India’s Push for Semiconductors
Context:
- The Union Government has so far distributed over 1,645 crore in performance-linked incentives (PLI) scheme for electronics firms as part of its efforts to draw more of the electronics supply chain to India.
Semiconductor-based chips:
- The conductivities of semiconductors fall in the middle of those of insulators and conductors. They could be single elements like silicon or germanium or mixtures like gallium, arsenide, or cadmium selenide.
- Because they are the essential elements that serve as the brain and heart of all modern electronics and information and communications technology products, semiconductor chips are significant.
Why does the government finance semiconductor manufacturing?
- Due to the increasing usage of integrated circuits (ICs), also known as semiconductors, in contemporary electronics and appliances, the demand for these components has greatly expanded recently.
- Many nations are making an effort to contest China’s dominance in the area as a result of geopolitical pressure to defend themselves against supply chain vulnerabilities.
- The creation of integrated circuits appropriate for use in almost all of the world’s electronic gadgets takes place in semiconductor fabrication facilities, or fabs.
- The cost of fabs can run into the billions of dollars, and they require a lot of funding. They also require a dependable, high-quality water, electricity, and weatherproofing source.
- The government-run Invest India organisation projects that the total electronics manufacturing sector will be worth $300 billion by the fiscal year 2025-2026. Fabs for producing chipsets and displays, which are crucial phases in the creation of many electronics, are less prevalent, despite the fact that the number of facilities for assembling final items has been growing quickly.
Can India produce semiconductors as well as finished goods?
- India should rely on its advantages in the electronics manufacturing value chain. Investments into so-called “foundry enterprises,” which turn silicon into semiconductors, can account for 35% of sales and incur billion-dollar launch costs.
- Yet, enterprises that specialise in outsourcing semiconductor assembly and test have lower startup costs and larger profit margins (OSAT). The OSAT setups handle the less expensive components of chip production, such as assembling the precise parts that have previously been made and running specialised tests to confirm them.
- Semiconductor manufacturing requires a sizable amount of design and intellectual labour. Due to the fact that a sizable portion of semiconductor design engineers worldwide are either Indian or of Indian ancestry and that chip manufacturing companies like Intel and NVIDIA have sizable facilities in India where they already have a wealth of Indian talent working on design issues, India has an advantage in this area. Sanctions and an ageing population are causing China to lose control of this edge.
Will the demand for chips in India be restricted?
- The development of display and semiconductor fabs is one of the strategic and economic goals of India’s electronics manufacturing incentive programmes, and the Union government and States are equally eager to achieve headway on lofty aims tied to well-known brands like Apple.
- Generally, the ecosystem’s elements that have the potential for long-term expansion and profitability seem to be under government development.
Conclusion:
- The electronics value chain would need to be a worldwide undertaking comprising countries with comparable values in order to succeed. Without merely consolidating power with another country, it is still possible to address the geopolitical problem of Chinese dominance if like-minded nations work together on assembly and distribution and each focuses on a different step in the semiconductor and electronics production process.
