Despite landing big-budget investments and claiming to have a dynamic ecosystem with incentives and policy support, why are MSMEs struggling in Gujarat’s semiconductor sector?
Gujarat’s semiconductor initiative has reportedly faced limited participation from the micro, small, and medium enterprises (MSME) sector in recent years despite achieving repeated investments from big players in the industry, including ₹1.26 trillion from major companies such as Tata Electronics, Micron, and Kaynes.
According to a report by the Financial Express, industry insiders point to high entry barriers, including steep investment requirements, as the main reasons for the lack of MSME involvement.
Under Gujarat’s policy, the minimum investment required to establish a semiconductor facility ranges from ₹500 million for an outsourced assembly and test (OSAT) plant to a staggering ₹200 billion for a semiconductor fabrication plant.
These thresholds, combined with a lack of incentives for research and development, make the sector a challenging space for cash-strapped MSMEs, according to experts.
According to Dr Pankaj Yadav, Associate Professor at Pandit Deendayal Energy, MSMEs face challenges in high-end chip fabrication, and instead, they could focus on microchips for broader electronic applications to scale up.
Mona Khandhar, Principal Secretary of Gujarat’s Department of Science and Technology, suggested that MSMEs can still enter the semiconductor sector by targeting niche areas like substrate or power semiconductors.
She mentioned to the Financial Express that large projects, such as those by Tata and Micron, offer MSMEs opportunities through third-party contracts and local sourcing.
However, MSMEs face challenges in securing the necessary financial backing too. As pointed out by Dr Yadav, unlike educational institutions, which can access government research funding, commercial enterprises and MSMEs are often left without such support.
Despite foreign companies like Nvidia and AMD establishing research centres in India, local MSMEs still struggle to obtain the necessary incentives to compete.
One example is Suchi Semicon, an MSME that has ventured into the semiconductor industry with an OSAT facility in Surat. Despite securing private funding, the company is still awaiting approval for capital support under the central government’s SPECS (Scheme for Promotion of Manufacturing Electronic Components and Semiconductors) incentive programme.
In a recent exclusive interview with EFY, Suchi Semicon’s founders, Ashok Mehta anjd Shetal Mehta mentioned, “We hope that India Semiconductor Mission (ISM) approves our application, and with that subsidy, we will reinvest in our company to purchase more top-notch equipment.”
Meanwhile, the Gujarat State Electronics Mission (GSEM) continues to facilitate semiconductor projects by providing land acquisition subsidies, power and water incentives, and single-window clearances.
Highlighting the state’s enormous support to the semiconductor industry in an interaction with EFY, GSEM’s mission director, Manish Gurwani, mentioned, “We are one of the very few states in India that has reliable water and power networks. Our policies are well-structured and effectively implemented without bureaucratic delays.”
