Electronics & Semiconductor Manufacturing in India
2023 JUN 26
Industry and infrastructure > Industrial Policies > Industry 4.0
- Some crucial parts of the government’s ambitious plan to make India a chips hub in the next five years were finalised during PM Modi’s US visit:
- Micron Technology - which was recently barred by the Chinese government from national projects over alleged national security risks - has said it will invest up to USD 825 million in its first semiconductor assembly and test facility in India, constructed under the Centre’s incentive scheme for the chips ecosystem in the country. The facility will be built in Gujarat.
- Other leading names including Applied Materials and Lam Research have announced that they will support research and training programs in the country.
- A semiconductor material has an electrical conductivity value falling between that of a conductor, such as metallic copper, and an insulator, such as glass. Common elemental semiconductors are silicon and germanium.
- Chipsets are the most commonly used semiconductor component. A chipset is a group of integrated circuits that control the flow of data and instructions between the central processing unit (CPU) and external devices.
- Their design and development occur in various stages:
- A wafer is designed and manufactured in wafer fabrication (FAB) units, also called foundries, by companies as per the requirements of chip manufacturers like Samsung and Qualcomm.
- The chipmakers then package, test and sell the chips to equipment manufacturers such as Xiaomi and Cisco.
- End-use industries that depend on semiconductors include mobile and telecommunication devices, industrial machinery, automobiles, automation (workplace, healthcare, manufacturing etc.), the Internet of Things (IoT) and other industries that have applications for computing in some form or other.
- Electronics manufacturing in the country had increased to USD 75 billion over the past seven years and is expected to reach USD 300 billion in the next six years.
- According to the India Electronics and Semiconductor Association (IESA), semiconductor consumption in India was worth USD 21 billion in 2019, growing at the rate of 15.1 percent.
- India has the requisite expertise in software and chip design. Yet, India lags in the establishment of semiconductor wafer fabrication (FAB) units.
I. National Policy on Electronics 2019 (NPE 2019):
- The Policy envisions positioning India as a global hub for Electronics System Design and Manufacturing (ESDM). Its salient Features of NPE 2019:
- Create eco-system for globally competitive ESDM sector
- Provide incentives and support for manufacturing of core electronic components.
- Provide special package of incentives for mega projects such as semiconductor facilities display fabrication.
- Formulate suitable schemes and incentive mechanisms to encourage new units and expansion of existing units.
- Promote Industry-led R&D and innovation in all sub-sectors of electronics.
- Provide incentives and support for significantly enhancing availability of skilled manpower, including re-skilling.
- Special thrust on Fabless Chip Design Industry, Medical Electronic Devices Industry, Automotive Electronics Industry and Power Electronics for Mobility and Strategic Electronics Industry.
- Create Sovereign Patent Fund (SPF) to promote the development and acquisition of IPs in ESDM sector.
- Promote trusted electronics value chain initiatives to improve national cyber security profile.
II. Program for Development Of Semiconductors And Display Manufacturing Ecosystem In India
- The Program for Development of Semiconductors and Display Manufacturing Ecosystem in India, with an outlay of Rs. 760 billion, aims for the development of a sustainable semiconductor and display manufacturing ecosystem in India.
- The scheme would provide fiscal support of up to 50% of the project cost for setting up semiconductor and display fabrication units.
- The Centre would work with the States to set up high-tech clusters with the necessary infrastructure such as land and semiconductor-grade water.
- India wants to set up at least two greenfield semiconductor fabs and two display fabs.
- In order to drive the long-term strategies for developing a sustainable semiconductors ecosystem, a specialised and independent ‘India Semiconductor Mission’ will be set up.
- The India Semiconductor Mission will be led by global experts in semiconductor and display industry. It will act as the nodal agency for efficient and smooth implementation of the schemes on semiconductors and display ecosystem.
III. PLI Scheme for Large Scale Electronics Manufacturing:
- Under the scheme, electronic manufacturing companies will get an incentive of 4 to 6% on incremental sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies over a period of next 5 years.
IV. scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS):
- Under the scheme, a financial incentive of 25% of capital expenditure has been approved by the Union Cabinet for the manufacturing of goods that constitute the supply chain of an electronic product.
V. Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme:
- The scheme will provide financial assistance up to 50% of the project cost subject to a ceiling of Rs 70 crore per 100 acres of land for setting up of Electronics Manufacturing Cluster projects.
WHY BOOST ELECTRONICS MANUFACTURING:
- Boost domestic manufacturing:
- India seeks to become self-reliant in manufacturing capabilities under Atmanirbhar Bharat and aims to emerge as a global hub for electronic system design and manufacturing.
- Attract investment:
- Through efforts like globally competitive incentive package to companies, the government hopes to attract large global chip makers to make India their production base.
- Digital sovereignty:
- Industry 4.0 and wireless communications like 5G have become integral to the country’s economic, strategic and security interests. The approved programmes will propel innovation and build domestic capacities to ensure the digital sovereignty of India.
- Employment generation:
- In the era of industry 4.0, a strong domestic electronics industry will create highly skilled employment opportunities to harness the demographic dividend of the country.
- Reap benefits of chip shortage:
- The world has been reeling under the shortage of semiconductor chips affecting production targets across almost all industries. If the recent policies can lure some of the fabrication units, it would go a big way in making our country self-reliant.
- Strategic significance:
- Manufacturing and supply capability are concentrated in few countries like Taiwan, South Korea, U.S., Japan and China. Any geopolitical tension can disrupt the supply chain and adversely affect India.
- Eg: Taiwan is the world’s leading chip producer and its growing tension with mainland China can impact India’s import. Here, attaining self sufficiency can alleviate any threat of Chinese aggression.
- Promote circular economy:
- A circular electronics system - one in which resources are re-used in countless ways creates a sustainable system and improves cost effectiveness of the industry. The development of such a system requires reliable domestic manufacturing capability.
- Capital intensive industry:
- A semiconductor fabrication facility can cost multiples of a billion dollars to set up even on a relatively small scale. They also have high operating costs and need frequent technology replacement. This makes it a viable industry for only a few corporate giants.
- Power demand:
- Chip fabs require extremely stable power supply. But this is a challenge in India.
- Eg: India recorded a power supply shortage of 1,201 million units in October 2021 — the highest in 5.5 years — due to coal shortage in thermal plants.
- Concerns over water use:
- Semiconductor manufacturing requires large volumes of ultra-pure water to avoid the contamination of electronic devices. For a water stressed country like India, such levels of water usage are unsustainable.
- Eg: Taiwan Semiconductor Manufacturing Company uses around 60 liters of water per layer of chip and the recent severe drought in Taiwan has affected production.
- Stiff competition:
- India has a weak ecosystem and shortage of resources as compared to more competitive bases like China and Vietnam. Hence, it would require immense government support to attract the industries to the country.
- Environmental concerns:
With electronics becoming a part and parcel of every aspect of human life, India’s push for creating indigenous capabilities and thrust on long-term strategies for the sustainable development of the chip and display industry is a step in the right direction.
Q. Discuss the significance of Electronics sector for India. Enumerate the various efforts taken by the government to promote electronics manufacturing in India?