[Answered] India aims to become a competitive semiconductor hub by building a full value chain. Examine the challenges and policy imperatives in achieving technological self-reliance and economic growth in this strategic sector.

Introduction

Global semiconductor revenues crossed $600 billion in 2022 (SEMI Report), underscoring their role as the “oil of the digital age.” India’s ambition to build a full value chain is central to Atmanirbhar Bharat.

Semiconductors: A Strategic Sector

1. Backbone of AI, 5G, EVs, defence, space, healthcare, and Industry 4.0.
2. India consumes $30+ billion worth of chips annually but imports nearly 100% of finished semiconductors (MeitY, 2024).
3. Pandemic-induced shortages exposed vulnerabilities, affecting India’s auto and electronics sectors, costing billions.

Current Progress in India

1. India Semiconductor Mission (ISM): ₹76,000 crore PLI scheme supporting fabs, OSAT (outsourced semiconductor assembly and testing), and design.
2. 10 fabs approved, pilot line already functioning at Sanand (Gujarat); SCL Mohali being modernised.
3. Design strength: India houses 20% of global chip design talent, with 60,000+ engineers trained on Electronic Design Automation tools.
4. Start-ups: Mindgrove (IoT chips, IIT-Madras’ SHAKTI processor), Netrasemi (₹107 crore VC funding).
5. Global investment: Applied Materials, Lam Research, AMD, and Merck committing over $1.1 billion for R&D.
6. International collaborations: US, Japan, Taiwan, EU under CHIPS4 alliance and India–US iCET partnership.

Challenges in Building a Full Value Chain

1. Capital Intensity: Setting up a fab costs $5–10 billion, with long payback periods.
2. Technological Dependence: Advanced lithography machines are monopolised by ASML (Netherlands); India lacks indigenous capability.
3. Supply Chain Fragility: Dependence on Taiwan, Korea, and Japan for raw wafers, chemicals, rare earths.
4. Talent Shortage: Global shortage of 1 million chip professionals by 2030 (SEMI), India must scale beyond design to manufacturing expertise.
5. Energy & Infrastructure Needs: Fabs require stable 24×7 power, ultra-pure water, and high-class logistics, still inconsistent in India.
6. Geopolitical Pressures: US-China tech war, export controls, and CBAM-type carbon pricing may increase compliance costs.
7. Fragmentation: Lack of coordination among PLI, DLI, and state incentives risks duplication and inefficiency.

Policy Imperatives

1. Strengthen Manufacturing Ecosystem: Integrate ISM with National Electronics Policy for a seamless value chain from design → fab → ATMP → end-product. Provide tax holidays, cheaper land/power, and infrastructure corridors (Gujarat, Karnataka, Tamil Nadu).
2. Talent & Skill Development: Expand semiconductor curriculum across IITs, NITs, IIITs, and polytechnics. Public–private skilling partnerships like Lam Research’s 60,000 engineer training program.
3. International Partnerships & Tech Transfer: Leverage India–US iCET, Japan–India Semiconductor MoU (2023), and Quad supply chain resilience initiatives. Negotiate IP-sharing and R&D collaborations instead of just FDI.
4. R&D and Start-up Ecosystem: Scale up Design Linked Incentive (DLI), promote fabless chip design start-ups. Invest in indigenous processors like SHAKTI (IIT-M) and VEGA (CDAC).
5. Raw Material and Energy Security: Diversify sources of rare earths through ties with Australia and Africa. Invest in renewable-powered fabs for sustainability.
6. Governance & Coordination: Establish an Integrated Semiconductor Task Force for inter-ministerial and state coordination. Encourage PPP models with Indian conglomerates (Tata, Vedanta, Reliance) leading investments.

Conclusion

As Amartya Sen notes in Development as Freedom, technology underpins sovereignty. A coherent semiconductor ecosystem can secure India’s digital future, balancing self-reliance, global integration, and sustainable economic growth.