India is set to invest an additional USD 15 billion in the second phase of its chip manufacturing incentive policy under the India Semiconductor Mission, after an initial commitment of USD 10 billion for the first phase. This significant move underscores India’s growing ambition to establish itself as a global hub for semiconductor manufacturing, a critical industry that powers modern technologies.

As part of the initiative, the government has approved three Assembly, Testing, Marking, and Packaging (ATMP) and Outsourced Semiconductor Assembly and Test (OSAT) plants. While these are less complex than full-fledged fabrication plants, they mark an important step in creating a self-sustaining ecosystem for semiconductor manufacturing in India.

Understanding Semiconductor Chips

• Semiconductor chips are the tiny electronic components made from materials like silicon or germanium, serving as the foundation for most modern electronic devices.
• These chips, sometimes containing billions of microscopic switches, control the flow of electricity and enable devices to process data, store information, and perform various other functions.
• The fabrication of these chips involves multiple stages, including wafer preparation, photolithography, etching, and packaging, each requiring high precision and advanced technology.

The Global Semiconductor Industry Landscape

• Globally, the semiconductor chip industry is dominated by Taiwan and the US.
• The US has introduced an incentive scheme of USD 50 billion to support its semiconductor sector, while the European Union has launched a similar initiative.
• In comparison, India has an almost negligible presence in the global semiconductor manufacturing sector.

The Need for Developing India’s Chipmaking Industry

• India’s move to develop a domestic semiconductor industry is driven by both economic and strategic imperatives.
• Semiconductor chips are essential components in virtually all industries, from rockets and automobiles to household appliances
• As geopolitical tensions, particularly between the US and China, continue to shape global supply chains, India aims to strengthen its domestic manufacturing capabilities and reduce its dependence on foreign imports.

Recent Developments in India’s Semiconductor Industry

• India is making notable strides in building its semiconductor ecosystem. Recently, India signed a chip deal with Singapore, a country known for its expertise in memory chips and logic processors, which are used in many electronic devices.
• Additionally, Tata is collaborating with Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC) to establish India’s first commercial fabrication plant.
• Further bolstering the industry, US-based Micron Technology signed an MoU with the Gujarat state government to set up a semiconductor unit worth Rs 22,500 crore near Ahmedabad.
• This project is expected to play a significant role in advancing India’s goal of self-reliance in memory chip production.

Status of India’s Semiconductor Ecosystem

• India is making significant strides towards developing a robust semiconductor ecosystem, driven by its large market potential, skilled workforce, and strong government support.
• The country’s efforts aim to reduce dependency on imports and build domestic manufacturing capabilities, positioning itself as a key player in the global semiconductor industry.
• India has had an established chip design industry since the 1990s, which will be instrumental in supporting its ambitions in semiconductor manufacturing. This growing industry offers diverse opportunities for professionals, extending beyond just electronics and computer engineers.

Key Advantages:

– **Market Potential**: India’s rapidly growing population and expanding middle class drive strong demand for semiconductor products. The country’s semiconductor market is projected to reach $55 billion by 2026, underscoring its commitment to domestic manufacturing.

– **Talent Pool**: India is focused on enhancing skill development and fostering innovation. The emphasis on nurturing domestic chip design skills positions the country to build a competitive edge in the global semiconductor landscape.

Challenges in India’s Semiconductor Industry

While these initiatives mark important progress, several challenges remain:

– **High Capital Requirements**: Building and maintaining semiconductor fabs requires massive capital investments, often deterring domestic players.

– **Technology and Expertise Deficit**: India lacks advanced semiconductor research and fabrication capabilities, leading to a heavy reliance on foreign technology and expertise.

– **Inadequate Infrastructure**: Reliable power, water resources, and logistical infrastructure are critical for fabs. India’s lack of robust infrastructure and specialised electronics manufacturing zones hinders progress.

– **High Barrier to Entry**: The complexity and high costs associated with developing cutting-edge chip technology place India at a disadvantage, with established players like Taiwan Semiconductor Manufacturing Company Ltd (TSMC) dominating the market.

The Way Forward

To overcome these challenges and bolster the semiconductor industry, India can adopt several strategic measures:

– **Global Collaborations and Strategic Alliances**: Bilateral and multilateral partnerships are essential for technology transfer and research collaborations. India’s ongoing partnerships with the US and Taiwan demonstrate a commitment to strengthening domestic manufacturing capabilities. Similarly, enhancing ties with South Korea could further support India’s ambitions in this sector.

– **Incentivizing Startups and SMEs**: Creating a favourable ecosystem for startups and small-to-medium enterprises (SMEs) by offering funding, incubation, and mentorship programs can drive innovation and technological development in the semiconductor space.

– **Sustainability and Green Manufacturing**: As the industry grows, India must focus on sustainable practices by investing in green technologies that reduce energy and water consumption. Ensuring that environmental regulations align with industry expansion will be key to long-term success.

Conclusion

India’s semiconductor mission is a critical step towards achieving self-reliance in an industry that is integral to the global economy. With substantial investments, strategic partnerships, and a clear vision for sustainable development, India has the potential to emerge as a significant player in the semiconductor space. However, addressing challenges related to infrastructure, technology, and capital will be crucial for the country to truly establish itself as a hub for chip manufacturing in the years to come.