Syllabus: GS3/science and Technology
Context
- India ramps up its semiconductor ambitions with a $15-billion incentive to emerge as a global chip hub, following in the footsteps of the US, Taiwan, and South Korea.
About
- The revised blueprint focuses on capital support for raw materials, gases, and chemicals essential for chip fabrication.
- However, the capex subsidy for assembly and testing plants, which had been raised to 50 percent, can be reduced under the new plan.
- In March 2024, the government approved proposals to set up three semiconductor units in Gujarat and Assam with an estimated investment of Rs 1.26 lakh crore.
- Now the government is looking at advanced fabrication technologies and micro-LED displays, signaling a shift towards more complex elements of the chip ecosystem.
| What is a Semiconductor? – Semiconductors also referred to as ‘chips’ are highly complex products to design and manufacture, providing the essential functionality for electronic devices to process, store and transmit data. – The chip comprises interconnections of transistors, diodes, capacitors and resistors, layered on a wafer sheet of silicon. |
Earlier policy
- In the first iteration of the incentive policy, which was released in 2021, the Union government had offered a 30 per cent capex subsidy for chip packaging and testing plants.
- However, in 2022, it had increased the subsidy for such plants to 50 per cent.
Global Scenario in Chip Manufacturing
- About 70% of the current global manufacturing capacity is confined to South Korea, Taiwan and China, with the US and Japan making up for much of the rest.
- Taiwan and South Korea make up about 80% of the global foundry base for chips.
- Only one company, the Netherlands-based ASML, produces EUV (extreme ultraviolet lithography) devices, without which it is not possible to make an advanced chip.
Challenges faced by India’s semiconductor industry
- India’s close allies, like the US and EU, also sense the semiconductor opportunity and have rolled out more lucrative incentive schemes than India.
- Talent pool: While India is the biggest back office for design engineers of all major chip companies, skilled talent that can work on factory floors of a fabrication plant is still hard to come by.
- Micron Technology’s ATMP plant in Gujarat’s Sanand is running 133 days behind schedule, due to the company’s inability to hire sufficient construction headcount.
- Research and Development: India currently lacks original research in semiconductor design, where the future of the chip is decided.
- Power supply: An uninterrupted supply of power is central to the process, with just seconds of fluctuations or spikes causing millions in losses.
- Water intensive: Chip-making requires gallons of ultrapure water in a single day.
Significance of the project
- Job Creation: Semiconductor manufacturing facilities in India will create many direct and indirect employment opportunities.
- Reduced Dependence on Imports: India currently relies on imported semiconductor chips for various electronic devices.
- Establishing a domestic semiconductor industry will enhance the country’s self-reliance and resilience in times of geopolitical tensions or disruptions in global supply chains.
- Export Opportunities: With a competitive semiconductor industry, India can export chips and related products to other countries, generating revenue and improving its trade balance.
- Strategic Importance: Semiconductor chips are critical components in various strategic sectors such as defense, aerospace, and telecommunications.
- Having a domestic semiconductor industry ensures greater control over the supply chain and reduces vulnerabilities to disruptions or external pressures.
Other Initiatives for Semiconductor Industry
- India Semiconductor Mission: It has been set up as an Independent Business Division within Digital India Corporation having administrative and financial autonomy to formulate and drive India’s long-term strategies for developing semiconductors and display manufacturing facilities and semiconductor design ecosystem.
- Production Linked Incentive scheme: Incentives are being provided for semiconductor design and packaging.
- QUAD Semiconductor Supply Chain Initiatives: To assess the capacity, pinpoint vulnerabilities, and enhance supply chain security for semiconductor and its critical components.
Way Ahead
- By establishing the semiconductor industries, India can increase its influence in the global technology landscape.
- India can also attract foreign investment, foster innovation, and stimulate other sectors such as electronics, telecommunications, and information technology. A robust industry will significantly contribute to India’s GDP growth.
Source: IE
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