Cabinet Approves Semiconductor Unit in Uttar Pradesh

Syllabus: GS3/Economy

Context

• The Union Cabinet approved the establishment of a Semiconductor Unit in Uttar Pradesh.
  • It is the sixth project to receive approval under the India Semiconductor Mission.

About

• The unit approved is a joint venture of HCL and Foxconn and will attract investment of Rs 3,700 crore.
  • Together they will set up a plant near Jewar airport in Yamuna Expressway Industrial Development Authority (YEIDA).
• This plant will manufacture display driver chips for mobile phones, laptops, automobiles, PCs, and a myriad of other devices that have displays.
• The plant is designed for 20,000 wafers per month. The design output capacity is 36 million units per month.

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.

Significance of the project

• Job Creation: Semiconductor manufacturing facilities in India create many direct and indirect employment opportunities.
• Reduced Dependence on Imports: Establishing  more domestic semiconductor industries will enhance the country’s self-reliance and resilience in times of geopolitical tensions or disruptions in global supply chains.
• Import Dependency: India imported ₹1.71 lakh crore worth of semiconductors in 2024. Nearly 38% came from China.
• Export Opportunities: India’s semiconductor market is projected to grow from $22 billion (2019) to $110 billion by 2030.
  • Expected to account for 10% of global chip consumption, driven by demand in smartphones, 5G, EVs, AI, IoT.
• 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.
• India’s R&D Edge: India houses 20% of the world’s semiconductor design engineers.
  • Boosts skills and tech in AI, robotics, EVs, precision tools, and advanced electronics.

Challenges faced by India’s semiconductor industry

• Countries like the US and EU, also sense the semiconductor opportunity and have rolled out more lucrative incentive schemes than India.
• High capital cost: A fab facility can cost upwards of $5–10 billion.
• 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.
• Research and Development: India currently lacks 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. 

Source: PIB