It was in 1987 that India had missed the semiconductor bus owing to poor policies of the then government and is presently 12 generations behind in the Global Semiconductor race. However, the semiconductor market in India is witnessing rapid growth and transformation owing to the development in technology and surge in demand for electronic devices.
Prime Minister Narendra Modi during his address from the ramparts of the Red Fort on the occasion of 78th Independence Day outlined India’s commitment towards becoming a global leader in semiconductor production.
PM Modi said, “Semiconductors, modern technologies and Artificial intelligence are inextricably linked to our future and we have started working on the Indian Semiconductor mission”.
He also exhorted that why can’t every piece of equipment have a ‘Made In India” chip? He further added that the country has the potential of fulfilling this dream and therefore the production and semiconductor-related work will happen in India.
“India has started working on its Semiconductor Mission. We are moving ahead rapidly with 5G, and towards further boosting our production capacity. And, I assure you we won’t stop here” said PM Modi.
Why did India miss the semiconductor bus?
Semiconductor or better known as the chip processor is one of the most important components for our mobile phones, computers , defence equipment, satellites as well as smart appliances, games and cars. In the past we all have witnessed the long wait for the delivery of cars. The primary reason is the dependence on semiconductor or the chip processor.
There was a shortage of chips simply because India did not manufacture the chips and imported a hundred percent of its semiconductor requirements (approximately $15 billion in 2020) and 37 percent of it was imported from China. The demand for the same is likely to increase to $32 billion in 2025 with use of 5G.
Top Semiconductor Manufacturing Countries
Presently, the countries which lead chip making are South Korea, Taiwan and China. Presently the chip making industry is worth 37.4 lakh crore. Chip making involves three stages which are:
- Design
- Fabrication (Chip manufacturing)
- Testing and assembling
Semiconductor Manufacturing in Value Chains
India is equipped to design the chips and testing and assemble them. However, it does not have fabrication. The Indian Space Research Organisation (ISRO) and the The Defence Research and Development Organisation (DRDO) have their respective fab foundries. Such foundries are mainly for their own requirements.
Meanwhile, some of the companies which are involved in design testing and assembling are referred to as Integrated Device Manufacturer (IDM). These companies which are engaged in chip designing are ARM, Nvidia, Qualcomm, Apple.
Where India lost the bus was that it did not have chip fabrication which is undertaken at huge manufacturing plants which are referred to as the fabrication foundries (FAB) and they are the leading employment generators and job creators.
This process of being on the backfoot started in 1960 when a company Fairchild Semiconductor decided to build a fab in India. However, due to red tapism they left India and set up their plant in Malaysia.
In 1962 government’s Bharat Electronics Limited which had established a fab to manufacture silicon and germanium transistors suffered the same fate as they could not match the international standards and were compelled to shut down in 1987.
The IISC professor A.R. Vasudeva Murthy helped to establish Metkem Silicon Ltd which, in partnership with Bharat Electronics Limited (BEL), to produce semiconductors. This could have proved to be a game changer and would have given the much needed impetus to the electronic revolution in India. However, once again the semiconductor industry was pushed back as there was no support from the government. Initially the government had committed that they would provide electricity at a subsidised rate, however it did not fulfill its promise due to which Metkem could not produce high quality polysilicon chips and they failed.
One of the most tragic stories of the semiconductor industry happened in 1984 when the Semiconductor Complex Ltd. (SCL), Chandigarh started its operations with a 5000 nm process and advanced to the 800 nm technology. It was the cutting edge only a year or two before at that point of time China and Taiwan had not even penetrated into the fab space. Unfortunately, the entire complex was turned into ashes due to fire in 1989.
The Manmohan Singh led United Progressive Alliance (UPA) government announced the first ever semiconductor policy in 2006. However, it remained only on papers and it was only in 2011 that for the first time that they invited the foreign companies to invest in India.
Apathy of the past governments towards the semiconductor industry
The UPA government under the Prime Ministership of Manmohan Singh was never serious about semiconductor manufacturing in India. It was in 2013 that the World Semiconductor Council wrote a letter to the government wherein they sought cooperation from them.
In 2005 a multinational semiconductor company commenced its operations in South India. However, they faced hurdles at every step and they had to import equipment from the US. The government did not give them any concessions. On the contrary, heavy import duties were levied. The company sought help from the government and the latter did not respond positively.
China capitalised on this opportunity and it opened the doors for the company and gave them all possible assistance.
India’s semiconductor industry witnesses transformation post 2014
The advent of the PM Narendra Modi led government in 2014 and in 2019 saw a turn of events for the semiconductor industry. Going by the past events, prior to 2014, it is clear that there was a clear absence of political will and vision for the semiconductor industry. Also the industry requires a huge amount of electricity supply backed by investment. The Indian government built huge infrastructure. The positive impact of the same can be seen as now India has emerged as the hub of mobile manufacturing.
India’s semiconductor consumption is likely to touch US$ 80 billion by 2026 and US$ 110 billion by 2030. India’s semiconductor market is structured into four different segments which are:
- Discrete semiconductors (used in basic electronic functions)
- Integrated circuits
- Optoelectronics (related to light)
- Sensors and Actuators (for sensing real-world factors)
With a 0.7per cent year on year growth in revenue earned by various sectors, the total revenue is projected to be US$ 8.5 billion in 2023.
Major policies introduced for the semiconductor industry by PM Modi led NDA government
The Indian government devised National Policy on Electronics 2019 (NPE 2019) which aims at making India as a global hub for Electronics System Design and Manufacturing (ESDM). Steps are being taken to develop core components, including chipsets and build an environment for the industry to face global competition.
Scheme for promotion of manufacturing of electronic components and semiconductors (SPECS), 2020
The objective of this scheme is to remove all the problems which pose a hurdle for domestic manufacturing of electronic components for the semiconductors.
Modified programme for semiconductors and display fab ecosystem, 2021
Under this programme, the government provides incentives worth Rs 76,000 crores. The following schemes fall under this programme:
Design Linked Incentive (DLI) Scheme- The Financial incentives and design infrastructure support will be provided to domestic companies, startups and to Micro, Small & Medium Enterprises. These incentives are given at different stages of development and deployment of semiconductor design for ICs Chipsets, Systems on Chips, etc. over a period of 5 years.
India Semiconductor Mission (ISM) –With an aim to accomplish the long-term strategies for developing sustainable semiconductors and display ecosystems has been developed. This mission has been developed by the Ministry of Electronics and Information Technology.
India’s Semiconductor Mission
Moreover, under leadership of PM Modi, a comprehensive semiconductor program was formulated to provide a uniform incentive of 50 per cent to support design, manufacturing and packaging. The government is working towards the development of 100 units as part of the semiconductor ecosystem.
Micron’s facility to generate 20,000 direct and indirect job opportunities in 5 years
The Government of India has approved Micron’s proposal to invest ₹22,516 crores with fiscal support of 50 per cent of the actual Capital. Micron, which is IDM in chip making, is setting up assembly, testing, marking, and packaging (ATMP) facilities in India.
Foxconn has also announced that they are preparing to apply for Silicon FAB and Display FAB.
Similarly, Vedanta will also establish FAB with new partners, earlier they were supposed to work in a Joint Venture with Foxconn but now both will work separately.
Conclusion
Seeing the progress that is being made in the semiconductor industry and the support which the government is extending indicates that India will catch the bus which it had failed to catch in the past. India’s semiconductor market is treading on the path of growth driven by the rising demand for electronic devices and the growing focus on domestic manufacturing. Owing to the emergence of new trends and collaboration with the global player collaborations,investment by Indian semiconductor players and increase in research and development, and intellectual properties, the Indian semiconductor market is all set to scale to new heights.
