Context-
On September 11, 2024, Prime Minister Narendra Modi addressed SEMICON India 2024, underlining India's ambition to become a global hub for semiconductors. He highlighted the favourable ecosystem, ease of doing business, and a skilled workforce of 85,000 semiconductor experts that have attracted investments totaling Rs 1.5 trillion. Modi emphasised the importance of resilient supply chains and reaffirmed India’s commitment to building a robust semiconductor industry, which will contribute to global technological advancements.
Semiconductors are essential for the production of electronic devices, projected to become a trillion-dollar industry by 2030. They are vital for developing components such as transistors, diodes, and integrated circuits (ICs), which form the backbone of modern electronics, including computers, smart devices, and military applications.
The semiconductor industry began flourishing in the 1960s, with major players emerging from China, Japan, South Korea, the United States, and Taiwan. Specialised companies, known as foundries, produce semiconductor chips for design firms, referred to as fabless companies. This division of labour allows for optimised chip manufacturing and innovation within the global semiconductor ecosystem.
Global Challenges in the Semiconductor Industry
The semiconductor industry has experienced significant supply chain disruptions due to various global events. These include:
● 2011 Tsunami in Japan: Impacted production and logistics.
● COVID-19 Pandemic: Led to widespread lockdowns and worker shortages.
● Russia–Ukraine Conflict: Disrupted global supply chains.
● Red Sea Shipping Crisis: Further complicated logistics and shipping.
These disruptions have resulted in chip shortages and increased prices, significantly affecting industries such as automotive manufacturing and consumer electronics.
Taiwan's status as the leading hub for semiconductor production, combined with the growing threat from China and trade disputes between the United States and China, highlights the urgent need for diversification in manufacturing and suppliers. This geopolitical landscape underscores India's resolve to strengthen its domestic semiconductor production capabilities.
India’s Historical Pursuit of Semiconductor Technology
India's engagement with semiconductor technology began in 1976 with the establishment of the Semi-Conductor Laboratory in Mohali, Punjab. However, the commercialization of fabrication plants faced significant challenges, limiting success.
Organisations such as ISRO and DRDO operate their own semiconductor foundry systems for in-house production. In pursuit of a comprehensive semiconductor ecosystem, India has set ambitious targets, aiming for US$ 500 billion in electronics production by 2030 to facilitate integration into Global Value Chains (GVCs).
Strategic Investments and Partnerships
In the context of global economic shifts, India is positioning itself as a hub for high-tech industries, including clean energy, medical devices, electronics, and ICT hardware.
India has long been a leader in semiconductor design, housing 20% of the world’s chip design talent. Recent strategic partnerships include:
● Micron Technology: In June 2023, India partnered with this U.S.-based company to establish a major Assembly, Testing, and Packaging (ATP) facility in Gujarat.
● Kaynes Semicon: On September 2, 2024, the central government approved Kaynes Semicon’s proposal to establish an ATMP facility in Sanand, Gujarat, with an investment of Rs 3,307 crore. This marks the fifth semiconductor unit approved under the India Semiconductor Mission (ISM).
Government Initiatives and Policy Framework
National Policy on Electronics (NPE)
In 2019, the Government of India launched the National Policy on Electronics (NPE) with the goal of making India a global center for Electronics System Design and Manufacturing (ESDM) and fostering a robust semiconductor chip design ecosystem. Key features of the policy include:
● Boosting Domestic Production: Emphasising local manufacturing and exports.
● Incentives for Core Component Manufacturing: Providing support for high-tech mega projects.
● Support for R&D and Innovation: Encouraging emerging technologies.
On December 15, 2021, the Indian government allocated approximately Rs 76,000 crore for developing the semiconductor and display manufacturing ecosystem. The Programme for Development of Semiconductors and Display Manufacturing Ecosystem, launched on December 21, 2021, provides financial incentives for semiconductor and display manufacturing.
The India Semiconductor Mission serves as the nodal agency for these initiatives, offering fiscal incentives that cover 50% of project costs for establishing semiconductor and display fabs. On February 29, 2024, Prime Minister Modi announced the establishment of three semiconductor units, further strengthening India's manufacturing capabilities.
India’s path to semiconductor self-reliance requires coordinated efforts at both the national and state levels. Various states are actively pursuing growth in the semiconductor industry through distinct strategies:
Tamil Nadu has introduced a comprehensive semiconductor policy that includes financial incentives, infrastructure development, and talent programs aimed at becoming a leader in advanced electronics manufacturing.
Gujarat is leveraging its Vibrant Gujarat initiative and the Gujarat Semiconductor Policy 2022–27 to attract major investments, establishing ‘Semicon City’ to enhance its semiconductor ecosystem.
Odisha's semiconductor policy offers incentives such as land cost reimbursement and subsidised power tariffs, capitalising on its deep-water ports and industrial corridors. However, it needs to further develop its talent pool and infrastructure.
Each state presents unique advantages and challenges. Streamlined regulatory processes and transparent governance will be crucial in attracting investments to the semiconductor sector.
Challenges to the Semiconductor Industry
Despite various initiatives to create a robust semiconductor manufacturing ecosystem, significant challenges persist:
Chip manufacturing is highly complex and capital-intensive, necessitating advanced technology and precision. For instance, the initial investment for the Tata Electronics facility in Dholera exceeded Rs 91,000 crore.
Successful semiconductor manufacturing relies on uninterrupted power supply, clean water, and expensive purification facilities. These factors add layers of complexity to establishing fabrication plants.
Attracting and nurturing a highly skilled workforce is critical. Efforts are underway to connect youth with academia and research institutions through Centers of Excellence (CoEs) established in several leading Indian Institutes of Technology (IITs).
Challenges have also arisen in joint venture efforts, such as the Vedanta-Foxconn partnership, which faced complications leading to Foxconn's withdrawal despite initial agreements.
Government Support and Future Directions
To address the challenges facing the semiconductor sector, the Design Linked Incentive (DLI) Scheme was introduced in January 2022, offering financial incentives and infrastructure support for semiconductor design and deployment.
The government has approved financial assistance for multiple companies under the DLI scheme, aiming to fund at least 100 start-ups. The Centre for Development of Advanced Computing (C-DAC) is responsible for implementing the DLI scheme.
Other initiatives, such as the Scheme for the Promotion of Electronic Components and Semiconductor Manufacturing (SPECS), aim to expand the electronics manufacturing sector in India. The expired Production-Linked Incentive (PLI) scheme is also under consideration for revisions.
As semiconductors play a crucial role in modern electronics, India recognizes the strategic importance of establishing itself as a global semiconductor manufacturing hub. Despite challenges such as high capital costs, the need for skilled labour, and technology transfer restrictions, India is advancing through government initiatives, strategic partnerships, and educational investments. The country’s focus on building a robust semiconductor ecosystem aligns with its broader goals of fostering innovation, enhancing supply chain resilience, attracting global investments, and positioning itself as a leader in the global electronics and manufacturing landscape. By capitalising on its strengths in chip design and promoting domestic semiconductor growth, India aims to meet domestic demands and establish itself as a significant player in the global semiconductor market.
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Source- Indian Express
