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Context:
The government has approved four semiconductor manufacturing projects that will cost almost Rs 1.5 lakh crore.
Details:
- In an era dominated by technological advancements, semiconductors play a pivotal role in powering everything from smartphones to advanced computing systems.
- Recognizing the strategic importance of semiconductor manufacturing, India is making a substantial push to build its own chipmaking industry, with a $15 billion investment aimed at bolstering self-reliance and reducing dependence on global supply chains.
The semiconductor value chain:
Pre-competitive research comprises 15-20% of the global value chain.
Design comprises 50% of value addition.
Front-end (wafer fabrication) adds 24% value.
Rest of the value is added through back-end (assembly, testing and packaging); electronic design automation (EDA) and core intellectual property (IP) which provide sophisticated software support to design; equipment and tools; and raw materials.
The Importance of Chipmaking
- Semiconductors are the backbone of modern electronic devices, forming the core of computing, telecommunications, and even critical infrastructure.
- The global demand for semiconductors has surged, driven by rapid technological innovation and the growing need for digital transformation across industries.
- However, the COVID-19 pandemic exposed vulnerabilities in global supply chains, leading to severe semiconductor shortages and highlighting the need for localized manufacturing capacities.
India’s $15 Billion Initiative
The Indian government has committed $15 billion towards developing a robust semiconductor ecosystem. This initiative aims to attract global semiconductor manufacturers, foster domestic capabilities, and ensure a steady supply of chips for various industries.
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Incentives and Subsidies:
The government is offering financial incentives and subsidies to attract major global semiconductor players to set up manufacturing units in India.
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- These incentives cover capital expenditure, research and development, and operational costs.
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Infrastructure Development:
Investment in state-of-the-art infrastructure, including semiconductor fabrication plants (fabs), testing and packaging units, and specialized research facilities, is a key aspect of the initiative.
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- Developing such infrastructure is critical to creating a conducive environment for semiconductor manufacturing.
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Skill Development:
Building a skilled workforce capable of handling advanced semiconductor technologies is vital.
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- The initiative includes programs aimed at training engineers, researchers, and technicians in semiconductor design and manufacturing processes.
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Research and Innovation:
Collaboration with leading academic and research institutions is encouraged to foster innovation in semiconductor technology.
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- This includes investing in cutting-edge research, encouraging patents, and supporting startups in the semiconductor space.
Strategic Objectives
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Reducing Import Dependence:
India currently relies heavily on imports for its semiconductor needs.
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- Developing domestic manufacturing capabilities will reduce this dependency and enhance national security by ensuring a stable supply of critical components.
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Boosting Economic Growth:
The semiconductor industry has the potential to generate significant economic benefits, including job creation, enhancing technological capabilities, and stimulating related industries such as electronics manufacturing.
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Strengthening Global Position:
By establishing itself as a semiconductor manufacturing hub, India aims to become a key player in the global semiconductor supply chain, attracting investments and fostering international collaborations.
Challenges and Considerations
Setting up semiconductor fabs requires substantial capital investment and advanced technological expertise.
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- Ensuring sustained financial commitment and strategic partnerships will be crucial.
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Technological Complexity:
Semiconductor manufacturing involves sophisticated processes and stringent quality controls.
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- Developing the requisite technological know-how and maintaining high standards will be a major challenge.
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Global Competition:
India will face competition from established semiconductor hubs like Taiwan, South Korea, and China. Differentiating itself through unique value propositions and efficient operations will be essential.
Future outlook:
- The future of chipmaking in India looks promising, with several global semiconductor giants expressing interest in setting up operations in the country.
- Collaborative efforts, continuous innovation, and supportive government policies will be key to realizing the vision of a self-reliant semiconductor industry.
- As India progresses on this path, it stands to gain not only economic and strategic advantages but also a significant position in the evolving global technology landscape.
Conclusion
- India's $15 billion push towards developing a chipmaking industry is a strategic move aimed at enhancing self-reliance, boosting economic growth, and securing a place in the global semiconductor ecosystem.
- While challenges remain, the potential benefits of a robust domestic semiconductor industry are immense.
- With sustained effort and strategic planning, India could emerge as a major player in the global semiconductor landscape, driving innovation and technological advancement.
READ IN DETAIL-
Semiconductor Manufacturing in India
https://indianexpress.com/article/explained/explained-economics/india-15-billion-push-chipmaking-9541416/
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PRACTICE QUESTION
Q. The global semiconductor shortage has highlighted the strategic importance of domestic manufacturing capabilities. Discuss the challenges and opportunities for India in establishing a robust semiconductor manufacturing ecosystem.
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