Chips for growth

Source: The post is based on an article “Chips for growth” published in The Business Standard on 25^th August 2022.

Syllabus: GS 3 – Industries and industrial policies

News: India’s attempt to enter the global semiconductor market with a government commitment of $10 billion is well-timed. But the policy decision must be followed up with a lot of work on the ground.

What were the reasons behind the disruption of the value chain for chips?

First due to the pandemic, and then by the Ukraine War, the supply of neon, a gas that’s key for the semiconductor manufacturing process, was affected.

What are the advantages for India to enter into the semiconductor market?

First, India has a strong background and plenty of skills and experience in chip design.

Second, it has a large domestic market, which is expected to grow faster after the launch of 5G telecom services, which will create new demand for chips.

Third, India has a large automobile industry, that has suffered from chip shortages.

Fourth, domestic semiconductor production could also provide a boost to the growing aerospace and defense sectors and enable local mobile handset manufacturing to move up the value chain.

What are the concerns associated with India, entering the semiconductor market?

Policy drafts, made for the industry, are ambiguous and unclear.

Delays in land acquisition, environmental and other statutory clearances are also major issues.

Lack of infrastructure.

Chip manufacturers require massive amounts of absolutely pure water, whereas India is water-deficient and the water quality is poor in most places.

The policy commitment of $10 billion and assurances of support by India may not be enough, as setting up these plants is fairly expensive.