Semiconductors, integral parts of modern electronic devices, play a significant role in the Indian economy. The Indian government has implemented several schemes to boost the manufacturing of semiconductors, such as the Production-Linked Incentive (PLI) scheme, Design-Linked Initiative (DLI) scheme, and the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS).
Current Developments in India’s Semiconductor Industry
Recently, the Centre approved changes to facilitate the development of a semiconductor and display manufacturing ecosystem in the country, making the $10 billion chip-making initiative more attractive to investors. These changes include uniform 50% fiscal support for all nodes, setting up new semiconductor plants, and emphasis on the production of the 45nm chip.
Understanding Semiconductor Chips and Their Significance
Semiconductors are materials with conductivity levels between conductors and insulators. The core component of a semiconductor chip is a silicon sliver etched with billions of microscopic transistors. Semiconductors serve as the building blocks of almost every modern electronic device and give computational power to devices. These chips are utilized differently based on their nanometer value, from automobiles to smartphones and laptops.
Global Chip-Making Industry Scenario
The primary players in the concentrated global chip-making industry are Taiwan, South Korea, and the U.S., among others. With around 90% of 5nm chips being produced by Taiwan, tensions concerning Taiwan and supply chain blockages due to the Russia-Ukraine conflict have encouraged major economies to get involved in the chip-making sector.
Indian Initiatives for Domestic Manufacturing of Semiconductors
Despite importing all chips, India’s market is projected to approach $100 billion by 2025. The Indian government has taken several initiatives, like allocating ₹76,000 crore to support the development of a ‘semiconductors and display manufacturing ecosystem’, launching the SPECS, and unveiling the DLI Scheme. India’s consumption of semiconductors is predicted to surpass $80 billion by 2026 and $10 billion by 2030.
Possible Way Ahead for India’s Semiconductor Dream
India currently focuses on “lagging-edge” technology nodes to supply to the automotive and appliance sectors. Attracting global players might be beneficial as they come with their own customer base. Allocating some of the current scheme outlay to support other elements like display fabs, packaging and testing facilities, and chip design centres could be advantageous. However, it’s crucial that initial funding should concentrate on areas like design and R&D where India has an existing talent pool.
Challenges for India in the Chip-Making Sector
Manufacturing semiconductors requires massive amounts of ultrapure water daily, which could be challenging given the drought conditions prevalent in large parts of the country. Uninterrupted power supply is also vital, as even minor fluctuations can lead to significant losses. Another task for the government is to incentivize consumer demand in the semiconductor industry to prevent these ventures from only remaining successful as long as taxpayers are required to subsidize them.
