Table of Contents
Context: The government has been encouraging semiconductor manufacturing in the country, with an aim to make India a global hub for electronic manufacturing with semiconductors as the building block.
What are Semiconductors?
- Semiconductors are materials that have electrical conductivity between that of a conductor (e.g., Copper) and an insulator (e.g., Rubber).
- This means that semiconductors can conduct electricity, but not as well as conductors, and they can also act as insulators, but not as effectively as insulators.
- This property allows for the creation of electronic components with specific electrical properties, enable the design of complex circuits and devices.
- Semiconductors are typically made from materials such as silicon, germanium, and gallium arsenide.
- Applications of semiconductors:
- Electronic devices: Semiconductors are the basis transistors, diodes, integrated circuits, microprocessors, and memory chips which are used in electronic devices such as computers, smart phones, televisions, radios, and more.
- Solar cells: They are used in manufacture of solar cells, which convert sun light into electricity.
- Lighting: They are used in light-emitting diodes (LEDs) to produce energy-efficient lighting.
- Sensors: They are used in power-electronics, which are used to control and convert electrical power.
Semiconductor Market in India
- Indian semiconductor market was worth nearly $23.2 billion in 2021 and is further projected to reach $80.3 billion by the year 2028, growing at the CAGR of 17.10% in the forecast period.
- India’s semiconductor market is mainly driven by:
- The increasing demand for electronic devices, fuelled by a growing middle class.
- Rising disposable incomes
- The increasing adoption of digital technologies.
- Government initiatives to promote the growth of the industry.
- The Indian semiconductor industry is dominated by the design and development segment, which accounts for almost 80% of the market.
Why is the Government Encouraging Semiconductor Manufacturing?
- Reducing imports and achieving self-sufficiency: India imports 100%of its chips from Taiwan, Singapore, Hong Kong, Thailand, and Vietnam.
- Semiconductor manufacturing in India would not only help domestic companies reduce dependence on imports, but also generate revenue from exports to other countries.
- Criticality: Semiconductor chips are the lifeblood of the modern information age. They enable electronic products to compute and control actions that simplify our lives.
- Drivers of ICT Development: Semiconductors are essential to drive the ICT (Information and Communications Technology) development in the country, which is critical for India to benefit from the 4th industrial revolution.
- Enhances National Security: They are used in critical infrastructures such as communication, power transmission, etc., that have implications for national security.
- Strategic independence: Domestic semiconductor manufacturing can enhance India’s strategic independence and reduce vulnerability to supply chain disruptions by making the country less dependent on other countries for critical technologies.
- Multiplier Effect on Different sectors: Development of the semiconductor and display ecosystem will have a multiplier effect across different sectors of the economy with deeper integration to the global value chain.
Challenges in Semiconductor Manufacturing in India
- Complex value chain: The chip design component is highly dependent on Research and Development (R&D) and Intellectual Property (IP) protection, and hence extremely expensive.
- Though many foreign companies have their R&D divisions in India, inadequate IP protection and contract enforcement make it difficult for the companies to collaborate with Indian companies.
- Requires Huge investment: Semiconductor manufacturing is a complex, capital and technology intensive process.
- Requirement of specific raw materials: Semiconductor fabrication requires specific raw materials such as silicon, germanium, gallium arsenide, as well as chemicals and gases, that need to be imported.
- Lack of uninterrupted power and water supply: In addition to the huge cost, manufacturing a single chip requires hundreds of gallons of pure water, which is both difficult and unsustainable for India.
- Other Issues: Lack of long-term stable policies, constant price pressure from other global players, ever-changing innovations and rapid changes in technology etc.
Initiatives taken for Semiconductor Manufacturing in India
|Semicon India Program||With a total outlay of INR 76,000 crore, it aims to provide financial support to companies investing in semiconductors, display manufacturing and design ecosystem.|
|India Semiconductor Mission (ISM)||It has been setup as an Independent Business Division within Digital India Corporation to drive long-term strategies for semiconductor design ecosystem in the country|
|SPECS Initiative||Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): It provides a financial incentive to boost domestic manufacturing and attract large investments in the electronics value chain including electronic components and semiconductors.|
|Modified Special Incentive Package Scheme (M-SIPS)||M-SIPS provides financial incentives for setting up new semiconductor manufacturing units in the country. Under the scheme, companies can get a subsidy of up to 25% of their capital expenditure.|
|SEWFAP||Semiconductor Wafer FAB Acquisition Program (SEWFAP)provides financial assistance to Indian companies for acquiring semiconductor fabrication facilities (fabs) outside India.|
|National Electronics Policy (NEP) 2019:||The NEP promotes the growth of the electronics industry in the country, including the semiconductor industry.|