India’s Semiconductor Push

Context: The government has been encouraging semiconductor manufacturing in the country, with an aim to make India a global hub for electronic manufacturing with semiconductors as the building block.

What are Semiconductors?

• Semiconductors are materials that have electrical conductivity between that of a conductor (e.g., Copper) and an insulator (e.g., Rubber).
• This means that semiconductors can conduct electricity, but not as well as conductors, and they can also act as insulators, but not as effectively as insulators.
• This property allows for the creation of electronic components with specific electrical properties, enable the design of complex circuits and devices.
• Semiconductors are typically made from materials such as silicon, germanium, and gallium arsenide.
• Applications of semiconductors:
  • Electronic devices: Semiconductors are the basis transistors, diodes, integrated circuits, microprocessors, and memory chips which are used in electronic devices such as computers, smart phones, televisions, radios, and more.
  • Solar cells: They are used in manufacture of solar cells, which convert sun light into electricity.
  • Lighting: They are used in light-emitting diodes (LEDs) to produce energy-efficient lighting.
  • Sensors: They are used in power-electronics, which are used to control and convert electrical power.

Semiconductor Market in India

• Indian semiconductor market was worth nearly $23.2 billion in 2021 and is further projected to reach $80.3 billion by the year 2028, growing at the CAGR of 17.10% in the forecast period.
• India’s semiconductor market is mainly driven by:
  • The increasing demand for electronic devices, fuelled by a growing middle class.
  • Rising disposable incomes
  • The increasing adoption of digital technologies.
  • Government initiatives to promote the growth of the industry.
  • The Indian semiconductor industry is dominated by the design and development segment, which accounts for almost 80% of the market.

Why is the Government Encouraging Semiconductor Manufacturing?

• Reducing imports and achieving self-sufficiency: India imports 100%of its chips from Taiwan, Singapore, Hong Kong, Thailand, and Vietnam.
  • Semiconductor manufacturing in India would not only help domestic companies reduce dependence on imports, but also generate revenue from exports to other countries.
• Criticality: Semiconductor chips are the lifeblood of the modern information age. They enable electronic products to compute and control actions that simplify our lives.
• Drivers of ICT Development: Semiconductors are essential to drive the ICT (Information and Communications Technology) development in the country, which is critical for India to benefit from the 4th industrial revolution.
• Enhances National Security: They are used in critical infrastructures such as communication, power transmission, etc., that have implications for national security.
• Strategic independence: Domestic semiconductor manufacturing can enhance India’s strategic independence and reduce vulnerability to supply chain disruptions by making the country less dependent on other countries for critical technologies.
• Multiplier Effect on Different sectors: Development of the semiconductor and display ecosystem will have a multiplier effect across different sectors of the economy with deeper integration to the global value chain.

Challenges in Semiconductor Manufacturing in India

• Complex value chain: The chip design component is highly dependent on Research and Development (R&D) and Intellectual Property (IP) protection, and hence extremely expensive.
  • Though many foreign companies have their R&D divisions in India, inadequate IP protection and contract enforcement make it difficult for the companies to collaborate with Indian companies.
• Requires Huge investment: Semiconductor manufacturing is a complex, capital and technology intensive process.
• Requirement of specific raw materials: Semiconductor fabrication requires specific raw materials such as silicon, germanium, gallium arsenide, as well as chemicals and gases, that need to be imported.
• Lack of uninterrupted power and water supply: In addition to the huge cost, manufacturing a single chip requires hundreds of gallons of pure water, which is both difficult and unsustainable for India.
• Other Issues: Lack of long-term stable policies, constant price pressure from other global players, ever-changing innovations and rapid changes in technology etc.

Initiatives taken for Semiconductor Manufacturing in India

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