While geographic specialism has served the business well, it also creates susceptibilities that each country needs to gauge in a manner specific to its own economic and security concerns. As per Boston Consulting Group (BCG), There are more than 50 points across the supply chain where one area controls over 65 per cent of the worldwide market share, although the threat related to each varies. Manufacturing appears as a key focal point regarding the pliability of the global semiconductor supply chain. About 75 per cent of semiconductor manufacturing capability and numerous suppliers of key materials—such as silicon wafers, photoresists, and other speciality chemicals—are based in China and East Asia, a region considerably open to high seismic activity and geopolitical strains. Moreover, the world’s utmost advanced semiconductor manufacturing ability—in nodes below 10 nanometers—is in South Korea (8%) and Taiwan (92%).
The semiconductor is a really global supply chain with designs in the UK with the support of US design software manufactured by US technicians in Taiwan with the assistance of silicon wafers and specialised gases obtained from Japan. A tremor to the semiconductor supply chain will impact every electronic goods supply chain, from cars, trucks, aeroplanes, industrial machinery, consumer electronics, and military weapons. Semiconductors is a grid of millions/ billions of transistors in a chip squeezed into a square inch of silicon, involving multiple stages.
Fabrication plants (also called fabs or foundries) turn silicon into microchips. There are about 170 commercial foundries globally, but there isn’t one in India. After the Modi government’s semiconductor scheme announcement with an outlay of Rs 76,000 crore (approximately $10 billion) worth of benefits, The Vedanta-Foxconn joint venture has submitted its application to set up an electronic chip manufacturing plant. Two months after India announced its semiconductor scheme, in February 2022, the European Union (EU) declared its semiconductor initiative, organising €43 billion in incentives to strengthen its chip industry. Following the trend, in August 2022, the United States, the global leader in chip manufacturing, announced a subsidy plan amounting to approximately $52 billion. With such a stiff race, it can be fathomable why India’s semiconductor mission needs more aggressive support and push to attract major fabs like TSMC, and Intel.
India also faces challenges in its supply chain due to the supremacy of various countries. The United States leads in microchip manufacturing with companies like Intel, GlobalFoundries, Qualcomm, AMD, and NVIDIA. Taiwan, particularly TSMC, dictates the outsourcing segment. China holds a substantial position in Rare Earth Elements mining, generating 85 per cent of the world’s supply of valuable semiconductor materials. Additionally, Japan and Korea play vital roles in the supply chain. Global players are strengthening their positions to counterbalance China’s increasing influence in the semiconductor sector. The Biden administration has restricted chip sales and manufacturing equipment to hinder China’s advancements.
Currently, India has a little stake in the Semiconductor Supply chain. For the Semiconductor mission, India needs to start from level zero . Many steady efforts will be required to fulfil the purpose. India Semiconductor Mission (ISM) aims to build a vibrant semiconductor and display ecosystem to make India Global Hub for electronics manufacturing and design.
USA and Japan are overall Champs of the Semiconductor Industry, but China though deficient in each aspect of the Semiconductor value chain, holds a major share in the assembly of semiconductors. Therefore, to fully gain the China+1 plan in favour of India, we will have to work on all facets of Semiconductor supply chains. As per SBI research, the following facets may be deliberated to incentivise ISM in India. Raw materials used in the Semiconductor supply chain, like silicon, germanium, Gallium Arsenide, and Indium Phosphide may be imported duty-free. The same has presently 5 per cent, 10 per cent, 10 per cent, and 10 per cent import tariffs, respectively at MFN Rate. China lacks in nearly everything in the semiconductor supply chain except the materials and chemicals. Europe is very important for materials for the Semiconductor supply chain.
CURRENT SCENARIO
More than 90 per cent of global semiconductor companies have their R&D centers in India, and as per the Department of Electronics and Information Technology, more than 2,000 chips are designed every year.
Most of the production occurs in the final assembly units in India. The idea is that focussing on assembly units, that is, ‘last-mile industries’, would eventually help cultivate deep backward linkages, thus inducing industrialisation. This was a hint advocated by economist Albert O Hirschman in his theory of ‘Unbalanced Growth’. The Economic Survey 2019-20 also promotes this by suggesting “assembly in India for the world”, especially in “networked products”, to generate four crore well-paid jobs by 2025 and eight crore jobs by 2030.
During Prime Minister Modi’s recent US visit, several noteworthy announcements were made for the semiconductor sector in India. Micron Technology announced to invest $825 million in a new semiconductor assembly and test facility, aiming to create thousands of job opportunities. Lam Research plans to upskill 60,000 Indian engineers through its virtual fabrication platform, contributing to India’s semiconductor education goals. Applied Materials aims to launch a Semiconductor Centre for Commercialisation and Innovation with a $400 million investment. Additionally, India and the US have signed an MoU to promote collaboration in the semiconductor supply chain and innovation, fostering commercial opportunities and skill development.
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