Push for Semiconductor Industry

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    • The government recently modified the production-linked incentive (PLI) scheme for the development of a semiconductor and display manufacturing ecosystem in India.
      • The scheme aims to make India’s $10 billion chip-making initiative more attractive to investors.

    More about the Modified Scheme

    • About:
      • The new scheme seeks to harmonise government incentives for all technology nodes of semiconductors.
      • It was brought to encourage all areas of chip-making & to create an integrated ecosystem in India, rather than manufacturing here and having to package and test chips elsewhere. 
    • Fiscal support:
      • The modified scheme:
        • It provides uniform 50% fiscal support for all nodes. 
        • Besides, it will provide 50% of capital expenditure for other steps of the process as well [chip design and ATMP (assembly, testing, marking and packaging)].
      • Original scheme:
        • In the previous version of the scheme, the Centre was offering to fund 
          • 30% of the project cost for 45nm to 65nm chip production, 
          • 40% for 28nm to 45nm, and 
          • 50% or half of the funding for chips 28nm or below. 
    • Production Focus:
      • The modified scheme also emphasised the production of the 45nm chip, which is fairly less time-consuming and economical in terms of production. 

    More about the Semiconductor industry

    • What are Semiconductors?
      • Semiconductors are the thumbnail-sized building blocks of almost every modern electronic device from smartphones to connected devices in the Internet of Things (IoT). 
      • They help give computational power to devices. 
      • Components:
        • The basic component of a semiconductor chip is a sliver of silicon, which is etched with billions of microscopic transistors and projected to specific minerals and gases, forming patterns to control the flow of current while following different computational instructions. 
    • Semiconductor nodes and uses:
      • The most-advanced semiconductor technology nodes available today are the 3 nanometre (nm) and the 5nm ones. 
        • Semiconductors having higher nanometre value are applied in automobiles, consumer electronics and so on. 
        • Those with lower values are used in devices such as smartphones and laptops.
    • India’s potential:
      • India’s consumption of semiconductors is expected to cross $80 billion by 2026 and is expected to reach $110 billion by 2030.
    • The global semiconductor industry:
      • The global semiconductor industry is currently valued at $500-$600 billion and caters to the global electronics industry currently valued at about $3 trillion.
      • The chip-making industry is a highly-concentrated one, with the big players being Taiwan, South Korea and the U.S. among others. 
        • 90% of 5nm (nanometre) chips are mass-produced in Taiwan, by the Taiwan Semiconductor Manufacturing Company (TSMC). 
      • Issue of the global chip shortage: 
        • U.S.-China tensions over Taiwan, and the supply chain blockages owing to the Russia-Ukraine conflict have led major economies to enter the chip-making sector with a renewed push.

    Challenges

    • Chip production is a resource-intensive and expensive process: 
      • While the new scheme provides equal funding for all steps of the process, the outlay of the scheme remains $10 billion
      • Notably, just the setting up of one semiconductor fab requires an investment of anywhere between $3 and $7 billion
    • Area of focus:
      • Analysts, while positive, are concerned that not much of the current scheme outlay could be allocated to supporting other elements including display fabs, packaging and testing facilities, and chip design centres
      • They also argue that the initial funding should focus on areas like design and R&D, for which India already has an established talent pool.
    • Lagging-edge vs cutting-edge technology:
      • India focuses on “lagging-edge” technology nodes in the start to supply to the automotive and appliance sector. 
      • Creating global demand may be difficult as giants like Taiwan offer viable cutting-edge chip-tech worldwide. 
    • Water intensive:
      • Chip-making also requires gallons of ultrapure water in a single day. 
      • This requirement could be a task for the government to provide to factories, compounded also by the drought conditions which often prevail in large parts of the country. 
    • Power supply:
      • Besides, an uninterrupted supply of power is central to the process, with just seconds of fluctuations or spikes causing millions in losses.

    Initiatives taken by India 

    • Semicon India programme:
      • It provides $10 bn fiscal support and other non-fiscal measures 
      • The Semicon India Program aims to provide attractive incentive support to companies/consortia that are engaged in Silicon Semiconductor Fabs, Display Fabs, Compound Semiconductors / Silicon Photonics / Sensors (including MEMS) Fabs, Semiconductor Packaging (ATMP / OSAT) and Semiconductor Design.
    • India Semiconductor Mission:
      • It has been set up as an Independent Business Division within Digital India Corporation having administrative and financial autonomy to formulate and drive India’s long-term strategies for developing semiconductors and display manufacturing facilities and semiconductor design ecosystem. 
    • Production Linked Incentive scheme:
      • The government also recently announced the PLI and DLI schemes as major steps towards building a semiconductor ecosystem in the country.
    • The Cabinet approval:
      • The recent Cabinet approval with an outlay of 76,000 crore spread over a period of six years for the development of semiconductors and display manufacturing ecosystem is expected to be a shot in the arm. 
      • This move claims to attract 1.7 lakh crore private investment in India.

    Production Linked Incentive (PLI) Scheme

    • The Finance Minister announced the Production Linked Incentive (PLI) Schemes across 13 key sectors.
    • It will create national manufacturing champions and generate employment opportunities for the country’s youth. 
    • The aim is to give companies incentives on incremental sales from products manufactured in domestic units.
    • It also invites foreign companies to set units in India along with encouraging local companies to set up or expand existing manufacturing units.

    Way Ahead

    • India must seize the opportunity and become an attractive alternative destination for semiconductor manufacturing.
      • Attracting global players to set up here would be beneficial as they come with their customer base.
    • Government policies should also focus on assuring and securing access to foreign technology suppliers through trade and foreign policy to ensure a global level of collaboration.

    Source: TH