Discuss some measures for making India self-reliant in semiconductor manufacturing
Semiconductors are materials with conductivity intermediate between conductors (often metals) and nonconductors or insulators (such as most ceramics). Semiconductors can be pure elements like silicon or germanium, or they can be compounds like gallium arsenide or cadmium selenide. The Indian electronics business is rapidly expanding, with demand estimated to exceed USD 400 billion by 2023-24. Domestic output has increased from USD 29 billion in 2014-15 to roughly USD 70 billion in 2019-20. (Compounded Annual Growth Rate of 25 percent ).
The majority of this manufacturing occurs in final assembly units (last-mile businesses) located in India, and focusing on them will aid in the development of deep backward connections, hence driving industrialisation.
Need for self-reliance
- Address supply shocks: The epidemic and ensuing lockdowns disrupted chip supply to India. Due to the shortfall, automobile manufacturers like as Mahindra & Mahindra and Tata group were forced to cut output.
- Geopolitical Advantages: Countries with an adequate supply of chips will be in a better position to shape the future course of geopolitics, which will be driven by data and the digital revolution. Increased self-sufficiency will reduce dependency on Chinese chip imports, particularly during difficult periods like the recent Galwan Valley border skirmish.
- Enhanced security: Chips manufactured in the United States will be designated as “trusted sources” and can be utilised in goods ranging from CCTV cameras to 5G equipment. This would boost the country’s cybersecurity profile.
- Jobs will be created as a result of indigenous chip production, which will help to expand its smartphone assembly industry and boost its electronics supply chain. This will result in a plethora of job chances for Indian youngsters.
- Increased revenue: Indigenous capacity would attract local taxes and increase export potential. Furthermore, India would be required to purchase less semiconductor chips, lowering its import cost.
- Meet expanding demand: Experts expect that over 50 crore individuals will join the internet during the next decade, necessitating the purchase of more phones and laptops.
- Similarly, in the post-pandemic era, there is a larger proclivity for work-from-home culture. This increases the demand for servers, internet connectivity, and cloud computing.
- 2019 National Electronics Policy: It aims to establish India as a global hub for the Electronics System Design and Manufacturing (ESDM) industry. It aims to promote the development of core components (including chipsets) and to foster an environment in which the industry can compete globally.
- Production Linked Incentive Scheme (PLI): Under this scheme, the government will offer an incentive of 4% to 6% on items manufactured in India and covered by target segments to qualified enterprises over a five-year period.
- Foreign Direct Investment (FDI): The Government of India has permitted 100% (FDI) under the automatic route in the Electronics Systems Design & Manufacturing industry.
- Scheme for Modified Electronics Manufacturing Clusters (EMC 2.0): The government will give assistance in the establishment of Electronics Manufacturing Clusters (EMCs) and Common Facility Centres under this programme (CFCs).
- Scheme for the Promotion of Electronic Components and Semiconductors Manufacturing (SPECS): The government will provide a 25% financial incentive on capital investment for a list of products that comprise the electronic product supply chain. Electronic components, semiconductors, and specialised sub-assemblies are examples of such products.
- India will pay more than $1 billion in cash to each semiconductor business that establishes a production facility in the country.
- Technological Restrictions: The indigenous manufacture of semiconductors necessitates the employment of cutting-edge technology. These technologies are licenced at a premium cost from patent holders.
- Structural flaws: FDI in electronics accounts for less than 1% of total FDI inflows because to a shortage of skilled workers, delays in land acquisition, and an unpredictable tax environment.
- High setup costs: According to official estimates, establishing a chip fabrication unit in India would cost between $5 and $7 billion.
- Inefficiencies in the bureaucracy: Establishing an indigenous semiconductor facility necessitates clearances and approvals from various government ministries. There are significant bureaucratic delays at each level, which discourages the formation of manufacturing facilities.
- Unstable power supply: The manufacture of semiconductors necessitates the availability of a continuous 24*7 power supply. Many regions in the country, however, do not meet this standard. This limits production to a small number of locales.
- The government could also assist companies in acquiring semiconductor manufacturing facilities in other countries. This is less difficult than establishing a domestic facility and can be completed quickly to provide a steady supply of chips.
- The proposed Sovereign Patent Fund (SPF) as part of the National Policy on electronics should be established as soon as possible. It is a totally or partially government-backed corporation that intends to boost domestic enterprises by acquiring and licencing patented technologies.
- Aside from that, producers must be assured of minimum domestic procurement by the government and private sector. The emphasis should be on producing cost-effective and technically viable choices such as 28nm chips.
- Increasing Investments: To lure the microchip giants, the entire outlay of the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) must be boosted from the existing Rs. 3300 crore.
- The government launched SPECS to give a 25% capital expenditure incentive for semiconductor production, among other fundamental components. The economic impact of a foundry is enormous, ranging from 6 to 23 times the plant’s investment. According to a recent estimate, a single foundry can offset USD 8 billion in imports over a projected period while also having a USD 15 billion multiplier effect on the Gross Domestic Product (GDP).
- Profiting from Anti-Chinese Sentiments: As a result of the United States’ claims against China for aggravating the Covid-19 and India-China dispute, as well as subsequent developments as a result of it, several multinational corporations (MNCs) are transferring manufacturing out of China.
- The government should provide appropriate resources to support technical institutes’ research and development capabilities.
- For example, with assistance from the Ministry of Electronics and Information Technology, IIT Madras created the ‘Moushik’ microprocessor.
- The plans to boost electronics manufacture, together with the Prime Minister’s call for a ‘Atmanirbhar Bharat,’ have rekindled hopes of a surge in the indigenous electronics industry, allowing India to become completely self-sufficient.
- Only by taking such steps can India hope to realise its aim of becoming a truly indigenous electronic ecosystem that encompasses all parts of the electronics industry.
The twenty-first century will be characterised by a digital revolution, which will result in increased use of mobile phones and computing devices. This increased demand can only be satisfied by ensuring the continued availability of semiconductor chips. As a result, in order to realise its digital potential and emerge as a strong force in the modern era, India must focus on domestic semiconductor development.
How to structure:
- Give an intro about semiconductor industry
- Mention the need for becoming self-reliant, especially after the pandemic and the importance of it in future tech like AI, quantum computing etc.
- Discuss measures and also mention relevant schemes