UPSC Issue at a Glance | India’s Semiconductor Push: 4 Key Questions You Must Know for Prelims and Mains

UPSC Syllabus: 

Preliminary Examination: Current events of national and international importance; General Science

Mains Examination: GS-II, GS-III: Science and Technology- developments and their applications and effects in everyday life; Indigenization of technology and developing new technology; Awareness in the fields of IT; Government policies and interventions; Economic Development.

Other areas of relevance: UPSC Aspirants will find it useful in Essays, and Current affairs for their Personality tests.

Question 1: What are semiconductors and their significance?

Most modern-day semiconductors are integrated circuits, also referred to as ‘chips’ — essentially a set of minute electronic circuits comprising transistors and diodes, as well as capacitors and resistors, and the myriad interconnections between them. Semiconductors are majorly made up of silicon and consist of millions or billions of transistors that act like miniature electrical switches that flip on and off to process data such as images, radio waves, and sounds. 

Semiconductors are an essential component of electronic devices, enabling advances in communications, computing, healthcare, military systems, transportation, clean energy, and countless other applications. They are highly complex products to design and manufacture, that provide the essential functionality for electronic devices to process, store and transmit data. 

Points to Ponder: 

— What are the characteristics of semiconductors?

Question 2: What are the challenges associated with the manufacturing of semiconductors in India?

India is looking to establish itself as a reliable presence in the semiconductor supply chain; however, there are some challenges faced by the semiconductor industry, such as:

1. Capital-Intensive Industry: The Semiconductor industry is capital-intensive. No other industry has a similar level of investment in both R&D (22% of annual semiconductor sales to electronic device makers) and capital expenditure (26%), according to a report commissioned by the Semiconductor Industry Association, thereby making semiconductor fabrication an extremely capital intensive business with high entry barriers.

2. Limited Access to Technology: The closed ecosystem and limited access to technology are other challenge associated with the manufacturing of semiconductors. The global semiconductor chip industry is dominated by some countries and a handful of companies — Taiwan and South Korea make up about 80% of the global foundry base for chips; and only one company, the Netherlands-based ASML, produces EUV (extreme ultraviolet lithography) devices, without which it is not possible to make an advanced chip. It’s a nearly closed manufacturing ecosystem with very high entry barriers.

3. Complexity of the Manufacturing Process: The semiconductor manufacturing process is complex. There could be between 500 and 1,500 steps in the overall manufacturing process of semiconductor wafers, requiring multiple inputs that include silicon wafers, commodity chemicals, speciality chemicals, and other infrastructural prerequisites such as clean water supply and uninterrupted power supply.

4. Lack of 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.

5. Lack of R&D in Semiconductors: India also currently lacks original research in semiconductor design, where the future of the chip is decided.

6. Apprehensions of the Major Players: It has been seen that major players in the semiconductor industry have apprehensions about policy stability in India’s semiconductor sector.

Soumyarendra Barik writes—“A “cumbersome” administrative structure, lack of experienced engineers, high tariffs on electronics component imports and inadequate infrastructure — these are some of the challenges that India needs to address before chip companies from the island territory start to commit serious investments, a top Taiwanese government representative said.”

 Anil Sasi writes—“In terms of policy, Taiwanese players share two major concerns: the fact that MeITY, the nodal ministry for overseeing the chip push, is not in-charge of the skilling effort, which is under a different ministry. The other issue is India’s unpredictable trade policy, where duties and new licensing norms are imposed overnight, and the direction of the tariff lines is broadly moving upwards.”

Points to Ponder: 

— What measures should be taken to tackle the challenges faced by the semiconductor industry in India?

Question 3: What is India’s domestic policy on semiconductors?

The government of India not only acknowledges the economic and geopolitical importance of the semiconductor industry but also recognises the shortcomings of the Indian semiconductor sector. As a result, various steps have been taken by the government from time to time to boost domestic semiconductor manufacturing.

Shubhajit Roy writes— 

“Supply disruptions during the Covid-19 pandemic and the geopolitical tensions arising out of China’s aggressive moves in the Taiwan Strait and the South China Sea have brought urgency to India’s efforts to develop its own semiconductor ecosystem. The global chip industry is dominated by companies from a very small number of countries, and India is a late entrant into this high-tech and expensive race.

In February, the Cabinet approved semiconductor-related projects adding up to investments of about Rs 1.26 lakh crore. That same month, the government announced a partnership between the Tata Group and Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC) to set up a semiconductor fabrication plant in Gujarat. The Cabinet has, so far, approved five semiconductor units, including four assembly units, under the incentive scheme.”

India Semiconductor Mission

The India Semiconductor Mission was launched in 2021. It is a strategic initiative undertaken by the government of India to promote the domestic semiconductor industry. Its goal is to improve semiconductor design and manufacturing capabilities domestically and to encourage innovation, employment, and economic growth. 

The India Semiconductor Mission operates under the guidance of the Ministry of Electronics and Information Technology (MeitY) and other relevant government bodies.

Semicon India Programme

The government has launched the Semicon India programme with a total outlay of Rs 76,000 crore to provide financial support to companies investing in semiconductors, display manufacturing and design ecosystems. This will help in the development of the semiconductor and display manufacturing ecosystem in the country. 

The programme has further been modified in view of the aggressive incentives offered by countries already having an established semiconductor ecosystem and a limited number of companies owning advanced node technologies.

The following four schemes have been introduced under the Semicon India programme:

1. Modified Scheme for setting up of Semiconductor Fabs in India

2. Modified Scheme for setting up of Display Fabs in India

3. Modified Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / OSAT facilities in India

4. Semicon India Future Design: Design Linked Incentive (DLI) Scheme

Prime Minister Narendra Modi addresses SEMICON India 2024 in Greater Noida. (PTI Photo)

Thus, we can say that India’s strategies related to the semiconductor sector are comprehensive and focused on boosting all three aspects of the semiconductor ecosystem – packaging units called ATMP facilities; assembly and testing projects called OSAT plants; and full-scale foundries that can manufacture chips.

According to Express Opinion in “Message from Moody’s: Government must handhold semi-conductor industry” — 

“Experts have rightly pointed out that the government’s plan to make India a semi-conductor hub would require not just financial backing but also investments in talent development….Now a report by the global rating firm, Moody’s, has underlined another challenge. Climate change can damage manufacturing facilities, disrupt supply chains and lead to significant financial losses.

The report warns that risks posed by global warming could deter investments in the industry and come in the way of India realising its ambition of becoming a chip-making hub. The message from the Moody’s report is clear: Government will have to handhold industry, invest in climate-resilient infrastructure and nudge fab units to adopt sustainable practices.”

Points to Ponder: 

—  What is the significance of the indigenisation of the semiconductor ecosystem?

(Thought process: Highlight the significance of indigenisation of the semiconductor ecosystem through connecting it with economy-import bills-India’s mission to atmanirbhar Bharat–look at the semiconductor materials imported from other countries.)

Question 4: What is the role of international collaboration in the development of the semiconductor industry in India?

 “The tailwinds are helping India progress in semiconductors. Our cooperation and partnerships with the US, EU, Japan, Korea etc. are tailwinds for our ambitions in semiconductors and electronics. The other countries who thought they were ahead of us have headwinds with export control that are working against them. So, we have a unique opportunity in electronics, in electronics design in semiconductors and semiconductor design at the same time,” said former Minister of State for Electronics and IT Rajeev Chandrasekhar.

This statement of the former Minister of State for Electronics and IT, Rajeev Chandrasekhar, clearly reflects the crucial role of international collaboration in the semiconductor industry. In this context, we see that India is collaborating with some countries in the field of semiconductors. Such as:

1. India-US Partnership: On September 9, 2024, the US announced a “new partnership” with India to explore semiconductor supply chain opportunities, which will include a “comprehensive assessment” of India’s existing semiconductor ecosystem, regulatory framework, workforce and infrastructure needs.

Earlier, India and the US had signed a memorandum of understanding (MoU) on semiconductor supply chain and innovation partnership during the Commercial Dialogue 2023.

2. India-Singapore Semiconductor Ecosystem Partnership:Recently, Prime Minister Narendra Modi and his Singaporean counterpart, Lawrence Wong, witnessed the exchange of the Memorandum of Understanding regarding an India-Singapore Semiconductor Ecosystem Partnership.

Prime Minister Narendra Modi with his Singapore counterpart Lawrence Wong during their visit to AEM Holdings Ltd., in Singapore, Thursday, Sept. 5, 2024. India signed a semiconductor ecosystem partnership with Singapore during Modi’s visit last week.(PTI photo)

Shubhajit Roy writes— “Nine of the world’s top 15 semiconductor firms have set up shop in Singapore, and the semiconductor sector contributes significantly to the country’s economic growth. Singapore has players in all segments of the semiconductor value chain: integrated circuit (IC) design, assembly, packaging and testing; wafer fabrication, and equipment/ raw material production. 

From New Delhi’s perspective, there is scope for collaboration with Singapore in talent development, and knowledge-sharing about best practices in managing semiconductor industrial parks (called Wafer Fab Parks in Singapore). There is also scope for India to engage and collaborate with semiconductor equipment and material manufacturers in Singapore to develop its own semiconductor manufacturing ecosystem.

Given the critical importance of semiconductor chips in almost everything, from missiles to mobile phones and cars to computers, the partnerships with Singapore and US have geo-strategic and geo-economic importance.

3. India-EU Semiconductor Pact:India and the European Union have signed a Memorandum of Understanding (MoU) on cooperation in the semiconductor ecosystem, which will facilitate investments, joint ventures, and technology partnerships, including manufacturing facilities.

4. India-Japan chip supply chain partnership: Last year, the Union Cabinet approved a Memorandum of Cooperation (MoC) between India and Japan on developing a semiconductor supply chain partnership that will focus on research and development (R&D), manufacturing, design, and talent development for the industry.

5. India-Taiwan: Tata is building India’s first commercial fabrication plant along with its Taiwanese partner Powerchip Semiconductor Manufacturing Corporation (PSMC) for a cost of more than Rs 91,000 crore.

Points to Ponder: 

— What are the challenges and opportunities associated with international collaboration in the semiconductor industry?

— Which nation holds the distinction of being the primary source of semiconductors on a global scale?

— Why is Taiwan important for India?

Post Read Questions

Prelims

(1) The application of semiconductor covers:

1. Integrated circuit (IC) design

2. Packaging and testing

3. Raw material production

4. Wafer fabrication

Select the correct answer using the codes given below:

(a) 1, 2 and 3 only

(b) 3 and 4 only

(c) 1 and 2 only

(d) 1, 2, 3 and 4

(2) With reference to Semiconductor industry, consider the following statements :

1. The Indian government has created a dedicated task-force called the India Semiconductor Mission, which aims to serve as a focal point for an efficient implementation of India’s chip ambitions.

2. More than 90 per cent of the world’s most advanced chips required for almost all electronic equipment such as smartphones, car components, data centres, fighter jets and AI technologies, are made in South Korea.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Mains

Why is India aiming to become self-sufficient in chip manufacturing? Highlight the government initiatives to strengthen India’s semiconductor ecosystem.

(Sources: ism.gov.in, India’s first semiconductor fabrication plant, How semiconductors became a flashpoint in the US-China rivalry,  After Singapore, US ties up with India to boost semiconductor sector, Why Singapore is significant for India’s semiconductor push , Cabinet approves India-Japan chip supply chain partnership)

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