- The Indian government has given electronics makers 1,645 crore in PLI incentives to bring more of the supply chain to India.
- Semiconductors are in high demand because they are used in almost all contemporary electronics.
- Due to supply chain vulnerabilities and geopolitical pressures, many countries are moving away from China’s dominance in the industry.
Manufacturing of semiconductors in India
- According to the Invest India agency, electronics manufacturing will be valued $300 billion by 2025-26.
- While completed product facilities have been expanding, fabs for chipsets and displays are becoming more scarce.
- The Ministry of Electronics and Information Technology will shortly announce the location of the first semiconductor manufacturing fab.
- The Semiconductor Industry Association (SIA) recommends that India capitalize on its strengths in the electronics production value chain.
- Foundry businesses require significant investments, whereas OSAT generates higher margins.
- Outsourced Semiconductor Assembly and Test (OSAT) facilities handle less capital-intensive aspects of chip manufacturing and perform specialized tests.
- Many chip manufacturing sites are captive units of larger corporations.
The significance of semiconductor production
- Semiconductor fabrication machines convert raw materials such as silicon into integrated circuits, which are used in almost all electronic hardware.
- Fabs are extremely capital-intensive endeavors that can cost billions of dollars for big facilities.
- The high degree of precision, cost, and capital required to create sophisticated circuits necessitates a highly reliable and high-quality source of water, electricity, and insulation from the elements.
- Countries have identified strategic value in monopolizing parts of the fab value chain.
- Last year, China surpassed Taiwan in terms of worldwide fab sales.
- The United States enacted the CHIPS Act to provide subsidies and investments to manufacturers who establish fabs and manufacture semiconductors in the United States.
- The United States also imposed restrictions and sanctions on the Chinese semiconductor sector.
The benefits of India in semiconductor manufacturing
- India has a competitive edge in semiconductor manufacturing because a large percentage of semiconductor design engineers worldwide are either Indian or of Indian descent.
- Chipmakers such as Intel and NVIDIA already have big facilities in India that are brimming with Indian talent working on design issues.
- In the face of sanctions and an aging population, China is losing control of this edge.
- According to experts, China’s semiconductor industry goals will not be met unless a sustainable pipeline of high-calibre talent is established.
Various difficulties
- Huge sums of money are at stake: Many expensive gadgets are required for the operation of a Semiconductor Fabrication facility. Complex tools and equipment are needed to test quality and move silicon from one location to another within the plant’s ultra-clean confines.
- Scale economies: In semiconductor fabrication, a high volume of production is needed to meet the market’s growing demand, while a strong financial backing is required because the Indian market is highly volatile in terms of financial fluctuations.
- Semiconductor fabrication is a multi-step sequence of photolithographic and chemical processing processes that results in the gradual creation of electronic circuits on a wafer composed of pure semiconducting material. This truly necessitates a high level of expertise.
- Scarcity of basic materials: From a value-chain standpoint, it requires silicon, germanium and gallium arsenide, and silicon carbide, all of which are unavailable in India and must be imported.
- Uncertain Indian market: An Indian semiconductor fabrication facility cannot rely solely on Indian customers for its complete sales structure. They must keep an overseas customer base in order to balance inflections in the Indian market caused by market trends, government policies, and so on.
- Hazardous refuse disposal: Many toxic materials, such as arsenic, antimony, and phosphorus, are used in the manufacturing process. The industry’s hazardous environmental effect may be an impediment to India’s commitment to mitigating climate change.
India’s policy efforts
- Make in India: This initiative seeks to turn India into a global center for electronic system design and manufacturing. (ESDM).
- PLI scheme:The Centre sanctioned 76,000 crore under the production-linked incentive (PLI) scheme in December 2021 to encourage the manufacturing of different semiconductor products in India.
- DLI scheme: It provides financial incentives and design infrastructure support at various phases of semiconductor design development and implementation for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores, and semiconductor linked design.
- Digital RISC-V (DIR-V) program: It aims to allow microprocessor production in India in the near future, with industry-grade silicon and design wins by December 2023.
- The goal of the India Semiconductor Mission (ISM) is to create a vibrant semiconductor and display design and innovation ecosystem that will allow India to emerge as a global hub for electronics production and design.
Way ahead
- India must take the following steps to ensure greater resilience in a volatile world in order to maintain domestic and global semiconductor demand:
- Framework for policy: Because foundry setup is highly capital intensive, it requires a firm long-term plan and financial backing. This support is needed from both the entrepreneur and the government.
- Financial support: In the text of the Indian Government, terms such as tax holiday, subsidy, zero duty, financial investment, and so on will play an essential role in promoting the Fab and the semiconductor industry in India, putting additional strain on the country’s already large fiscal deficit.
- Support Infrastructure: A modern Fab requires world-class, sustainable infrastructure, including fast transit, a large quantity of pure water, uninterrupted electricity, communication, and a pollutant-free environment.
@the end
- India’s electronic manufacturing incentive programs are aimed at breaking new ground in ambitious plans linked to well-known names like Apple.
- The Indian government is trying to build an ecosystem that will support long-term growth and fiscal viability in the semiconductor sector.
- To be successful, the electronics value chain must be an international endeavor involving like-minded nations with shared values.
Source: https://www.thehindu.com/opinion/op-ed/explained-indias-push-for-semiconductors/article66652916.ece