highlighting recent events such as Semicon India, which attracted 675 exhibitors and over 200 global leaders.
“We are already a semiconductor nation. It is not that we are zero. I am sure a day will come when we will be a lead player,” he said.

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