The recent focus on how many semiconductor companies India can attract for investment has drawn attention from various quarters.

In July, Hon Hai Precision Industry Co., Ltd., the parent company of Foxconn, announced its withdrawal from plans to build a joint venture semiconductor fabrication plant in India.

This marked the shelving of three applications received by India following its approximately $10 billion semiconductor subsidy initiative in 2021, for various reasons. Questions have been raised by analysts regarding whether India provides a favorable business environment and can supply sufficient water, electricity, and technical talent for semiconductor manufacturing.

However, India continues to voice ambitions for domestic semiconductor development. At the Semicon India 2023 forum in late July, Prime Minister Modi invited global semiconductor giants to invest in India, stating that "whoever comes will have a first-mover advantage."

Local media reports suggest that companies like Micron, Applied Materials, and Foxconn already have plans to build semiconductor factories or research centers in India.

The Modi government aims for India's chip market demand to increase to $80 billion by 2028, quadrupling the current scale. However, questions remain about whether India can break into the global semiconductor supply chain given its infrastructure, labor force, and policy environment. The semiconductor industry landscape is undergoing restructuring due to considerations such as semiconductor supply chain security.

Multiple countries and regions are vying for semiconductor factories, particularly high-process fabrication plants, and India's approximately $10 billion semiconductor subsidy may not be considered substantial within this competition.

When considering India's infrastructure, labor force, and policy environment, doubts persist regarding whether India can integrate into the global chip industry chain.

To make incentives effective, India needs a starting point. India is a major consumer electronics market and an international hub for chip design, but the leap from consumer electronics manufacturing to chip design and then to chip manufacturing is significant.

The highly specialized nature of the semiconductor manufacturing industry increases efficiency through capital-intensive wafer manufacturing, driving process development. The wafer landscape formed over many years of specialization is relatively stable.

To break through, India previously attempted to establish semiconductor manufacturing by supporting domestic firms, with minimal success. In the 1960s, when semiconductor companies were establishing factories across Asia, Fairchild Semiconductor considered setting up a factory in India but ultimately chose locations like Malaysia due to the business environment.

Missing the previous investment wave, India contributed funds to establish Semiconductor Complex Ltd. (SCL) in 1984. This factory upgraded its process technology from 5 micrometers to 0.8 micrometers in the 1980s, briefly trailing only Intel. However, in 1989, a fire destroyed the SCL factory. It was not until 1997 that the rebuilt SCL factory became operational.

During the lengthy 8-year period, competitors such as Samsung and TSMC emerged, and processes evolved, leading India to miss another golden opportunity for semiconductor development. Since then, overseas chip manufacturers have expressed a willingness to establish factories in India. In 2005, Intel planned to establish assembly and testing facilities in India but abandoned the plan due to India's delay in introducing semiconductor investment policies.

From 2012 onwards, India launched several semiconductor-related incentive policies, such as the Special Incentive Package Scheme for Electronics Systems Design and Manufacturing (ESDM) in 2012, offering 20% to 25% capital subsidies for investment projects. However, India seemed unprepared locally. In 2013, Indian media reported that Karnataka was unwilling to establish wafer factories due to an inability to meet the water demands of such facilities.

Companies previously expressing intentions to establish factories in India include GlobalFoundries and STMicroelectronics. However, India has encountered delays in implementing effective semiconductor incentive policies, hindering factory construction plans. To date, India still lacks domestic wafer fabrication facilities.

Although a series of incentive plans introduced by the Indian government have indeed attracted the attention of global semiconductor companies to some extent, there is still a long way for India to go from "attracting" to "retaining" and then to "utilizing" these investments effectively.