10-November-2023-Special-Article

CHIP OFF THE BLOCKS: ON SEMICONDUCTOR FABRICATION IN INDIA

India’s push for semiconductor manufacturing, backed by production-linked incentives (PLI), faces challenges as funds remain underutilized. The government’s investment of crores of rupees in semiconductor fabrication capabilities, especially under the PLI scheme, demands scrutiny. The critical question revolves around the achieved and anticipated outcomes, given the significant financial allocation.

What are semiconductors?

Semiconductors represent a class of crystalline solids characterized by their electrical conductivity, occupying an intermediate position between conductors and insulators.

Key Properties:

Electrical Conductivity: Semiconductors exhibit moderate electrical conductivity, making them versatile for various applications.

Crystal Structure: These materials possess a specific crystalline structure that contributes to their unique electrical properties.

Applications in Electronic Devices:

Diodes: Semiconductors are integral to the manufacturing of diodes, fundamental electronic components enabling the flow of current in one direction.

Transistors: The semiconductor’s conductivity can be manipulated, forming the basis for transistors, crucial for amplification and switching in electronic circuits.

Integrated Circuits: The compact nature of semiconductors facilitates the creation of integrated circuits, essential for modern electronics.

About India Semiconductor Mission (ISM):

Launch: Initiated in 2021 with a substantial financial allocation of Rs76,000 crore, the India Semiconductor Mission (ISM) operates under the Ministry of Electronics and IT (MeitY).

Objective: Integral to a comprehensive program, ISM focuses on cultivating a sustainable semiconductor and display ecosystem within India.

Key Components:

Semiconductor Fabs Scheme: Provides fiscal support to attract investments for setting up semiconductor wafer fabrication facilities.

Display Fabs Scheme: Offers fiscal incentives for establishing TFT LCD / AMOLED-based display fabrication facilities.

Compound Semiconductors / Silicon Photonics Scheme: Extends fiscal support for the establishment of Compound Semiconductors, Silicon Photonics, Sensors Fab, and Semiconductor Assembly, Testing, Marking, and Packaging (ATMP) facilities.

Design Linked Incentive (DLI) Scheme: Provides financial incentives and design infrastructure support for semiconductor design development, including ICs, Chipsets, SoCs, Systems & IP Cores.

Vision:

Global Hub: Aims to build a vibrant semiconductor and display design ecosystem, positioning India as a global hub for electronics manufacturing and design.

Underutilized Production-Linked Incentives:

Funds Allocation: PLI for semiconductors and displays has ₹38,601 crore earmarked, but utilization remains below expectations.

Limited Employment Impact: Manufacturing semiconductor chips, crucial for various hardware, is highly automated, offering limited employment opportunities despite significant financial allocations.

Challenges and Wager with PLI Schemes:

Value Addition Concerns: The central wager involves attracting an “ecosystem” to enhance India’s electronics manufacturing sector’s value addition.

Global Supply Chain Dynamics: The success of PLI schemes relies on global manufacturing giants deviating from established supply chain dynamics, posing challenges.

Need for a Holistic Approach:

Diversification of Efforts: The focus on large manufacturing plants, while significant, needs to be complemented by efforts to strengthen semiconductor design talent domestically.

Design-Linked Incentives: Schemes like the design-linked incentive show promise but need broader implementation to enhance India’s technological position.

Challenges in Private Capital and Technological Advancements:

Limited Substantive Commitments: Despite incentives, multinational chipmakers hesitate to make substantive commitments, and private capital faces uncertainty.

Technological Advancements: Emerging technologies like artificial intelligence impact resource allocation, leaving policymakers in a state of flux.

Clarity in Objectives and Tangible Outcomes:

Define Desired Outcomes: The purpose of semiconductor investments needs clear articulation, be it safeguarding cyber sovereignty, making electronics affordable for Indian consumers, or establishing India as a global electronics manufacturing centre.

Facilitate Course Correction: Clarity enables early identification of failures and facilitates course correction before massive PLI spending with minimal results.

Conclusion:

India’s semiconductor manufacturing journey, propelled by PLI schemes, demands a strategic approach. While financial allocations are substantial, challenges in utilization, global supply chain dynamics, and technological advancements necessitate a comprehensive strategy. Clarity in desired outcomes, coupled with efforts to diversify and strengthen semiconductor design capabilities, can ensure a more effective and resilient semiconductor ecosystem for India.

Mains Question:

1. Assess the challenges and outcomes of India’s semiconductor manufacturing initiative, focusing on the role of production-linked incentives (PLI). Examine the key components of the India Semiconductor Mission (ISM) and its vision for global leadership in electronics manufacturing. Analyze the underutilization of PLI funds, addressing limited employment impact and challenges in fostering a conducive “ecosystem” for value addition.