Setting up three New Semiconductors Plants in India

General Studies Paper -3

Context: The government approved proposals to set up three semiconductor units in Gujarat and Assam with an estimated investment of Rs 1.26 lakh crore.

Proposed Semiconductors Plants

• A semiconductor fabrication plant will be set up by Tata Electronics and Taiwan’s Powerchip Semiconductor Manufacturing Corp. (PSMC) in Gujarat’s Dholera.
• The Tata Group will also set up a chip assembly plant in Morigaon, Assam at a cost of Rs 27,000 crore.
• CG Power and Japan’s Renesas will also set up a semiconductor plant in Gujarat’s Sanand at an estimated cost of Rs 7,600 crore.

What is a Semiconductor?

• Semiconductors also referred to as ‘chips’ are highly complex products to design and manufacture, providing the essential functionality for electronic devices to process, store and transmit data.
• The chip comprises interconnections of transistors, diodes, capacitors and resistors, layered on a wafer sheet of silicon.

Global Scenario in Chip Manufacturing

• About 70%of the current global manufacturing capacity is confined to South Korea, Taiwan and China, with the US and Japan making up for much of the rest.
• Taiwan and South Korea make up about 80% of the global foundry base for chips.
• Only one company, the Netherlands-based ASML, produces EUV (extreme ultraviolet lithography) devices, without which it is not possible to make an advanced chip.

Challenges

• India’s close allies, like the US and EU, also sense the semiconductor opportunity and have rolled out more lucrative incentive schemes than India.
• Talent pool:While India is the biggest back office for design engineers of all major chip companies, skilled talent that can work on factory floors of a fabrication plant is still hard to come by.
• Research and Development:India currently lacks original research in semiconductor design, where the future of the chip is decided.
• Power supply: Besides, an uninterrupted supply of power is central to the process, with just seconds of fluctuations or spikes causing millions in losses.
• Water intensive: Chip-making also requires gallons of ultrapure water in a single day. This requirement could be a task for the government to provide to factories, compounded also by the drought conditions which often prevail in large parts of the country.

Significance of the Project

• Job Creation:The semiconductor industry is highly labor-intensive, requiring skilled engineers and technicians. Semiconductor manufacturing facilities in India will create many direct and indirect employment opportunities.
• Reduced Dependence on Imports: India currently relies on imported semiconductor chips for various electronic devices. Establishing a domestic semiconductor industry will enhance the country’s self-reliance and resilience in times of geopolitical tensions or disruptions in global supply chains.
• Export Opportunities:With a competitive semiconductor industry, India can export chips and related products to other countries, generating revenue and improving its trade balance.
• Strategic Importance: Semiconductor chips are critical components in various strategic sectors such as defense, aerospace, and telecommunications. Having a domestic semiconductor industry ensures greater control over the supply chain and reduces vulnerabilities to disruptions or external pressures.

Way Ahead

• By establishing a semiconductor industry, India can increase its influence in the global technology landscape.
• India can also attract foreign investment, foster innovation, and stimulate other sectors such as electronics, telecommunications, and information technology. A robust industry will significantly contribute to India’s GDP growth.