Industry executives at Semicon India are urging the government to expand support for semiconductor equipment, subsystems, and component manufacturing. While the current focus remains on chip fabrication, companies like Disco Hi-Tec and Advantest argue that building local tools is vital for a self-sustaining ecosystem. Investors should track whether future policy incentives shift toward this high-precision upstream sector.
The semiconductor industry in India is calling for a strategic shift in government support, moving from a focus purely on chip fabrication to the development of a domestic semiconductor equipment ecosystem. During the Semicon India event, industry leaders argued that for India to become a truly self-reliant manufacturing hub, it must build local capabilities in the high-precision tools, subsystems, and components that fabs and assembly units rely on daily.
The Shift Toward Equipment Manufacturing
Currently, the India Semiconductor Mission (ISM) provides substantial financial incentives for setting up semiconductor fabrication plants (fabs) and assembly, testing, marking, and packaging (ATMP) units. However, industry participants highlighted that the upstream supply chain remains heavily dependent on imports. The call for R&D incentives is intended to encourage domestic firms to invest in the design and production of the specialized equipment required to build and test chips.
Executives noted that this would require more than just subsidies. The industry is asking for support in the form of pilot manufacturing facilities, prototype development programs, and access to qualified testbeds. These resources are essential for validating locally developed products before they can be integrated into commercial semiconductor operations.
Expanding Engineering Footprint
Major global equipment manufacturers are already beginning to scale their Indian operations, signaling a growing recognition of the country's potential. Japanese firms, in particular, are deepening their involvement. Disco Hi-Tec, which specializes in equipment for cutting and polishing wafers, has partnered with Pandit Deendayal Energy University in Gujarat to establish a training center aimed at developing a skilled workforce for the chip ecosystem.
Similarly, Advantest Corporation, a leader in semiconductor test equipment, has expanded its local presence with operations in Bengaluru and Chennai. The company now runs dedicated research and development facilities in India focusing on both hardware and software, currently supporting over 30 customers. These moves suggest that international players are betting on the long-term growth of India's semiconductor sector, even while they wait for more specific policy support for the equipment industry.
Risks and Investor Monitorables
While the push for domestic equipment manufacturing aims to reduce import dependence, it presents significant challenges. The semiconductor equipment sector is characterized by high barriers to entry, requiring immense capital, long gestation periods for research, and deep intellectual property expertise. Globally, the market is dominated by established giants with decades of experience, making it difficult for new entrants to gain market share quickly.
For investors, the primary monitorable is how the government responds to these requests. Future policy updates regarding R&D incentives for upstream equipment and subsystems could significantly change the investment landscape. Furthermore, success in this area will depend on the ability of domestic engineering teams to bridge the gap between prototype and high-volume commercial production, a process that is as much about manufacturing precision as it is about research.