In the recent “Semicon India” conference, Prime Minister Narendra Modi announced that India is entering the second phase of its semiconductor mission and the day won't be long when tiny silicon chips made in India will create a huge difference all over the world. This assertion is of utmost importance in the present technology-oriented world, with semiconductors being essential parts with widespread usage in nearly every sector.
Fields such as Artificial Intelligence (AI), quantum computing, and clean energy depend significantly on semiconductors. Ranging from computers, laptops, smart TVs, and mobiles to electronic devices and digital cameras, there is virtually no contemporary device that does not use them.
Incentives to Indigenous Manufacturers
Global demand for semiconductors has risen sharply since 2020 as almost all sophisticated electronic gadgets became reliant upon them. The supply has not kept up. The COVID-19 pandemic and the Russia-Ukraine war have extensively hindered chip supply, resulting in a global shortage. Worldwide, the top producers of semiconductors are Taiwan, South Korea, China, and the United States. Taiwan produces over 60% of the world's chips, and South Korea, via entities such as Samsung Electronics, is the forerunner in state-of-the-art chip production. With this, the Indian government has come out with notable incentives to support indigenous semiconductor manufacturing.
Govt Initiatives and Industry Involvement
Entities such as Tata, Vedanta, and Adani are gearing up to enter this sector. It is especially noteworthy that CG Semi (Murugappa Group) recently said it would make the first indigenous chip by the end of this year, days after the Union Cabinet cleared four semiconductor projects. Ten semiconductor projects worth $18 billion are already under way. Taiwan's Powerchip Semiconductor Manufacturing Corporation (PSMC), in collaboration with the Tata Group, is also poised to initiate chip manufacturing. The recent approvals granted for semiconductor projects in six states for an investment of $1.6 lakh crores (approximately $19 billion) is a welcome change. While there are some who claim that the investments are small, this trend is an important positive move following decades of lost opportunities.
PM’s Assurance on Design Linked Incentives
Prime Minister Narendra Modi had recently announced that the government would revive the Design Linked Incentive (DLI) scheme to access the trillion-dollar global chip market. With increasing protectionism and militarization in nations such as the US, widespread demand for the chip business is a cause for alarm. On this note, it is important that India emphasizes local manufacturing and minimizes reliance on other nations. The investments required for these projects are in place, and with time-bound coordination between state governments in project clearances, India may be able to produce 95 million chips per day soon.
India’s Forecast - $110 billion by 2030
India's semiconductor industry was worth $27.2 billion in 2021 and rose by approximately 19% each year, reaching $64 billion in 2023. It is forecast to reach $80 billion in 2026 and $110 billion in 2030. India hopes that its chips will contribute 8-10% of the world's trillion-dollar chip sales. These factories, however, need proper on-ground facilities. Several nations are planning to produce on a large scale and are providing substantial subsidies. The US, China, European Union, Japan, South Korea, and Taiwan are giving subsidies of as much as $388 billion to these factories. While there is just one mega-plant being built in India, there are 44 in China, 12 in Japan, 14 in Taiwan, 10 in Europe, and 15 in the US under construction.
Challenges and the Road Ahead
Seven projects related to Outsourced Semiconductor Assembly and Test (OSAT) and Assembly, Testing, Marking, and Packaging (ATMP) facilities have been cleared by India. While realizing the vision of "Design in India, Made in India, Trusted by the World," the current challenges need to be met. The most significant challenge is that there is not much quality semiconductor manufacturing happening in India.
Skill Shortage Is Serious Issue
Another serious issue is the enormous skill shortage. India will require an estimated 500,000 to a million skilled workers by 2030. In order to fill this gap, it is essential to implement strategies such as the Skill India Semiconductor Program at once. The process of fast-paced skill development should be done through a rapid collaboration between industry, academia, and the government.
