BriefCASE: Chips on the table - India seizes opportunities in a thriving automotive scene

Semiconductor companies are starting to turn their focus to India's automotive market, where chip content is growing at an attractive rate in applications such as telematics, infotainment systems, electric mobility and advanced driver assistance systems. Demand for advanced infotainment systems, including modem and cockpit systems-on-chips, is high as these systems emerge as a key differentiator for original equipment manufacturers. This enrichment of vehicle content, combined with strong growth in total industry volume—which will see India second only to mainland China in its contribution to global light vehicle production growth between 2024 and 2034—is making India a doubly attractive location for investment.

Consequently, investments are beginning to mount up for both research and development and for local manufacturing of semiconductors. According to a report in Mint, Taiwanese fabless semiconductor company MediaTek plans to increase its presence in the Indian automotive sector. Mike Chang, corporate vice president at MediaTek, was quoted as saying that the company's chipsets will be integrated into five car models by October and 11 more by the end of 2024. MediaTek is also expanding its R&D efforts, looking to leverage Indian talent for research and design, with plans to add new sites to its existing centers in Bangalore and Noida. MediaTek plans to deploy India-made internet of things modules, apps and clusters, which make up the infotainment touch screen.

Qualcomm also seems bullish on India. The US company is reportedly in trials with various automakers for its chipsets and has teamed up with India's Tata Motors, Mahindra & Mahindra, and TVS Motor to drive digitalization in the automotive sector.

Government promotes local manufacturing

Market dynamics are not the sole driver of increasing interest, the Indian government has also played an active role in boosting the country's attractiveness. The government recognized the country's heavy reliance on the importation of automotive-grade electronics and semiconductors. To reverse this, the Indian government has launched several production-linked incentive (PLI) schemes under its "Make in India" initiative to boost domestic production of semiconductors and advanced automotive technology. Last month, Indian IT Minister Ashwini Vaishnaw said the second phase of the semiconductor policy, referred to as Semicon 2.0, is in development and expected to be implemented within three to four months.

Tata Electronics, part of India's Tata Group, is taking advantage of the semiconductor PLI scheme to establish a semiconductor assembly and test facility in Assam. The facility is expected to begin production by late 2025 or early 2026, catering to the automotive, power, electronics and other industries. A month ago, Tata Electronics made headlines by partnering with Powerchip Semiconductor Manufacturing to establish India's first semiconductor fab in Dholera, Gujarat. This facility will have a manufacturing capacity of up to 50,000 wafers per month. The fab will manufacture chips for applications such as power management integrated circuits, display drivers, microcontrollers and high-performance computing logic, addressing the growing demand in markets such as AI, automotive and computing. Recently, Analog Devices announced a strategic alliance with Tata Electronics and Tata Motors to explore semiconductor manufacturing opportunities in India.

Likewise, India's L&T Semiconductor Technologies has signed a memorandum of understanding with the Centre for Development of Advanced Computing to promote indigenization and accelerate innovation in semiconductor design and development. The collaboration focuses on creating Make in India integrated circuit/system-on-chips and electronics system design and manufacturing solutions for automotive and other applications. In the automotive sector, the company is developing high-end silicon chips to support the growing demand for software-defined vehicles and electric mobility. L&T Semiconductor Technologies CEO Sandeep Kumar told Reuters in August that the company would sign contracts with six automobile companies.

The growing demand for chips has attracted investment from relatively new players as well. Recently, Kaynes Semicon received approval to set up a semiconductor manufacturing unit in Sanand, Gujarat. It aims to produce 6 million chips daily for various applications, including automotive.
Automotive semiconductor manufacturing is in its early stages in India, but rapidly growing demand for vehicles equipped with advanced connectivity and safety features bodes well for the industry.

Authored By: Rohan Hazarika, Senior Research Analyst, Supply Chain & Technology, S&P Global Mobility

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