India’s Commitment towards Becoming a Global Leader in Semiconductor Production

General Studies Paper-3

Context: The Prime Minister on the occasion of 78th Independence day, outlined commitment towards becoming a global leader in semiconductor production and achieving the target of Viksit Bharat by 2047.

About

• There was a time when India used to import mobile phones but now India has created a manufacturing ecosystem in the country and emerged as a big manufacturing hub.
• Many global companies are eager to invest in India, with the nation poised to become a global leader in semiconductor production.
• There is a need for state governments to compete in attracting these investments, which requires policies that ensure good governance and law and order.

India’s Semiconductor Industry

• In 2022, the Indian semiconductor market was valued at US$ 26.3 billion and is projected to expand at a CAGR of 26.3% to US$ 271.9 billion by 2032.
• Semiconductor devices include diodes, transistors and photovoltaic cells assembled or not assembled in modules or panels, light-emitting diodes (LEDs) and mounted piezo-electric crystals.

Factors favouring India

• Skilled Workforce: India leads the world with record number of Science, Technology, Engineering and Mathematics (STEM) graduates, offering the much-needed skilled workforce required in semiconductor manufacturing, design, research, and development.
• Cost Advantage: India offers a substantial cost advantage for semiconductor manufacturing due to the lower labour cost, supply chain efficiency and emerging ecosystem.
• Global Supply Chain Diversification: India has become a preferred destination for back-end assembly and testing operations amidst this industry relocation, with potential for future front-end manufacturing.
• Policy support: The Indian government has promptly seized the opportunity following the global semiconductor supply chain glut after the pandemic and showed great intent through policy support to present India as an alternative to China in the global semi supply chain.

Government Initiatives

• India Semiconductor Mission: It functions as a dedicated division within the Digital India Corporation.
  • Its main goal is to nurture a strong semiconductor and display ecosystem to position India as a prominent global player in electronics manufacturing and design.
  • Under ISM, there are several schemes in place:
• The government offers incentives for manufacturing setup in India:
  • Under the Semiconductor Fab Scheme, fiscal support of 50% of the project cost on an equal footing for all technology nodes.
  • Under the Display Fab Scheme, fiscal support of 50% of the project cost on an equal footing basis.
  • Under the Compound Semiconductor Scheme, fiscal support of 50% of the capital expenditure on an equal footing basis, including support for discrete semiconductor fabs.
• In February 2024, the government approved the establishment of three semiconductor plants, two in Gujarat and one in Assam.

Way Ahead

• India is poised to witness exponential growth in its semiconductor industry with the advent of well-thought initiatives as well as calculated partnerships.
• Through the European Commission and Japan, the Indian government’s MoU indicates their commitment to take proactive steps towards strengthening global semiconductor ecosystems.
• With sustained efforts and a proactive stance, India is on course to solidify its position as a leading semiconductor manufacturing hub, contributing majorly to technological advancement and economic growth.