Semiconductor manufacturing often requires significant investment, typically feasible only for governments or large corporations. But are there opportunities for MSMEs as well? We spoke with Sanjay Gupta of L&T Semiconductor Technologies, and intriguingly, many opportunities do exist! Read on…
Q. There is significant discussion about India’s role in the semiconductor sector. Despite previous setbacks and companies withdrawing commitments, is India on the right track now?
A. Absolutely, I am optimistic about India’s semiconductor industry trajectory this time. To demystify the semiconductor landscape in India, we can consider four key pillars: IC design, wafer fabrication, chip packaging, and electronics system design. India excels in IC design, with a strong presence of global MNCs in fabless semiconductors, developing substantial intellectual property without owning fabrication facilities.
While India has faced challenges establishing wafer fabrication facilities, recent developments indicate a turning point. The commitment from the government and private sector, including significant initiatives by Tata and other companies, is stronger than ever. India has also cultivated a significant portion of the global semiconductor R&D workforce, underscoring the country’s deep expertise.
The strategic importance of establishing a robust semiconductor manufacturing ecosystem in India cannot be overstated, especially considering geopolitical tensions and the global dependency on regions like Taiwan. Recent government-backed initiatives and private investments are promising signs that India is poised to overcome past hurdles. The construction of wafer fabs and packaging facilities is underway, signalling a shift from planning to actual execution. This progress, supported by the government and industry leaders, suggests India is on the right path to realising its semiconductor ambitions.
Q. Many MSME representatives believe the semiconductor industry is too capital-intensive for their involvement. What are your thoughts? Where can MSMEs contribute across the semiconductor process?
A. You are right in noting the capital-intensive nature of the semiconductor industry, but there are numerous opportunities for MSMEs within its ecosystem. The process of creating semiconductors spans several stages and requires a diverse array of inputs—from specialised gases and chemicals to sophisticated robotics and AI algorithms. However, MSMEs do not need to tackle all aspects. They can focus on specific niches where they have expertise or where costs are feasible.
For example, the first pillar, IC design, is perhaps the most accessible. Each design consists of several IPs that can be independently designed and developed by Indian startups. MSMEs could also develop specialised software for various semiconductor applications, such as automotive systems like battery management or charging infrastructures, where the value-added significantly exceeds the production cost. Even small components like analogue front ends or A/D converters present opportunities. These are critical to larger systems and often monopolised by a few large companies, allowing smaller players to enter with competitive pricing.
Moreover, the burgeoning demand in sectors like automotive, IoT, and industrial electronics in India provides a robust market for innovative semiconductor products. MSMEs can harness this demand by developing niche products or services, with strong potential for growth by offering competitive alternatives to the high-margin products of dominant players.
Thus, while the semiconductor sector is capital-intensive, strategic entry points exist for MSMEs to contribute meaningfully and profitably. This approach supports the national objective of strengthening semiconductor capabilities and positions these enterprises to capitalise on India’s rapid economic growth and increasing technological needs.
Q. How can MSMEs identify their niche in the market, especially when facing budget constraints that limit their ROI compared to giant corporations like L&T or Tata?
A. Identifying the right niche for companies involves deep introspection and recognising the real strength areas with the potential for high ROI. I previously mentioned design, but there are multiple sectors within electronic manufacturing where MSMEs can excel. The challenge often lies in the awareness and the need for more knowledge about potential partners for creating synergies. For instance, L&T Semiconductors constantly seeks startups for acquisitions or partnerships in very specific niche areas of semiconductor design, but we do not find relevant matches. MSMEs must focus on solving real customer problems—this is often where many startups fail and end up developing Me-Too products. They either do not meet market needs or fail to align their offerings with customer issues. I advise MSMEs to stay as close to their customers as possible. Understanding customer needs sharpens focus on developing the right product architecture, increasing the chances of success by aligning with industry gaps.
| Sanjay’s Background |
| Sanjay graduated in electronics engineering from Delhi College of Engineering in 1996. He later completed an MBA at the Indian School of Business, Hyderabad, earning recognition on the Dean’s List. After his engineering, he accepted an offer from a US-based startup. Within a year, he was transferred to San Jose, California, where he gained insights into the burgeoning field of microprocessors and microcontrollers. His initial projects involved 250-nanometre technology. By 1998, that startup was acquired by Motorola, where he helped establish their wireless design centre in India, later transitioning to their networking group to work on high-performance chips. From 2005 to 2016, he created India’s largest automotive R&D centre, which had over 500 US patents. After Motorola transitioned to NXP, he served as the Vice President of Engineering and Managing Director for NXP’s India Technical Innovation Centres, overseeing 5000 engineers working on innovative projects in the industrial, IoT, networking and automotive sectors. He currently leads L&T’s nascent semiconductor venture as Chief Development Officer and Global Head of Engineering at L&T Semiconductor Technologies (LTSCT). Prior to joining L&T Semiconductor, Sanjay spearheaded Minda Corporation’s Advanced Technologies business vertical as President & CEO. |
Q. Considering some entities’ control over the raw material market, do you see a role for MSMEs in this sector?
A. Raw materials encompass a variety of elements depending on the context. For example, in electronics, it could mean supplying PCB boards and discrete components, which are crucial for maintaining supply chains. In my experience, many design projects are delayed due to unavailable components. MSMEs can establish themselves by offering optimal component solutions that big players could use to optimise their overall BOM cost or improve their supply chains. They could become key suppliers of high-quality, cost-effective components.
Furthermore, the definition of raw materials can extend beyond physical components. Talent can also be considered a critical raw material. MSMEs could distinguish themselves by supplying highly skilled professionals in specific fields. Another area is the chemical and gas supplies needed for semiconductor manufacturing. MSMEs could become distributors or even partners in joint ventures, potentially gaining a monopoly with strategic resource management.
The semiconductor industry is set to grow significantly, supported by national initiatives. MSMEs should prepare to scale their operations to align with industry growth timelines, like Tata’s projected advancements by 2027. The key is to be proactive and ready when market demands increase, maximising their impact in the sector.
Q. The primary challenge in India’s electronics industry is not demand but supply. There is more demand than available suppliers. Would you agree with this assessment?
A. Absolutely, I agree. This issue permeates every facet of the ecosystem—talent, suppliers, and logistics. Companies often struggle to find reliable logistics partners who deliver on time and precisely. This is not a minor issue; delayed supplies can nullify all the effort that goes into engineering and coordination. Moreover, with the overload of available information, the challenge extends to discerning which data is essential. MSMEs have a significant opportunity to set a standard in providing accurate, crucial details on industry components.
The shift from traditional CMOS to advanced technologies, such as high-voltage IGBTs, silicon carbide, and GaN, is also a significant area ripe for innovation. These advancements are making devices more compact and efficient, and the opportunities for local development in these areas are vast, especially given that much of this technology is currently concentrated in China and Taiwan. Essentially, there are opportunities at every turn—it is just a matter of choosing to pursue them.
Q. Numerous MSMEs feel that large companies like yours fail to provide opportunities to showcase their offerings. How do you respond to this?
A. First, it is essential to understand that industries are made up of people, not just buildings. There is a significant workforce shortage at all levels, doubling the pressure on companies. However, organisations such as the Indian Electronics and Semiconductors Association, where I have served as chairman, can bridge the information gap between MSMEs and larger companies. These institutions play a crucial role in connecting industry, academia, and government.
However, the real challenge is not just about obtaining information but also about making your value proposition known. MSMEs need to be proactive and persistent in reaching out. For example, if an MSME has capabilities in IP supply or system design that are in demand, they must communicate this to potential partners. Opportunities exist, but MSMEs need to make their presence known and take the initiative to capitalise on them.
I will share an anecdote about Steve Jobs, who was greatly inspired by someone who dared to call him directly for an internship, bypassing conventional application processes. This individual eventually became a top executive at Apple. This story highlights the importance of persistence and initiative—qualities essential for MSMEs looking to break through. Always remember, someone might be waiting for your call.
Q. It appears that many PCB manufacturing companies prefer to operate abroad, claiming that the Indian market lacks competitive pricing compared to China. How can we encourage support for local manufacturers? What can MSMEs do to overcome this challenge?
A. This challenge stems from two main issues. Historically, Indian consumers and businesses have been highly price-sensitive, influenced by a relatively low per capita income. A decade ago, India’s per capita income was under $1000, fostering a mindset where even minor cost savings were crucial. However, this is changing. India’s per capita income is now approaching $2500, shifting spending from essentials to discretionary items. With rising incomes, spending is shifting from essentials to quality and features rather than price alone.
Internationally, markets operate differently due to higher economic affluence. For instance, the US has a per capita income of over $15,000, and China’s is above $7500. India is on a similar trajectory, expected to reach these levels within the next decade. As the economy grows, consumer behaviour is shifting towards valuing features and quality over mere cost.
For MSMEs, the key is to focus on quality and reliability rather than competing solely on price. The Indian market is evolving, and both businesses and consumers are increasingly willing to pay for higher quality and advanced features. Companies such as L&T Semiconductors prioritise quality over cost when selecting suppliers. As India progresses economically, there will be greater opportunities for MSMEs to emphasise quality in their offerings. The mindset of suppliers and consumers is shifting, and MSMEs must adapt to these changes to succeed.
Q. How did China, once trailing India in car manufacturing, begin exporting 16,000 cars daily last fiscal year, becoming a major player similar to its rise in the semiconductor sector? Where has India fallen short in this area?
A. India’s automotive industry ranks among the top three globally, showcasing significant capabilities. However, it trails behind China, which has achieved exceptional advancements in its automotive sector over the past two decades. This progress is largely due to China’s robust local semiconductor and system design industries. Observers often note the scale of China’s manufacturing facilities, referring to them as ‘ultra-mega factories.’ For example, the production area in China’s EV battery plants is so vast that one cannot see the facility’s end wall—a stark contrast to even the largest plants in India.
