PLI Scheme for Chip Manufacturing: Can India be a Winner? : Daily Current Affairs

Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment; Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth; Infrastructure; /GS-3: Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights.

Key Phrases: PLI Scheme, Semiconductor and display manufacturing, Electronic system design and manufacturing (ESDM), India Semiconductor Mission, Chips to start-ups, design-linked incentive scheme, Integrated Circuits, Chip design and Fabrication, ATMP (assembly, testing, marking, and packaging) operations, Critical information infrastructure.

Why in News?

The Union Cabinet on Wednesday approved a Rs76,000 crore scheme to boost semiconductor and display manufacturing in the country. With this, the total amount of incentives announced for the electronics sector is now Rs2.30 lakh crore.

Key points:

The comprehensive programme for the “development of sustainable semiconductor and display ecosystem in the country” is aimed at making India a global hub of electronic system design and manufacturing (ESDM).
In order to drive the long-term strategies for developing a sustainable semiconductors and display ecosystem, a specialised and independent ‘India Semiconductor Mission’ will be launched.
- Mission will be led by global experts in semiconductor and display industry. It will act as the nodal agency for efficient and smooth implementation of the schemes on semiconductors and display ecosystem.
A “chips to start-ups” programme is also launched simultaneously that would develop 85,000 well-trained engineers.
Semiconductor designers would be given the opportunity to launch start-ups. The government would bear 50% of the expense under the design-linked incentive scheme. The entire programme would lead to 35,000 high-quality direct jobs and 1 lakh indirect employment.

Understanding Semiconductor Technology:

At the core of the semiconductor business is the chip, an integrated circuit or IC. A chip contains transistors that help computations through a calibrated flow of electric current.
- Since more transistors on a chip mean a more powerful chip, chip-making firms are in a race to house as many transistors onto the small chip area.
- In 1965, Intel’s Gordon Moore predicted that transistors on a chip would double every year. High R&D expenditure made this possible year after year.
- Today, a thumbnail-size chip contains billions of transistors. This led to a one trillion-fold increase in computing power while lowering the cost of the chip.
The semiconductor value chain has five broad segments.

1. Chip design: The chip-making process starts with designers developing circuitry for use in the latest devices. Three expertise areas are core IP, electronic design, and chip design. The design captures 30 per cent revenue of the semiconductor business.

The US has captured over half the share in core IP and chip design.
While Intel and Samsung are present in most value chain parts, Qualcomm, Nvidia, and AMD focus on design.
India plans to set up 20 semiconductor design companies to get a share in the design business.
Also, it will invest in developing high-tech clusters and support over 85,000 researchers.

2. Manufacturing of silicon wafers: Silica sand is melted into large pieces called ‘ingots’. These are then sliced into ultra-purified thin wafers. Such wafers make the base for chips.

Wafer manufacturing captures 3 per cent revenue of the semiconductor business. Japan produces about 60 per cent of wafers.
Patented high technology prevents easy entry into this segment.

3. Chip fabrication tools: Chip-making requires specialised equipment, chemicals, and gases. Such tools convert the prototype designs into mass produce chips in the fabs.

Only ASML (Advanced Semiconductor Material Lithography), a Dutch firm, makes the extreme ultraviolet (EUV) lithography devices that make advanced 3-5 nanometer chips (nanometer is one billionth of a meter!!).
An EUV machine contains over 100,000 parts, is large and is shipped in 40 freight containers.
Chip fabrication tools capture 15 per cent revenue of the semiconductor business.
India like most countries have to buy such machines for its use.

4. Chip fabrication units or fabs: Fabs mass-produce chips from a prototype. The base is prepared by depositing thin films of semiconductors and materials like boron and phosphorous on wafers which serve as the base of the chip.

The coated wafer then enters the lithography machine inside a fab. It’s a dust-free environment, a thousand times cleaner than a hospital ICU.
A lithography machine converts a wafer into a powerful chip containing billions of transistors. Such changes occur at the nano level, making the process most complicated to copy.
Fabs capture 40 per cent of the revenue of the semiconductor business. Taiwanese firms TSMC (Taiwan Semiconductor Manufacturing Company), and UMC (United Microelectronics Corporation) make chips for others.
India plans to enter the fab space by providing support for the setting up of two greenfield semiconductor fabs and two display fabs.
It would also help modernise the brownfield fab facility of the Semi-conductor Laboratory (SCL) through joint venture with a fab partner.

5. ATMP (assembly, testing, marking, and packaging) operations: The fabricated chips need ATMP to weed out defects and package the chips.

ATMP captures about 10 per cent revenue of the semiconductor business. Taiwan and China lead with 50 per cent value.
India hopes to capture this segment in a big way. It would support the setting up of 15 semiconductor ATMP units.
The availability of a low cost skilled technical workforce will help capture part of the business in a few years.

Need:

Trusted sources of semiconductors and displays had strategic importance in the current geopolitical scenario.
- With the bulk of semiconductor manufacturing and supply capability concentrated in a handful of countries including Taiwan, South Korea, U.S., Japan and, more recently, China, governments worldwide have realised that it is in the national interest to treat chip manufacturing as a strategic imperative.
These are key to the security of critical information infrastructure.
The approved programme will propel innovation and build domestic capacities to ensure the digital sovereignty of India.
It will also create highly skilled employment opportunities to harness the demographic dividend of the country.
Electronics manufacturing in the country had increased to $75 billion over the past seven years and is expected to reach $300 billion in the next six years.
The decision is expected to attract an investment of ₹1.67 lakh crore and lead to production worth ₹9.50 lakh crore.

Concerns:

The level of fiscal support currently envisioned is minuscule, considering the scale of investments typically required to set up manufacturing capacities in the various sub sectors of the semiconductor industry.
A semiconductor fabrication facility, or fab, can cost multiples of a billion dollars to set up even on a relatively small scale and lagging a generation or two behind the latest in technology.
Even granting that India’s Production Linked Incentive scheme intends to give only 50% of the cost of setting up at least two greenfield semiconductor fabs by way of fiscal support, not much of the current scheme outlay of approximately $10 billion is likely to be left to support other elements including display fabs, packaging and testing facilities, and chip design centres.
Chip fabs are also very thirsty units requiring millions of litres of clean water and extremely stable power supply.

Conclusion:

Due to the ongoing US-China trade and technology rivalry, many countries, led by the US, are setting up an alternative semiconductor supply chains. India's window of opportunity lies in this space.With the scheme, India has expressed its intent to become a serious player in the annual $500-billion high technology semiconductor business.Success will rest on tie-ups with the supply-chain partners, developing the domestic ecosystem, and capturing business in a few critical parts of the supply chain.

Source: The Hindu BL

Mains Question:

Q. Critically Analyse the recently given incentives in Semiconductor design & manufacturing to develop India as a hub for electronics & semiconductors.