Why is Indian IT Investing in Semiconductors?
Infosys recently announced its intention to acquire InSemi to strengthen its engineering and R&D capabilities. InSemi, a semiconductor design company brings its expertise in electronic design, platform design, and automation to the table. Last year after multiple misses, Foxconn partnered with HCL Group to build an outsourced assembly and testing unit (OSAT) in India. L&T, on the other hand, is not seeking partnerships but investing INR 830 crore to set up a wholly owned subsidiary that will be engaged in the business of fabless semiconductor chip design and product ownership. “Partnering with and acquiring semiconductor firms provides IT companies with the necessary talent and customer access, establishing them as full-stack service providers essential for capturing the growing semiconductor demand,” remarked Pareekh Jain, CEO of EIIR (Engineering IoT R&D) Trend, in an interview with AIM. Strategic moves in the industry In the case of Infosys and InSemi, the partnership is expected to significantly bolster Infosys’ engineering R&D capabilities. InSemi is a mammoth in platform design, automation, embedded and software technologies. InSemi’s expertise will also get Infosys to enhance its chip-to-cloud strategy, providing niche design skills at scale, aligning with Infosys’ heavy investments in AI/automation platforms and industry partnerships. This acquisition is expected to enable Infosys to offer comprehensive end-to-end product development for its clients, addressing the increasing demand for advanced semiconductor design services integrated with embedded systems, explained Infosys chief Salil Parekh. TCS also partnered with Renesas Electronics Corporation to open an Innovation Center in Bengaluru and Hyderabad in March 2023. Like Infosys, its focus is to create semiconductor designs and software solutions for various sectors including IoT, infrastructure, industrial, and automotive segments. They plan to combine their expertise in IoT, manufacturing, telecom, automotive industries and advanced semiconductor designs, and embedded software support to push forward with new semiconductor designs. Wipro has also been working towards building an alliance with semiconductors for a while. The company acquired Eximius Design in 2020 to improve their VLSI and systems design capabilities. Eximius brought its expertise in semiconductor, software, and systems design to equip Wipro with comprehensive solutions for IoT, Industry 4.0, edge computing, cloud, and 5G applications. In 2022, Wipro also joined the Intel Foundry Services’ Accelerator Alliance, aiming to expedite the chip design cycle. This partnership was focused on making both complete chips (SoC) and specialised chips (ASIC) for specific uses. Diversification, from design to manufacturing HCL Group, on the other hand, is diversifying and foraying into semiconductor manufacturing. In the second attempt by Foxconn, the companies are in talks with Tamil Nadu and Telangana to set up its recently announced semiconductor assembly and testing unit. “Foxconn and HCL are partnering to establish OSAT operations in India to create a local industry ecosystem of supply chain stability. Foxconn plans to implement its BOL (build-operate-localise) model to benefit local communities through this investment,” a spokesperson for Foxconn said. The joint venture will be established with $37.2 million investment from Foxconn, securing a 40% stake. “Indian IT giants have strategically acquired semiconductor engineering firms to bolster their capabilities in this high-growth sector, showing a clear intent to capture the vast potential market for semiconductor outsourcing,” Jain explained. For HCL Group, the OSAT facility creates infrastructure for chip packaging and testing within India, a crucial step towards self-sufficiency in the semiconductor industry. Government support and the future Indian IT companies’ strategic emphasis on semiconductors is also propelled by government initiatives. The Indian government has approved significant financial outlays, including a INR 76,000 crore PLI scheme, to bolster the semiconductor sector and making entry into the segment a lucrative affair. Larsen & Toubro, a rather new player, made a strategic entry into the semiconductor industry by focusing on fabless chip design rather than manufacturing. R Shankar Raman, L&T’s CFO said at the earnings call last year, “We are mostly focused on designing automobile and industrial chips. At the moment it will be less investment and low manufacturing, but getting our positioning accessed for the design.” Each company’s approach differs from the other. While Infosys and Wipro focus on design and development, TCS emphasises innovation through partnerships, HCL on investment in manufacturing capabilities, and L&T on fabless models. The companies in India are working independently in the semiconductor industry, with each one contributing to a different part of the production chain, helping the industry grow as a whole. In conclusion, the IT sector aims to build semiconductor capabilities in-house, and end-to-end. While L&T are focusing only on chip design, HCL Group is setting up manufacturing facilities. This diversified approach not only aims to attract investment but also seeks to upskill the workforce to meet the industry’s growing demands, as seen through initiatives by HCLTech along with Electronics Sector Skills Council of India (ESSCI)​​​​. India’s semiconductor sector is set to hit $271.9 billion by 2032, growing at a 25.7% CAGR from 2022. Driven to self sufficiency, Indian IT is pushing hard to fulfil this prediction.
Instead of outsourcing chips, the IT sector aims to design, develop and manufacture them.
Instead of outsourcing chips, the Indian IT sector aims to design, develop and manufacture them. 
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K L Krithika is a tech journalist at AIM. Apart from writing tech news, she enjoys reading sci-fi and pondering the impossible technologies, trying not to confuse it with reality.