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Semiconductor manufacturing in India

GS Paper 3

 Syllabus: Changes in Industrial Policy and Their Effects on Industrial Growth

 

Source: IE

 Context: India’s ambition of manufacturing semiconductor chips appears to be taking longer to materialize.

 

Why?

  • Three entities (Vedanta-Foxconn, international consortium ISMC and Singapore-based IGSS Ventures) that had applied to build the chips are facing hurdles in setting up their manufacturing plants in India.
  • The Centre, which expects its semiconductor market to be worth $63 billion by 2026, had received three proposals to set up a fab (fabrication/production) in the country.

 

What are the hurdles?

  • Vedanta-Foxconn struggles to find a tech partner that could licence them the technology to manufacture 28-nanometre chips.
  • ISMC (backed by Abu Dhabi-based Next Orbit and Israel’s Tower Semiconductor) has asked not to consider its proposal owing to a pending merger between Intel and Tower Semiconductor
  • Singapore-based IGSS Venture’s proposal was not found to be up to the mark by the government’s advisory committee.

 

Semiconductors:

  • Semiconductors are materials which have a conductivity between –
    • Conductors (generally metals) at high temperatures and
    • Non-conductors or insulators (such as most ceramics) at low temperatures
  • Semiconductors/integrated circuits (ICs)/microchips can be pure elements, such as silicon or germanium, or compounds such as gallium arsenide or cadmium selenide.
  • Small amounts of impurities called doping are added to pure semiconductors causing large changes in the conductivity of the material.
  • Due to the semiconductor chip shortage in recent years, the global automobile manufacturing industry is particularly affected.

 

Why is India pushing for semiconductor manufacturing?

  • India has identified electronics manufacturing as a key sector to boost its growth by producing goods not just for the domestic market, but also for global markets.
  • While smartphone manufacturing has taken off in the country with Apple taking the lead, the entire process is largely centred around assembling various imported components.
  • India has made chip manufacturing a top priority (by luring global companies) for its economic strategy to
    • Develop a domestic electronics supply chain and
    • Reduce its imports, especially from China

 

Govt. efforts – Semicon India Programme: Launched in 2021 with an outlay of Rs 76,000 crore, the programme seeks to support the development of the semiconductors and the display manufacturing ecosystem in India.

 

Impact of the above hurdles on India: It will affect the country’s ambitious target of becoming a global semiconductor hub in the next five years.

 

Decision taken by the Ministry of Electronics and IT (MeitY): It will reopen the window for applying to its Rs 76,000 crore semiconductor manufacturing plan.

 

Way ahead:

  • As more companies try to diversify their bases from China, India has an opportunity to emerge as a reliable destination.
  • On the lines of the USA’s CHIPS Act, India can also provide subsidies for manufacturing chips in the country.

 

Insta Links:

A push for the semiconductor industry