26-October-2024-Special-Article

INDIA’S SEMICONDUCTOR INDUSTRY

India is making strides to establish itself in the global semiconductor industry, especially with the recent approval of a major $11 billion semiconductor plant project in Gujarat, led by the Tata Group and Taiwan’s Powerchip.

This development aligns with India’s goal to be a significant player in the semiconductor sector, essential for future technological advancement.

 

Current Status and Opportunities in India’s Semiconductor Industry

Current Status:

• India’s semiconductor market was valued at $45 billion in 2023.
• Expected to grow at a compound annual growth rate (CAGR) of 13%, potentially reaching $100 billion by 2030.

Opportunities:

Expanding Domestic Market:

• As one of the world’s largest consumer markets, India has substantial demand for semiconductors, especially with the growth in smartphones, electronics, and automobiles.
• India was the second-largest market for 5G smartphones in early 2024.

Government Support:

• The Indian government has introduced several supportive programs like the Semicon India initiative to encourage semiconductor and display manufacturing.

Infrastructure Growth:

• Establishing manufacturing facilities, such as chip assembly and packaging units, is building a strong base for the industry.

Global Partnerships:

• India is collaborating with countries like the US and Japan to develop its semiconductor capabilities, ensuring knowledge and technology transfer.

Key Government Initiatives Supporting the Semiconductor Industry

India Semiconductor Mission (ISM):

• Launched in 2021 under the Ministry of Electronics and IT with a budget of ₹76,000 crore.
• ISM aims to support companies working in semiconductor manufacturing and design, making it the central body for managing related programs.

Main Schemes Under ISM:

• Modified Scheme for Semiconductor Fabs: Offers 50% financial support to encourage large investments in semiconductor production.
• Modified Scheme for Display Fabs: Provides 50% support for manufacturing display panels, such as TFT and AMOLED.
• Modified Scheme for Compound Semiconductor Facilities: Aids in setting up specialized semiconductor plants with a 50% subsidy.
• Design Linked Incentive Scheme: Provides up to 50% financial aid for design, with additional incentives based on sales turnover.

Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS):

• Focuses on enhancing India’s capacity in electronic component production, targeting a market expected to reach $200 billion by 2025.

Production Linked Incentive (PLI) Schemes:

• Supports large-scale electronics manufacturing and IT hardware, encouraging domestic production of essential electronic components.

Modified Electronics Manufacturing Clusters (EMC 2.0):

• Provides financial incentives to develop quality infrastructure, reducing logistics costs and boosting supply chain efficiency.

Strategic Importance of Semiconductor Fabrication

Economic Growth:

• Developing a semiconductor industry can generate high-value jobs and drive investment in India’s electronics sector.
• With the global semiconductor market set to reach $1 trillion by 2030, India targets capturing 10% of this share.

Self-Reliance and National Security:

• India’s reliance on imports, especially from China, for electronic components can be reduced through local semiconductor production.
• Boosting domestic capabilities aligns with the Make in India and Aatma Nirbhar Bharat (Self-Reliant India) campaigns.

Global Positioning:

• Semiconductors are critical to modern economies. By advancing in this industry, India can gain a stronger global reputation in technology.

Innovation and R&D:

• The semiconductor industry can encourage technological research and innovation, fostering an ecosystem that supports advanced technologies.

Industry 4.0 and Emerging Technologies:

• A strong semiconductor foundation is essential for growth in artificial intelligence (AI), robotics, and quantum computing, which are central to Industry 4.0.

Challenges Facing the Semiconductor Industry in India

• Supply Chain and Infrastructure: Semiconductor production requires specialized infrastructure, such as contamination-free cleanrooms, which demand extensive investment.
• High Capital Costs: Semiconductor fabs require significant capital, including funds for R&D, high-tech equipment, and skilled labor.
• Skilled Workforce Shortage: India currently faces a shortfall in semiconductor engineering expertise, expected to reach 250,000-300,000 professionals by 2027.
• Intense Global Competition: Taiwan and South Korea dominate the global semiconductor market. Competing against these established players poses a challenge for India.
• Technological Monopolies: Advanced semiconductor fabrication relies on specialized technologies like Extreme Ultraviolet Lithography (EUV), controlled by a few global suppliers, limiting India’s access.
• Environmental Concerns: Semiconductor manufacturing involves hazardous chemicals, necessitating proper management of environmental risks.

The Way Forward

Developing Talent:

• Training in semiconductor engineering is essential to bridge the skills gap. Over 300 Indian institutions now offer semiconductor-specific courses.

Enhancing R&D Investments:

• India must prioritize R&D in semiconductor technology, fostering innovation in product design and intellectual property.

Policy Support and Incentives:

• Consistent government backing through incentives and favorable policies, such as state-level schemes, will attract more investments.

Global Partnerships and Chip Diplomacy:

• Collaborating internationally, especially with established semiconductor players, can help India overcome the capital challenges of this sector.

Focus on Niche Areas:

• India could focus on niche technologies like MEMS and sensors for IoT and automotive industries, positioning itself in specialized market segments.

Increasing Private Sector Participation:

• Private companies, exemplified by the Tata Group’s initiative with Taiwan’s Powerchip, can play a key role in expanding the semiconductor industry in India.

Leveraging Geopolitical Opportunities:

• The ongoing tensions between the US and China have reshaped the semiconductor market, providing India with new opportunities to strengthen its position through strategic alliances.

Conclusion:

India’s semiconductor ambitions, underscored by large-scale investments and government support, signal a new era for its technological capabilities. This push not only supports economic and strategic imperatives but also advances India’s position as a potential global leader in the semiconductor sector. By addressing challenges and leveraging its opportunities, India can make significant strides towards a self-sufficient and innovative semiconductor ecosystem.

Mains Question:

1. “Discuss the strategic importance of India’s semiconductor industry in achieving technological self-reliance and its potential impact on India’s global positioning and economic growth.” (150 WORDS)