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Silicon rally: India positions itself as major chip player

Indian politicians, entrepreneurs and investors have spotted the chance to position the subcontinent as a major player in the semiconductor industry in the midst of a trade war between China and the US.

Indian mining conglomerate Vedanta [NSE:VEDL] captured the headlines last year when it signed a joint venture deal with Foxconn [TPE:2354] of Taiwan to set up a semiconductor plant in Gujarat with an eye-watering potential investment of USD 1.5trn. The firms have already recruited hundreds of engineers and plan to generate revenues by 2027.

Other players are following in Vedanta's footsteps, according to Utkarsh Sinha, managing director of Bexley Advisors. And this has encouraged a flurry of chip-design startups, he said, adding that deeptech companies that couldn't get funding two years ago are now getting term sheets.

However, the boom is still just beginning. Total deal volumes for M&A and fundraising in the Indian semiconductor market stands at just USD 16.3m for the year to date (YTD), according to Mergermarket data.

This stands in stark contrast to YTD 2022, a record year, when total deal volumes stood at USD 383m spread over four deals.

Chips with curry sauce

Some of the prominent deals so far include Chennai-based Quest Global acquiring Adept, a product design house with capabilities in the semi-conductor, automotive and hi-tech vertical in November 2022. Meanwhile in March 2022, Tejas Networks [NSE:TEJASNET] acquired Bengaluru-based fabless semiconductor company Saankhya Labs.

There have been more acquirors from India in recent years, according to the data. Other acquirors have been from US and Japan such as Alten Calsoft Labs and UST (formerly known as UST Global).

Sequoia Capital India also recently made investment of USD 3m in pre-seed funding in Chennai-based fabless semiconductor focused on RISC-V processor solutions Incore Semiconductors. The company will be receptive to investor approaches as it seeks to kickstart fundraise by mid-to-end 2024, according to a Mergermarket report in May 2023.

The fund also made another investment of USD 2.35m in Chennai-based Mindgrove, an IIT-Madras incubated semiconductor startup, according to local media reports in February 2023.

Chips Ahoy!

The Indian semiconductor market is to reach USD 55bn by 2026 with more than 60% of the growth coming from three industries including smartphones and wearables, automotive components, and computing and data storage, according to a report by Deloitte.

One company to watch is Polyamtech, a Kancheepuram, Tamil Nadu-based chip manufacturer. It is in the process of acquiring a semiconductor company in France, according to Eswara Rao Nandam, Founding President. The due diligence is completed. The memorandum of understanding (MoU) has been signed, he said.

Polyamtech is also planning a deal in the US and is in discussion with the potential target, the executive said.

Meanwhile, Unicorn India Ventures, a Mumbai-based technology focused fund, will look to support companies which are at commercialization stage, according to Anil Joshi, its managing partner.

Whether or not the ambitious plans will come to fruition will depend on other countries trying to muscle into the same space, including Cambodia, Thailand, and Vietnam. Even so, India has every right to feel chippy as the battle begins.

Analytics by Manu Rajput