India is eager for chip manufacturing due to soaring semiconductor demand in electronics. India imports $24B annually, expected $110B by 2030. Pandemic disruptions and geopolitical tensions highlight the need for self-reliance. India Semiconductor Mission has been set up by the Modi Government. Given the importance of this topic, MBAUniverse.com recommends that all MBA aspirants read this important article as MBA GD Topic, and MBA Interview.
Why is India keen on setting up chip units?
India is eager to establish chip manufacturing units due to the critical importance of semiconductors in modern electronics. The demand for semiconductors is rapidly increasing, and India, being a major consumer of electronics, heavily relies on imports, spending around $24 billion annually on semiconductor imports (with expected demand to reach $110 billion by 2030). The pandemic exposed significant supply disruptions, and geopolitical tensions worldwide are emphasizing the need for self-reliance in accessing this vital commodity. Additionally, India has recognized electronics manufacturing as a strategic sector to enhance economic growth and promote exports. As a result, India aims to develop a self-sufficient semiconductor industry to meet its domestic needs and boost its position in the global market.
Did India make attempts to manufacture Semiconductor and Chips in Past?
Yes, India has made several attempts in the past to establish fab units. As early as 2006, the Andhra Pradesh government partnered with SemIndia to establish a $3 billion chip manufacturing facility, but the project did not materialize. In 2007, the Indian government tried to attract Intel Corporation to invest in chip manufacturing, but Intel chose to invest in China and Vietnam instead. Over the next decade, India received multiple expressions of interest (EoIs) for fab units. The Union Cabinet approved two projects in February 2014, one by JP Associates and the other by Hindustan Semiconductor Manufacturing Corporation. However, both projects faced obstacles and eventually had to be abandoned. Despite these setbacks, India is continuing its efforts to promote domestic chip manufacturing and achieve self-reliance in the semiconductor industry.
What are the key challenges?
India faces several challenges in the semiconductor sector. One of the main challenges is the high capital intensity required for semiconductor manufacturing, making it financially demanding and less viable without significant government support. Until recently, the semiconductor manufacturing in India has been limited.
Another challenge is the complexity of chip-making, which involves various stages such as designing, fabricating, assembling, testing, marking, and packing. Establishing fab units requires a comprehensive ecosystem to support these processes. Some experts argue that the government's focus on setting up fab units might be premature without having the necessary ecosystem fully developed.
To create a successful semiconductor industry in India, there is a need to address these challenges and build a robust ecosystem that can support the entire semiconductor value chain. This includes investment in research and development, skill development, infrastructure, and government policies that incentivize domestic manufacturing and attract global investments in the sector.
Are Modi Government’s current initiatives working?
The latest attempt by the Indian government to establish semiconductor fab units faced challenges and delays. Under the Production-Linked Incentive (PLI) scheme, the government announced $10 billion in subsidies or up to 50% of the project cost to incentivize setting up semiconductor fab units in India. Three Expressions of Interest (EoIs) were approved: Vedanta-Foxconn, ISMC consortium backed by Israel's Tower Semiconductors, and Singapore-based IGSS Ventures.
However, progress has been limited for these projects. The Vedanta-Foxconn joint venture fell apart, leading to the demise of the project. The ISMC project is on hold as Tower Semiconductors and Intel are merging, causing uncertainty. Additionally, IGSS Ventures is still in search of an Indian partner to move forward with their project.
These setbacks highlight the challenges and complexities of establishing semiconductor fab units in India. To ensure success, it will require concerted efforts from both the government and industry stakeholders to overcome these obstacles and develop a vibrant semiconductor ecosystem in the country.
How are other countries working on Chip Supply?
- United States: The US government has enacted the CHIPS Act, which provides substantial subsidies worth $280 billion for research and production of semiconductor chips within the country. This move aims to boost domestic chip manufacturing and strengthen the nation's semiconductor industry.
- Germany: Germany has announced subsidies worth $22 billion to incentivize companies to establish semiconductor fab units within its borders. This initiative aims to enhance domestic chip production and reduce reliance on imports.
- European Union: The European Union has enacted the European Chips Act to support and boost semiconductor production in the region. This act seeks to strengthen the EU's semiconductor ecosystem and promote self-reliance in chip supply.
- United Kingdom: The UK has also unveiled a semiconductor strategy to enhance its chip manufacturing capabilities and promote growth in the semiconductor industry.
These initiatives demonstrate how countries across the globe are recognizing the critical importance of semiconductor chips and are taking significant steps to promote domestic production, reduce reliance on imports, and ensure a stable and robust supply of this essential technology.
India Semiconductor Mission: What is it? How it supports the sector?
The India Semiconductor Mission (ISM) operates as an independent and specialized Business Division under the Digital India Corporation. Its primary objective is to foster a robust semiconductor and display ecosystem, positioning India as a prominent global hub for electronics manufacturing and design. The mission is guided by esteemed global experts in the semiconductor and display industry. Its key role is to serve as a central point for the systematic and efficient execution of the Program for Development of Semiconductor and Display Ecosystem, in collaboration with government ministries, departments, agencies, industry partners, and academic institutions.
The India Semiconductor Mission (ISM) has several key objectives:
- Formulate a comprehensive long-term strategy for developing sustainable semiconductor and display manufacturing facilities, as well as a semiconductor design ecosystem in consultation with various stakeholders.
- Facilitate the adoption of secure microelectronics and establish a trusted semiconductor supply chain, including raw materials, specialty chemicals, gases, and manufacturing equipment.
- Promote significant growth in the Indian semiconductor design industry by providing support through Electronic Design Automation (EDA) tools, foundry services, and other mechanisms for early-stage startups.
- Foster indigenous Intellectual Property (IP) generation and encourage the transfer of technologies (ToT).
- Establish mechanisms to harness economies of scale in the Indian semiconductor and display industry.
- Support cutting-edge research in semiconductors and display industry through grants, global collaborations, and establishing Centers of Excellence (CoEs) in academia and research institutions.
- Facilitate collaborations and partnership programs with national and international agencies, industries, and institutions to catalyze collaborative research, commercialization, and skill development.
Latest updates on India Semiconductor Mission GD Topics
- The government’s semiconductor push in the last 18 months has turned India into a rising force in the critical sector, despite missing opportunities to develop a local ecosystem for decades due to the lack of a political vision, said Rajeev Chandrasekhar, minister of state for electronics and information technology, on July 27, 2023. The minister pointed out that several proposals for building manufacturing and semiconductor assembly, testing, marking and packaging (ATMP) were under consideration.
- “Today, we can achieve in the coming techade what some neighbouring nations took 30 years and $200 billion and still failed to achieve,” Chandrasekhar told reporters in New Delhi on the eve of the second SemiconIndia global summit.
- Micron, a world major in the semiconductor memory space, has announced its first-ever investment in Gujarat. This $2.75 billion investment will help develop supply chains and Fabs. It is expected to create at least 5,000 new direct and 15,000 community jobs.
As highlighted above, India is eager for chip manufacturing due to soaring semiconductor demand in electronics. However, there are many challenges. Given the importance of this topic, MBAUniverse.com recommends that all MBA aspirants read this important article as MBA GD Topic, and MBA Interview. This article will be periodically updated, so bookmark this page.
