Semiconductor Ecosystem in India

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    In Context 

    Electronics industry is critically dependent on Semiconductors.

    • India’s National Policy on Electronics (NPE) 2019 aims for the electronics industry to achieve a turnover of about Rs 33 lakh crore by 2025.

    Potential of Semiconductor industry

    • Semiconductors are critical technological components for emerging technologies viz. artificial intelligence (AI) and internet of things applications, 5G communications, cloud computing, automation, electric vehicles, with a wide coverage of applications from basic consumable electronic gadgets and automobiles to areas of strategic operations.
      • They help give computational power to devices. 
    • India’s semiconductor component market is likely to reach $300 billion in cumulative revenues by 2026, as ‘Make in India’ and PLI schemes will boost local sourcing of semi-components in the coming years, according to the report by the India Electronics & Semiconductor Association (IESA) and Counterpoint Research.
    • According to the Electronics and IT Ministry, semiconductor demand in India would increase to $70-$80 billion by 2026 with the growing demand for digital devices and electronic products.

    Challenges 

    • COVID 19 Pandemic : It has brought to the fore the fragility of the global supply chain of semiconductor manufacturing. 
      • The situation is exacerbated by the overdependence of the world on East Asia for fab manufacturing, the rising price of silicon, and the China-U.S. trade war. 
    • India does not have an ecosystem in place for advanced semiconductor manufacturing.
    • Lack of investments and supportive government policies are some of the challenges to set up fabs in India
    • Inadequate logistics and absence of proper waste disposal have further exacerbated the poor state of its production. 
    • Russia -Ukraine Conflict  : The conflict impacted the supply of neon and hexafluorobutadiene gases. 
      • These gases are essential for manufacturing semiconductor chips used in the lithography processes for chip production, and Russia and Ukraine are the major sources of these gases.

    Government’s Initiatives 

    • In December 2021, India announced its roughly $10 billion dollar production-linked incentive (PLI) scheme to encourage semiconductor and display manufacturing in the country. 
    • It also announced fiscal support for a design-linked initiative (DLI) scheme to drive global and domestic investment related to design software, IP rights etc.
      • The PLI and DLI schemes had attracted many global semiconductor players for setting up fabs in India 
    • The new changes announced recently seek to harmonise government incentives for all technology nodes of semiconductors. 
      • The modified programme would expedite these investments and bring in more applicants.

    Conclusion and Way Forward 

    • Government needs to incentivise more FDI in electronics to deepen our supply chains through incentive schemes, 
    • We need to focus on encouraging Indian manufacturers and start-ups to enter and master complex R&D and manufacturing verticals.
    • Chip-making also requires gallons of ultrapure water in a single day, which could be a task for the government to provide to factories.
      • Besides, an uninterrupted supply of power is central to the process, with just seconds of fluctuations or spikes causing millions in losses 
    • Another task for the government is to drive up consumer demand in the semiconductor industry to not end up in a situation where these ventures remain successful only till taxpayers are forced to fund required subsidies.
    • Diplomacy can also play a crucial role in semiconductor business. 
      • A global platform such as Quad can come forward to collaborate and put resources in research, technological know-how, access to critical technologies and materials logistics and other market support.
      • Cooperation with consortium like ASEAN, a political and economic union of 10 member-states in Southeast Asia can further help to ameliorate the supply constraints with regard to semiconductor chips
    • The Russia-Ukraine conflict served as a lesson. We need to be robust on the industry-supporting infrastructure front, so the supply chains are not disturbed

    Mains Practice Question

    [Q]As demand for chips sustains globally, India is taking steps towards developing a semiconductor ecosystem.Discuss