[Answered] Why is the government encouraging semiconductor manufacturing in India?
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Red Book

Introduction: Contextual introduction.
Body: Explain why the government is encouraging semiconductor manufacturing in India.
Conclusion: Write a way forward.

Semiconductors are the building blocks of almost every modern electronic device from smartphones to connected devices in the Internet of Things.The Union Government has disbursed around ₹1,645 crore in performance-linked incentives (PLI) for electronics manufacturers so far. The Semiconductor Industry is facing an acute crisis with a global semiconductor shortage. Hence, the shortage is expected to have a major impact on global manufacturing industry and consequently the economy.

The government is encouraging semiconductor manufacturing in India due to following reasons:

  • These chips are found in practically every modern electrical appliance and personal electronics devices. More and more nations are trying to turn away from China’s dominance in the space, following geopolitical pressures to de-leverage themselves from supply chain vulnerabilities.
  • Semiconductor companies have been gearing up to ramp up capacity for manufacturing advanced chips required by 5G Technology.
  • Also, India imports almost all semiconductors to meet its demand, which is estimated to reach around $100 billion by 2025 from about $24 billion now. It will cut the import bill too.
  • Further, these chips are made with embedded instructions, which may contain malware or backdoorsand are impossible to diagnose. And as Semiconductor chips are used in various strategic areas like, defence and telecom, the domestic manufacturing of chips assumes strategic importance and would provide a measure of security. 
  • Setting up domestic manufacturing units would help to insulate India against future supply disruptions. Moreover, any intellectual propertythat is generated will be a big bonus.
  • This move will also make the Indian manufacturers globally competitiveto attract investment in the areas of core competency and cutting-edge technology.
  • Additionally, economies with a large production of Semiconductor chips, like US, Japan, Korea, China and Singapore, have benefited the most in terms of enhancing their GDPand establishing a strong foothold on the global economy.

Chip production is a resource-intensive and expensive process. Initial funding should focus on areas like design and R&D. Like-minded nations should specialize in different aspects of the semiconductor and electronics manufacturing process.

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