Growth of semiconductor industry in India

Source-This post on Growth of semiconductor industry in India has been created based on the article “Express View on semiconductors: Betting big” published in “The Indian Express” on 2 March 2023.

UPSC Syllabus–GS paper 3- Changes in Industrial Policy and their Effects on Industrial Growth.

News-The article mentions the steps taken by the government to promote semiconductor manufacturing in India.

Background-The central government has recently approved India’s first semiconductor fabrication plant to be set up in Dholera, Gujarat, by the Tata Group.

What are Semiconductor Chips?

Semiconductors are materials which have a conductivity between conductors and insulators. They can be pure elements, silicon or germanium or compounds, gallium, arsenide or cadmium selenide.

What is the state of Chip manufacturing in world?

Currently, South Korea, Taiwan and China account for around 70 per cent of the global manufacturing capacity.

Read more- Elusive quest for semiconductor self-sufficiency

What are the steps taken by the government to promote Chip manufacturing in India?

1) Incentive scheme:-
a) The government has rolled out Rs 76,000 crore chip incentive scheme. There will be incentives for every part of the supply chain including electronic components, sub-assemblies, and finished goods.

b) The scheme will cover all three parts of the semiconductor ecosystem — packaging units (ATMP facilities), assembly and testing projects (OSAT plants), and full-scale foundries.

2) Fiscal support-The central government offers fiscal support and state governments can offer additional incentives to attract investments.
For ex- in the case of Micron, of the project cost of Rs 2.75 billion, the company will contribute $825 million, with 50 per cent coming from the central government and 20 per cent from the Gujarat government.

3) Promoting research and development– The government is planning to set up an R&D lab at the Semiconductor Laboratory.

What is the significance of Chip manufacturing industry for India?

1) Strategic significance – Domestic manufacturing will reduce dependence on imported semiconductors. This will help in safeguarding critical infrastructure, defense system, sensitive data from cyber vulnerabilities.

2) Digital Transformation- It can lay the foundation for digital transformation. Chips are at the core of modern electronics and important for the fourth industrial revolution.

3) Economic significance–

A) Robust supply chains-The domestic manufacturing of chips will lead to diversification of supply chains. This would minimize uncertainty in the manufacturing of chips.

B) Employment Generation-It will create new employment in domains like design, fabrication, assembly, and testing.

C) Enhance export potential – It can help tap the global market and contribute to export earnings.

D) Boost to domestic manufacturing-It will support Make in India. For ex- The Tata-PSMC plant will serve industries such as high-performance computing, electric vehicles, defense and others.

The government has taken the right steps by providing support at a fiscal and regulatory level. However, it must also ensure a stable policy environment.

Question for practice

Stating the significance of domestic manufacturing of semiconductor chips, enumerate the steps taken by the government in this regard?