Investing.com -- India is gaining momentum in semiconductor manufacturing as global firms begin to respond to shifting trade dynamics and rising tariffs, according to analysts at Barclays, who see the country’s localisation efforts accelerating as a result.
Barclays analysts said the progress India has made in building a domestic electronics and semiconductor supply chain is “strong,” citing growing interest from global chipmakers including Infineon (OTC: IFNNY ), which recently signed a memorandum of understanding with local player CDIL for packaging services.
NXP (NASDAQ: NXPI ) is also in talks with Tata Electronics to become a foundry and outsourced semiconductor assembly and test (OSAT) client, potentially joining a wave of foreign firms expanding production in India.
The shift comes as India positions itself as a beneficiary of rising global trade tensions, particularly between the U.S. and China.
Tariffs have pushed companies to diversify their supply chains, and Barclays analysts believe India’s relatively lower reciprocal tariff rates and its ongoing trade negotiations with the U.S. make it a strategic alternative. “Tariffs could be a tailwind for domestic electronics,” they said.
India’s appeal is also underpinned by a $2.7 billion government-approved incentive program for electronics sub-assemblies and components.
The scheme includes revenue-linked incentives and capital expenditure support to attract production of bare components and capital goods used in electronics manufacturing.
According to Barclays, this could reduce India’s reliance on pre-packaged imports and strengthen demand for locally produced semiconductors.
Barclays analysts noted that several global firms are already responding to these shifts. Apple (NASDAQ: AAPL ) has confirmed that the majority of iPhones sold in the U.S. will be assembled in India.
Foxconn (SS: 601138 ) is reportedly planning a new 300-acre facility in Greater Noida, while Alphabet (NASDAQ: GOOGL ) and Samsung (KS: 005930 ) are exploring moves to shift production from Vietnam to India. PC brands such as Lenovo, HP (NYSE: HPQ ), MSI and Asus are also reportedly looking to expand local manufacturing operations.
The analysts flagged a surge in capital equipment imports as another indicator of India’s growing momentum.
Imports of semiconductor equipment hit record levels in 2024, despite a slowdown in the fourth quarter. Smartphone exports are also growing quickly, and EV sales in the country are accelerating.
Tata Electronics’ first semiconductor fab remains on track, despite delays in some back-end projects and a reported pause in the Adani/Tower project.
Barclays considers Tata’s project a key step in building India’s front-end chipmaking capacity.
India’s progress is drawing more attention from major international firms. Infineon is considering local manufacturing in India, though it will depend on the maturity of the domestic value chain.
The company is aiming to double its workforce in India and has set a target of $1 billion in revenue from the country by 2030.
Barclays analysts also flagged recent signs of movement in the semiconductor materials supply chain.
Fujifilm has signed an agreement with Tata Electronics to explore setting up a local supply chain for chip materials, while Merck (NSE: PROR ) and Linde (NYSE: LIN ) are reportedly evaluating investments in facilities for speciality chemicals and high-purity gases.
The potential entry of Tesla (NASDAQ: TSLA ) into the Indian semiconductor ecosystem could further accelerate this trend.
Tata Group companies are reported to have signed global agreements with Tesla, while the EV maker is also in early talks with back-end facility developers CG Semi and Micron (NASDAQ: MU ).
Though details remain unclear, analysts at Barclays said such moves would signal growing confidence in India’s chipmaking ambitions.