India-Japan Collaboration: Pioneering the Semiconductor Ecosystem Development

India’s ambitious strides in the semiconductor sector have found a promising ally in Japan, as Japanese firms express keen interest in setting up semiconductor units in the country. With their advanced expertise, global leadership in semiconductor components, and operational experience, Japanese companies are ideally positioned to partner with Indian counterparts to build a resilient semiconductor ecosystem. Deloitte has highlighted the potential for this collaboration, emphasizing the critical role of skilled labor, financial resources, and consistent government support to achieve India’s semiconductor goals.

India and Japan: Strategic Partners in the Semiconductor Journey
In July 2024, India and Japan signed a landmark memorandum of cooperation aimed at the joint development of the semiconductor ecosystem. This partnership seeks to bolster semiconductor design, manufacturing, equipment research, talent development, and supply chain resilience. This agreement positioned Japan as the second Quad member, after the United States, to commit to enhancing India’s semiconductor capabilities.

According to Shingo Kamaya, Deloitte’s Asia Pacific and Semiconductor and Technology Risk Leader, Japanese firms are “super enthusiastic” about India’s potential in this sector. The agreement reflects the shared vision of the two nations to address global semiconductor supply chain vulnerabilities while fostering sustainable growth in the industry.

Japan’s Semiconductor Expertise: A Catalyst for India’s Vision
Japan ranks among the top five countries globally in terms of semiconductor ecosystem maturity, boasting nearly 100 semiconductor manufacturing plants. Its firms are recognized leaders in essential semiconductor components, including raw wafers, chemicals, specialized gases, and high-precision lenses used in chip manufacturing equipment. Furthermore, Japan’s advanced display technologies align with India’s aspirations to expand its technological capabilities.

India, which has set an ambitious target of establishing 10 semiconductor manufacturing plants over the next decade, views Japan as a critical partner. As Rohit Berry, President of Strategy, Risk, and Transactions at Deloitte India, pointed out, Japan’s technology and specialization make it an invaluable collaborator for building a robust semiconductor ecosystem.

“There is no better partner to develop such an ambitious and critical ecosystem than Japan,” Berry noted. He emphasized that Japan’s experience in setting up comprehensive semiconductor ecosystems, both domestically and internationally, is essential for replicating similar success in India.

Building an Ecosystem: Beyond Individual Factories
India’s semiconductor development plan is not limited to constructing isolated manufacturing units. The vision entails creating a comprehensive ecosystem that includes research, design, talent cultivation, and supply chain integration. Berry explained, “The semiconductor story in India is about the entire ecosystem. Many Japanese companies have already established such ecosystems elsewhere, and their expertise will be critical for India.”

This holistic approach aligns with India’s goal of fostering long-term growth and global competitiveness in the semiconductor domain. Collaborative efforts between Indian and Japanese firms are seen as fundamental to achieving this vision. Berry highlighted the importance of enduring partnerships, noting, “This is not a one-year game or a two-year game. This will benefit India and Japan for generations.”

Key Enablers for Growth: Skilled Workforce, Investments, and Incentives
A skilled workforce is among the primary enablers for India’s semiconductor ambitions. Developing industry-ready talent will require extensive training programs, curriculum updates, and international collaborations. Japan’s experience in nurturing specialized semiconductor talent can provide valuable insights for India’s educational and industrial policies.

Additionally, sustained financial investments are essential. Japanese firms’ willingness to invest in India reflects their confidence in the market’s potential. At the same time, Indian government initiatives such as production-linked incentive (PLI) schemes, financial subsidies, and tax benefits are expected to play a pivotal role in attracting and retaining investments.

Government support at both the central and state levels remains crucial. Kamaya emphasized the need for a “center-state partnership” to facilitate seamless operations and collaboration. Aligning incentives across all stakeholders — the central government, state governments, private firms, and international partners like Japan — will create an environment conducive to innovation and growth.

A Long-Term Commitment for a Resilient Supply Chain
The India-Japan semiconductor partnership is set to strengthen the global supply chain. Recent disruptions, such as the COVID-19 pandemic and geopolitical tensions, have highlighted the fragility of existing supply networks. By working together, India and Japan aim to create a resilient semiconductor supply chain that benefits not just their domestic markets but also the global technology ecosystem.

Japanese firms are uniquely positioned to contribute to this effort. Their leadership in producing key materials, such as semiconductor wafers and manufacturing chemicals, can address supply bottlenecks. Moreover, integrating Japan’s expertise with India’s growing semiconductor aspirations will create synergies that foster innovation and efficiency.

The Road Ahead: Challenges and Opportunities
While the India-Japan collaboration holds immense promise, challenges remain. Establishing a semiconductor ecosystem requires significant time, capital, and coordination among various stakeholders. Moreover, maintaining consistent government support through policy continuity and fiscal incentives is vital for sustaining momentum.

Berry underscored the long-term nature of the initiative, calling it a “once-in-a-lifetime setup.” He stressed the importance of ensuring that all stakeholders — central and state governments, private sector players, and international partners — work in harmony to achieve common goals.

Conclusion: A Win-Win for India and Japan
The India-Japan partnership in the semiconductor sector represents a convergence of complementary strengths. For India, Japan’s expertise offers a pathway to achieving its ambitious semiconductor targets. For Japan, India provides a growing market and an opportunity to solidify its role in the global semiconductor landscape.

This collaboration is more than an industrial initiative; it is a strategic alignment that will shape the future of technology and innovation. As the two nations embark on this transformative journey, the benefits will extend beyond borders, fostering technological advancement and economic growth for generations to come.

The image added is for representation purposes only