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India’s Semiconductor Push

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.

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