Date : 29/07/2023

Relevance: GS Paper 3 - Economy- Industries

Keywords: Semicon India, India Semiconductor Mission (ISM), domestic semiconductor ecosystem, self-sufficiency, global value chain, digital sovereignty,

Context-

• The second edition of Semicon India, an annual conference by the India Semiconductor Mission (ISM), marks a crucial phase in India's semiconductor industry. As the global semiconductor landscape undergoes rapid changes, the conference highlights India's strides in semiconductor design and manufacturing.
• The government's commitment to fostering a self-sufficient domestic ecosystem and positioning India as a key player in the global value chain is evident through its unprecedented fiscal support and active engagement with industry giants.

Building from Scratch: India's Missed Opportunities

• Over the years, India faced missed opportunities to establish a thriving semiconductor industry. From missing out on the Fairchild Semiconductor fab in the '60s to regulatory and bureaucratic hurdles hindering a global semiconductor company's interest in the mid-2000s, to missing out on Intel's global expansion in the late 2000s to Vietnam-India repeatedly missed the bus due to the then government's opaque functioning and inordinate delays in articulating a vision and drafting a formal policy.
• Despite a promising start by public sector undertakings, India failed to capitalise on the potential demonstrated in the early days. Bharat Electronics Ltd (BEL) and some other labs and institutions were not able to achieve the volume needed for competitiveness nor did they have the state-of-the-art technology to become industry leaders.
• India's VLSI fabrication plant at the Semiconductor Complex Limited in Chandigarh started production well before Taiwan's foray into semi-conductor manufacturing. But, after a massive fire in 1989, it remained shut for many years. The inability of successive governments to swiftly restart operations at SCL is a stark reminder of how a lack of strategic vision and policy failure prevented India from keeping up with leading nations.
• Despite a promising start by public sector undertakings, the lack of strategic vision and state-of-the-art technology hindered competitiveness.
• As a result, India became heavily dependent on semiconductor imports, which not only impacted economic growth but also raised concerns about national security. However, the India Semiconductor Mission (ISM), initiated by Prime Minister Narendra Modi, aims to reverse this trend and achieve semiconductor self-reliance.

ISM's Vision and Concrete Action

• The ISM's vision centers around creating a robust domestic semiconductor ecosystem that fuels economic growth safeguards industries from global disruptions, and ensures digital sovereignty. Unlike other industries where existing domestic sectors are bolstered through programs like Production Linked Incentives, the semiconductor sector is being built almost entirely from scratch.
• The government's fiscal incentives and regulatory support play a pivotal role in attracting global investors to set up their manufacturing plants in India. Policymakers understand the long-term support required for the semiconductor sector's growth, and their comprehensive approach spans the entire value chain, from semiconductor design to final assembly and testing.
• Policymakers have understood that the industry is a foundational and core one that directly and indirectly powers the growth of multiple industries and contributes immensely towards job creation. The government identified opportunities from the global semiconductor shortage, which disrupted supply chains across industries, and realized the urgency of achieving semiconductor self-reliance. Finally, domestic manufacturing is necessary to ensure "digital sovereignty", a critical aspect of national security
• Select startups are supported through the Design Linked Incentive (DLI) scheme, and efforts to modernize the Semiconductor Complex Limited in Chandigarh are underway. Agreements with the US and Japan further exemplify India's global appeal and commitment to semiconductor development and talent nurturing.

Sustainable Semiconductor Manufacturing: An Opportunity for India

• The semiconductor industry faces concerns regarding high energy and water consumption. This challenge presents an opportunity for India to focus on sustainable semiconductor manufacturing by investing in green technologies and fostering innovations.
• As environmental considerations gain prominence globally, India can establish itself as a leader in sustainable practices within the semiconductor industry.

India's Emergence as a Global Semiconductor Hub

• Prime Minister Narendra Modi's compelling pitch to global investors at the Semicon India 2023 conclave highlights India's aspiration to become a global semiconductor hub. The government's policy reforms, tax incentives, and efforts to attract global players to establish manufacturing plants in India contribute significantly to this vision.
• PM highlighted Internet penetration and fiber infrastructure in the country, availability of talent, a huge market, besides a friendly and attractive corporate tax system. He also underlined the political stability in the country.
• Prime Minister touched upon the rapid development driven by India’s future aspirations, citing the reduction in extreme poverty and the widespread availability of affordable data connectivity which has reached even remote places in the country.
• According to him, the country has made huge progress in the electronic manufacturing sector which has grown from $30 billion to over $100 billion and talked about rising electronic manufacturing exports from the country and the presence of more than 200 mobile manufacturing units in India.
• The announcement of AMD's $400 million investment to build its largest design center in Bengaluru is a testament to global players' confidence in India's semiconductor potential. Foxconn's chairman expressing optimism about India's determination and growth potential further strengthens India's position as an attractive destination for semiconductor manufacturing.

Conclusion:

India's semiconductor journey has evolved from a virtually non-existent domestic ecosystem to a thriving sector attracting global investors. The ISM's vision and concrete actions have instilled confidence among industry giants. As India embraces this new world of opportunities, it must focus on sustainable practices and strategic partnerships to establish itself as a significant player in the global semiconductor landscape. With the government's unwavering support and the semiconductor industry's global value chain rebalancing, India stands on the cusp of transforming into a global semiconductor powerhouse.

Source - The Hindu