India’s Semiconductor Mission: Building Chip Power

INDIA’S SEMICONDUCTOR MISSION AND CHIP DIPLOMACY

Syllabus:

GS-3: ● Science and technology ● Indigenization of technology and development of new technology

Why in the News?

India’s India Semiconductor Mission is making global headlines after the government approved significant investments to establish semiconductor foundry and assembly plants in Gujarat and Assam. This comes amidst geopolitical tensions disrupting supply chains, especially in the US-China technology rivalry. As semiconductors power everything from consumer electronics to fighter jets, India’s move is both an economic and strategic necessity in the rapidly evolving global semiconductor landscape. The recent Semicon India 2023 event further highlighted the country’s commitment to developing its semiconductor capabilities.

STRATEGIC IMPORTANCE OF SEMICONDUCTORS

• Core technology: Semiconductors form the backbone of digital economy, powering devices, automobiles, defense systems, and critical infrastructure essential for national security.
• Supply chains: Recent chip shortages during COVID-19 highlighted the vulnerability of global supply chains, pushing nations to diversify semiconductor manufacturing bases.
• National security: Secure and reliable semiconductor supply chain is crucial for defense, space, and cybersecurity, reducing dependence on external powers.
• Economic driver: The global semiconductor industry is valued over $600 billion, and India aspires to capture a major share through semiconductor fabrication, chip design, and chip packaging.
• Strategic autonomy: By building domestic capability, India seeks technology self-reliance, reducing vulnerability to US-China trade wars and sanctions.

GOVERNMENT INITIATIVES AND POLICIES

• PLI scheme: The Production Linked Incentive (PLI) scheme incentivizes semiconductor manufacturing with substantial subsidies for capital investment.
• ISM creation: The government set up the India Semiconductor Mission (ISM) to develop semiconductor foundry, assembly, and testing facilities.
• FDI attraction: Liberalized foreign direct investment (FDI) norms encourage global semiconductor companies to partner with Indian firms in chip-making.
• Skill ecosystem: Initiatives like ‘Chips to Startup’ aim at training engineers in semiconductor design and wafer fabrication skills, building a robust semiconductor workforce.
• State role: Gujarat’s Dholera Special Industrial Region and Assam’s proposed semiconductor fabrication plant highlight state participation in fostering the semiconductor ecosystem.
• Semicon India Programme: The government launched the Semicon India programme to boost semiconductor and display manufacturing in the country, with events like Semicon India 2023 showcasing progress and opportunities.
• DLI scheme: The Design Linked Incentive (DLI) scheme has been introduced to promote chip design and innovation in India’s semiconductor industry.

GLOBAL CONTEXT AND CHIP DIPLOMACY

• US-China rivalry: The technological cold war between the US and China has transformed semiconductors into a geopolitical battlefield.
• Taiwan dominance: Taiwan’s TSMC controls 90% of advanced chips, creating global concerns over stability in the Taiwan Strait.
• Allied collaborations: The US-led Chip 4 Alliance (US, Japan, South Korea, Taiwan) seeks to diversify supply chains and counter China.
• Indian positioning: India positions itself as a trusted partner by aligning with the US, Japan, and EU for semiconductor cooperation.
• Tech partnerships: Recent India-US agreements, including Micron’s investment, indicate rising technology partnerships in the semiconductor ecosystem.

CHALLENGES TO INDIA’S CHIP MISSION

• Capital intensity: Semiconductor foundry and fab in India require billions of dollars in investments with long gestation periods, deterring private players.
• Technological gap: India lags in advanced fabrication technology, including silicon carbide and compound semiconductors, which is dominated by Taiwan, South Korea, and the US.
• Skill shortage: Despite a large IT workforce, there is a shortage of specialized semiconductor engineers and technicians in the semiconductor workforce.
• Infrastructure gaps: Semiconductor fabs demand uninterrupted power, water, and logistics, where India faces infrastructure bottlenecks.
• Global competition: Countries like Vietnam and Malaysia are also vying to become alternative hubs, intensifying competition in the semiconductor market.

POTENTIAL BENEFITS FOR INDIA

• Economic growth: Developing a semiconductor ecosystem could add billions to GDP and generate high-quality employment in the semiconductor industry.
• Export potential: India can emerge as a global hub for chip exports, diversifying beyond IT services.
• Defense security: Domestic semiconductor production ensures secure supply for defense and aerospace, reducing semiconductor imports dependency.
• Startup boost: Chip innovation could catalyze semiconductor startups in AI, IoT, and robotics, building a robust digital economy.
• Geopolitical clout: Chip capability enhances India’s strategic leverage in international technology and trade negotiations.

LESSONS FROM GLOBAL MODELS

• Taiwan model: Taiwan nurtured TSMC through long-term state support, highlighting patience and consistent policies.
• South Korea model: Korea’s success rests on public-private synergy with Samsung and SK Hynix leading the global race in semiconductor fabrication.
• US model: The CHIPS and Science Act commits billions to reshore semiconductor manufacturing amid security concerns.
• China model: Heavy state subsidies helped China achieve 70% self-reliance target by 2025, though global sanctions slowed progress.
• EU model: Europe’s Chips Act aims at 20% global market share, showcasing regional cooperation as a strategy.

WAY FORWARD FOR INDIA

• Long-term vision: India must ensure policy consistency with decades-long commitment instead of short-term industrial incentives for the semiconductor industry.
• Global alliances: Active collaboration with US, Japan, Taiwan, and EU can help bridge technological gaps in semiconductor technology and chip fabrication.
• R&D investment: Increasing public and private investment in semiconductor research and semiconductor innovation is essential for sustainable growth. Establishing a robust semiconductor laboratory network is crucial for this effort.
• Skill building: Expansion of specialized semiconductor courses in IITs, NITs, and global universities partnerships is critical for developing the semiconductor workforce.
• Green fabs: Focus on sustainable energy use in semiconductor fabrication plants can position India as an eco-friendly semiconductor manufacturing destination.
• Semiconductor policy: Develop a comprehensive semiconductor policy that addresses all aspects of the industry, from chip design to advanced packaging.
• Semiconductor incentives: Implement targeted incentives for different segments of the semiconductor value chain, including the Design Linked Incentive (DLI) scheme for chip design.
• Semiconductor clusters: Establish dedicated semiconductor clusters with state-of-the-art infrastructure and ecosystem support, including ATMP facilities (Assembly, Testing, Marking and Packaging) and OSAT facilities (Outsourced Semiconductor Assembly and Test).

CONCLUSION

India’s India Semiconductor Mission represents more than industrial policy; it is a geostrategic necessity in the era of technological competition. By balancing foreign collaborations with indigenous capabilities, India can secure both economic growth and strategic autonomy in the semiconductor industry. Sustained investments, consistent policy support, and skill development will determine whether India transforms from a digital consumer into a semiconductor powerhouse.

The success of initiatives like “Make in India” and “Atmanirbhar Bharat” in the context of semiconductors could redefine India’s position in the global semiconductor value chain, fostering semiconductor innovation and reducing semiconductor imports. The Semicon India programme and the push for semiconductor self-reliance are crucial steps towards meeting the growing semiconductor demand in consumer electronics and other critical sectors.

The development of semiconductor assembly and semiconductor testing capabilities, along with investments in semiconductor equipment, will be key to establishing a comprehensive semiconductor ecosystem in India. Initiatives like the creation of a semiconductor cluster and the promotion of heterogeneous packaging technologies will further strengthen India’s position in the global semiconductor landscape.

MAINS PRACTICE QUESTION

“Semiconductors are the new oil of the 21st century. Discuss the strategic and economic significance of India’s semiconductor mission in the context of global chip geopolitics.”