Recently, PM Narendra Modi created history by laying the foundation stone of India’s first commercial semiconductor Fabrication unit at Dholera in Gujrat. He also inaugurated the test OSAT facility and CG Power-Renesas outsourced assembly at Sanand and TATA OSAT at Morigaon. The estimated cost of these projects is Rs 1.25 Lakh crore each.
What Are Semiconductors?
These Semiconductors are basically small piece of silicon that have electrical conductivity between that of a conductor and an insulator. They are used to create electronic devices such as transistors, diodes, and integrated circuits (ICs). These electronic components are the building blocks of modern electronics and are essential for all electronic equipments. They are used in everything from smartphones to computers to medical equipment and defence equipments.
Strategic Significance-
Recent developments are of great significance, as so far, India has largely been an importer of semiconductors. India imports 95% of its semiconductors from countries like China, Taiwan, South Korea and Singapore. The setting up of our own semiconductor Fabs is a step which will not only reduce our reliance on China but will also help achieve the target of $5 trillion economy.
In today’s age of Industrial revolution 5.0, semiconductors chips play a crucial role. As a matter of fact, our vision of becoming an economic power runs through the highway of semiconductors. In the past few years India has witnessed a huge surge in electronic consumption. Thereby, increasing the demand for semiconductors. The semiconductor Industry is projected to achieve a market value of $55 Billion by 2026.
However, attaining this status of economic power won’t be easy. The COVID times exposed the vulnerabilities in global supply chain, making us realise that we cannot depend on any other country. In fact, the pandemic times shed light on the “Invisible Chip War“, wherein one country can use the supply of semiconductor chips to arm twist another country. Just like in Sino-American Tech war or the financial war which U.S waged on Russia using SWIFT. In this era, if a country depends of one or two countries for its semiconductor needs then that supplier country can easily mend its economic and foreign policy. This is clearly evident- in the manner in which- China brought US down on its knees.
As such, the production and self-reliance in semiconductors have become crucial for nations to maintain their technological sovereignty and economic prowess. In this context, the current step of setting India’s first commercial semiconductor Fab units is of great significance.
Steps Towards Self-Reliance…
The Ministry of Electronics and Information Technology (MeitY) has announced a $10 billion commitment towards India Semiconductor Mission (ISM). This will help reduce our reliance on imported semiconductors. Under this mission, the government has come up with a long term strategy to incentivise, facilitate and create an ecosystem for semiconductor production in the country.
This highlights the government’s desire to establish its presence in the semiconductor industry. The investment includes production incentives and Design Linked Incentive (DLI) program etc. This will help boost Fabless startups in developing products for both domestic and foreign markets.
Apart from setting up Semiconductor Fab units, the government has abolished over 40,000 compliances and the rules for FDI have been simplified. Thereby not only improving ease of doing business but also facilitating manufacturing of semiconductors. The government has initiated programs like “Chips to Startup”, has set up Semiconductor Laboratory (SCL), Institute of Semiconductors Technology (IST), and Centers of Excellence to boost research and development.
Moreover, initiatives like Atal Tinkering Labs, innovation centers and the initiation of India’s Quantum Mission and AI mission will foster innovation. All these steps will help boost technological development.
Then the National Policy on Electronics (NPE) 2019 aims to create an environment that is conducive to the electronics industry. It has a target turnover of around $400 billion by 2025. In addition to this, the second phase of the Production Linked incentive (PLI) scheme for Large Scale Electronics Manufacturing has been initiated in 2021. The PLI scheme offers a 4-6% incentive on incremental sales of electronics made in India over five years.
All in All,
The decision of investing in Semiconductor industry and Fab units is not just good economics. It is also the the need of the hour, to ensure our economic sovereignty and our stake in India’s Technological future.
Though our path to achieving complete self reliance in semiconductors has its own challenges both domestic and geopolitical. Yet, making “Chipmaking” a national priority and collaborating with other countries will not only lead to economic growth but it will also have a multiplier effect on other industries.
Furthermore, establishing semiconductor fabs within the country not only enhances India’s leverage and bargaining power in the supply chain. It also bolsters our national security by granting us control over critical technology.
Last but not the least, It will help India transition from being a mere consumer of technology towards being an innovator and a creator of technology.