INDIA’S SEMICONDUCTOR PUSH

Syllabus:

  • GS 2: Bilateral Relations

Why in the News?

During the recent visit of PM Modi to Singapore, the ties were further reinforced with Critical agreements semiconductors, digital technologies, and skill development-some priority areas in the transformation toward semiconductor self-reliance by India.

 Source: PIB

Introduction

  • Recently PM Narendra Modi’s visited to Brunei and Singapore this week, which reinforced India’s widening engagement with South-East Asia, especially in trade, defence, and technology.
  • During visit Critical agreements on semiconductors and digital technologies signed in Singapore have strategic importance to India in its development of the semiconductor ecosystem.
Semiconductor Mission of India

  • Launch: 2021
  • Incentive: Rs 76,000 crore.
  • Subsidy: gives 50% of the capital expenditure costs of a plant as  subsidy.

Recent Developments

  • February 2023: Cabinet gave Approval to semiconductor projects worth Rs 1.26 lakh crore in February 2023.
  • A joint venture of Tata Group and Taiwan’s PSMC willset up a fabrication plant.
  • Till now, Cabinet has cleared 5 semiconductor units, of which four are assembly units.

PM Modi’s visit to Southeast Asia

  • Historic Visit: first visit by any Indian Prime Minister to Brunei.
  • Key areas: emphasized on communication with Sultan Haji Hasanal on security and cultural cooperation.
  • Indo-Pacific Vision: Brunei plays an important role in India’s Pre-Act Policy and Indo-Pacific Strategy.
  • 5th visit: PM Modi’s fifth visit to Singapore highlighted strengthening bilateral ties.
  • Strategic dialogue: Focused on increasing collaboration in areas such as semiconductors, digital technologies and skills development.

India-Singapore Partnership Ahead

Strategic value

  • MOU on Semiconductor Ecosystem Sharing was signed between India and Singapore during the visit by the PM Modi.
  • This Partnership important in view of the key role semiconductors have assumed in current technologies starting from missiles to mobiles, automobiles, and computer

Geostrategic and economic implications

  • Only a few countries dominate the global semiconductor sector, and entry into the sector is hard and crucial for India.
  • Covid-19 pandemic-induced supply chain fluctuations and geopolitical tensions over China’s involvement in the Taiwan Straits and the South China Sea – have raised the stake on the urgency of developing its semiconductor ecosystem for India.

Story of Semiconductor in Singapore

  • Singapore’s semiconductor industry owes its early success to the vision and policies of Prime Minister Lee Kuan Yew.
  • In 1973, Lee Kuan Yew discussed with U.S. President Richard Nixon his dream plans to boost exports and create jobs, which led Singapore to help Texas Instruments and set up National Semiconductors assembly plants.

Major Developments in 1980s

  • According to Chris Miller’s Chip, in the early 1980s, the electronics industry contributed 7% of Singapore’s GDP and a quarter of manufacturing jobs.

Global semiconductor Share

  • Presently, Singapore has 10% of global semiconductor production, 5% of wafer production, and around 20% of semiconductor device production.
  • Singapore is a hub for semiconductors, playing an important role in all aspects of the semiconductor value chain, from integrated circuit (IC) design, assembly, packaging, and testing, wafer manufacturing, to equipment/materials.

Leading MNCs

  • Of world’s top 15 semiconductor companies, 9 have established operations in Singapore, contributing significantly to its economic growth and development.

Lesson’s From Singapore’s Semi-conductor Success

  • In early 1960s and 1970s, USA’s semiconductor companies looked for cheap labor and skilled labor, which led to offshore manufacturing in Southeast Asia.

Reasons for Singapore’s success

  • Infrastructure and communication: Singapore has a strong infrastructure and business environment.
  • Significant number of companies: Singapore attracted leading companies covering the entire semiconductor value chain from manufacturing to testing.
  • Skilled workforce: Human capital development played an important role, with universities offering specialized courses in microelectronics and IC design alongside research with industry.

Government assistance

  • Wafer Manufacturing Parks: The semiconductor plants have 4 manufacturing facilities spread over 374 hectares, where the government provides customized manufacturing facilities

Investment

  • Taiwan Micro-electricity Corporation: invested $5 billion with an expectation of starting production in 2023.
  • GlobalFoundries: will set up a $4 billion factory by September 2023, which can produce 28nm specialty chips.
  • NXP Semiconductors and Vanguard International Semiconductor Corporation declared a joint venture in June 2024 of $8 billion to produce 40-130 nm chips, with production expected in 2027.

Challenges and Opportunities Ahead

High-End Chip Production

  • Singapore Semiconductor Industry focuses on mature-node chips, 28 nm or larger, which are used in appliances, cars, and industrial equipment.
  • It is not designed for high-value logic chips for AI applications that require nodes at 7 nm or smaller.

Increasing Costs and Shifts in the Industry

  • Due to increased production costs, chip firms seek to outsource as many manpower-intensive operations as possible to lower-cost locations.
  • For example, Utac has transferred some of its manual operations to Thailand due to rising costs in Singapore.

Minimal Incentives

  • As compared to other countries, Singapore is not very aggressive in providing subsidies and incentives to attract semiconductor investments.
  • In addition, land and labor scarcity could drive Singapore’s industry as countries such as India are making strides to develop their semiconductor industries.

Looking Back at Collaboration

  • However, even amidst such challenges, the areas of talent development and knowledge on the management of Wafer Fab Parks do provide India and Singapore collaboration opportunities.
  • Singapore’s experience in managing such parks would be an important input for developing India’s semiconductor ecosystem.

Conclusion

With its huge land area and low labor costs in comparison with other countries, India can be seen as a very attractive option for Singaporean semiconductor companies to expand, India can work in tandem with Singapore’s equipment and material manufacturers for semiconductors in developing its semiconductor ecosystem.

Source:Indian Express

Mains Practice Question:

How India-Singapore collaboration in semiconductors can help India become self-reliant, Discuss its implication on India-Singapore Relations.