Chipped & vulnerable: GoI must make public investments to encourage private manufacturing in strategic semiconductor industry

Synopsis: There is an urgent need for India to scale up the manufacturing of semiconductors.

Introduction

India’s automobile industry is facing a major shortage of semiconductors. The supply situation isn’t expected to ease any time soon. That’s mainly because chip manufacturing is concentrated in a few countries.

Why there is a shortage of semiconductors?

The semiconductor shortage today is a result of multiple factors.

These include the rapid growth of 5G Technology, the ever-growing need for greater computing power, the Covid pandemic induced demand for information communication technology and digital entertainment products.

Private firms cannot easily set up manufacturing plants to produce semiconductors. Establishing foundries is hugely capital intensive and has a gestation period of up to three years.

What has India already done?

India invited proposals from semiconductor companies to set up the industry in December 2020. The government also offered more than $1 billion in cash incentives to each semiconductor company that sets up manufacturing units.

What should India do to improve the availability of semiconductors?

India should increase the base for semiconductor manufacturing and also has to formulate policies to promote domestic chip manufacturing.

India should follow the US, China and South Korea’s path. These countries invested huge public money on-chip manufacturing.

Source: This post is based on the article “Chipped & vulnerable: GoI must make public investments to encourage private manufacturing in strategic semiconductor industry” published in The Times of India on 2nd September 2021.