As India attempts to boost its semiconductor ambitions, Equirus Securities said India’s place in chips for the past two decades has been defined by its hidden advantage of a design talent pool, while the next chapter will likely see the country move from design talent toward full-stack capability as India begins to fabricate, package and test chips on home soil.
Finance Ministry's Expenditure Finance Committee (EFC) approved a spending proposal of about Rs 1.20 lakh crore for the second phase of the government's semiconductor programme, people aware of the development told The Economic Times.
While the government ramps up efforts to boost India's chip dreams, Equirus, in its note, said that the global chip market is on course to grow from about $775 billion to $1.6 trillion by 2030, and the journey is being rewired by a geopolitical reordering of where chips are made.
Equirus noted that semiconductors have been recast from a tradable component into critical national infrastructure, a vulnerability that a shortage in 2021 exposed and the AI build-out magnified. More than $600 billion worth of incentives announced since 2022 across the US, EU, Japan, Korea, China and India are steering new capacity away from a chain where Taiwan still makes over 90% of leading-edge logic, it further said, adding that the demand pull is immense. The top five hyperscalers are lifting capex toward roughly $700 billion in 2026, almost all of it through the same narrow supplier base.
Also read: India Semiconductor Mission 2.0 gets EFC nod with ₹1.2 lakh crore outlay
India’s hidden advantage in the semiconductor journey
India is building where its advantages are real, according to the brokerage. “It's roughly three lakh chip designers, about a fifth of the global pool and second only to the US, run architecture, verification and tape outs, including a 2 nm tape out by Qualcomm's India teams. ISM deliberately targets OSAT and mature nodes of 28 to 110nm, about 56% of global wafer capacity and the auto, industrial and consumer chips India uses most, where assembly cost runs substantially below Taiwan. " Demand-led import substitution underpins the case, with chip consumption set to more than double to about $155 billion by CY31," it added.
However, the constraints are real, and the growth horizon is long, according to Equirus. India will still import more than 90% of its equipment and most speciality chemicals and gases, the leading edge below 7nm is absent, and the binding risk is execution rather than strategy, according to the brokerage. “India is synthesising the best of its Asian predecessors, government-seeded research from Taiwan, domestic champions from Korea and FDI anchors from Malaysia and Singapore, while staying open, unlike China's closed model. This is roughly year five of a twenty-year build, the most favourable entry any economy has had since Malaysia opened Penang in 1972,” it added.
Also read : CG Semi’s Gujarat chip unit starts to ship
Which country dominates the semiconductor market?
US dominates the design and software aspect of the semiconductor market, Equirus highlighted, as the country accounts for over 75% of EDA revenue and roughly 60% of chip-design revenue. Yet, it manufactures only a small proportion of the chips it designs. Taiwan, China, Korea and Japan, meanwhile, dominate manufacturing, together accounting for around 78% of wafer fabrication and roughly 76% of memory production.
China is among the leaders in OSAT and is moving up the value chain. “India occupies a meaningful, though still nascent, position. It accounts for an estimated 3% of global chip-design revenue despite employing about 20% of the world's semiconductor design engineers – a gap that represents one of India's most tangible opportunities and one that the DLI and C2S programmes are designed to address.
On the manufacturing side, India is only beginning its journey through the OSAT projects supported under ISM. India is entering the value chain at its lowest-barrier segment, where its advantages in talent, domestic demand and trusted-partner positioning can compound most rapidly,” the brokerage said.
Also read: India's chip startups cross from prototype to production
India’s semiconductor opportunity, domestic demand drivers
Equirus noted that India's semiconductor opportunity extends well beyond industrial policy. The country’s domestic semiconductor consumption has grown at an 18-20% CAGR over the past eight years, from roughly $15 billion in 2018 to $62 billion in 2026, making it one of the world's fastest-growing semiconductor markets.
“The key drivers are well established: a scaled smartphone production base, the early stages of a data centre buildout, and rising auto electrification. IESA and Datalabs forecast the market to reach US$ 155 billion by CY31E, a 20% CAGR that would increase India's share of global semiconductor consumption to roughly 9%, it added, noting that India's broader electronics manufacturing ambition further supports this.
Semiconductor stocks
Equirus maintained its ‘Reduce’ rating on the shares of CG Power and Kaynes Technologies. For the shares of CG Power, the brokerage set a target price of Rs 875 apiece, implying a downside potential of more than 10% from the stock’s previous closing price of Rs 976.50 apiece on the NSE.
For the shares of Kaynes Tech, Equirus has a target price of Rs 3,100 apiece. This implies a downside potential of nearly 2% from the stock’s previous closing price of Rs 3,152.10 apiece.
Also read: Micron, GM sign semiconductor supply agreement for vehicles
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
