India’s Semiconductor Push

Syllabus :GS 3/Economy

In  News

• The Union Cabinet, chaired by Prime Minister Narendra Modi, approved Kaynes Semicon Pvt Ltd’s proposal to set up a semiconductor unit in Sanand, Gujarat.

About 

• The unit will be established with an investment of Rs 3,300 crore.
• It will have the capacity to produce 60 lakh chips per day.
• Chips produced will serve various sectors including industrial, automotive, electric vehicles, consumer electronics, telecom, and mobile phones.
  • In June 2023, the Union Cabinet approved the first semiconductor unit in Sanand, Gujarat.
  • In February 2024, three additional semiconductor units were approved.

Semiconductor Ecosystem

• Semiconductors are essential components in various modern technologies, from smartphones to medical devices and vehicles.
  • Surge in semiconductor demand due to widespread 5G adoption, rising cryptocurrency mining, and government digitization efforts.
• Currently, about 70% of the world’s semiconductor manufacturing is concentrated in South Korea, Taiwan, China, the United States, and Japan.
• There is a global shift away from China’s dominance due to geopolitical pressures and supply chain vulnerabilities.

Status in India 

• India relies on imports to meet its semiconductor device needs due to the lack of domestic fabrication facilities.
  • In 2022, the Indian semiconductor market was valued at US$ 26.3 billion and is projected to expand at a CAGR of 26.3% to US$ 271.9 billion by 2032.
• India is starting to establish itself in the international semiconductor market and could become a significant hub for semiconductor manufacturing in the future.
• India has a significant advantage in semiconductor design and intellectual labor.
• Many global semiconductor design engineers are of Indian origin, and companies like Intel and NVIDIA have large facilities in India.
• The semiconductor industry in India is advancing rapidly, with companies like Tata Group projecting that commercial production from their Gujarat and Assam plants will commence by 2026.
  • This comes in response to the global chip shortages experienced during the COVID-19 pandemic, underscoring the strategic importance of self-reliant semiconductor manufacturing.

Challenges 

• India faces challenges in becoming a semiconductor superpower due to high costs of land, power, and labor, which have previously discouraged investors.
• Unavailability of  trained workers 
• Another major challenge is the creation of an ecosystem for ancillary industries.
• Lack of ancillary industry becomes a disability for companies which want to set up units in India.

Government Initiatives:

• India Semiconductor Mission (ISM) : It  is a specialized and independent Business Division within the Digital India Corporation
  • It aims to build a vibrant semiconductor and display ecosystem to enable India’s emergence as a global hub for electronics manufacturing and design. 
• The ‘Make in India’ initiative (2014) aims to enhance manufacturing and establish India as a global manufacturing hub.
• Production Linked Incentive (PLI) Scheme: Offers incentive packages to companies setting up semiconductor manufacturing facilities in India.
  • Aims to boost semiconductor production and create direct and indirect job opportunities.
• Additional Schemes: Design Linked Incentive (DLI): Supports semiconductor design efforts.
  • Chips to Startup (C2S): Promotes semiconductor startups.
  • Scheme for Promotion of Electronic Components and Semiconductors (SPECS): Supports electronic components and semiconductor manufacturing.

• The government plans to increase the funding outlay for the second phase of its chip manufacturing incentive policy to $15 billion from the $10 billion it had committed for the first phase.
• The Union Cabinet was apprised of a Memorandum of Understanding (MoU) signed in 2023 between the Government of Republic of India and the European Commission on Working Arrangements on Semiconductors Ecosystems, its supply chain and innovation under the framework of EU-India Trade and Technology Council (TTC).

Conclusion and Way Forward 

• India is set for significant growth in the semiconductor industry due to strategic initiatives and partnerships.
• To become a major player, India needs to focus on manufacturing precision at the atomic level, learning from leaders like Taiwan, Korea, and Japan.
• As the Prime Minister emphasized, “India will soon start commercial production of semiconductors and related products and become a global power in this sector,” signaling the nation’s ambitious drive towards technological self-sufficiency under the Atma Nirbhar Bharat and Make in India initiatives.
• With sustained efforts and a proactive stance, India is on course to solidify its position as a leading semiconductor manufacturing hub, contributing majorly to technological advancement and economic growth.

Source:PIB