Semiconductors: What are they?
Semiconductors are the intermediary component of electrical conductivity between an insulator and a conductor which are widely utilized for all kinds of electronic and mechanical devices. Diodes, transistors, and integrated circuits are merely a few of the electrical devices that use semiconductors in their manufacturing process. Due to their portability, dependability, energy efficiency, and affordability, these gadgets are widely used in today’s world.
Additionally, they have been employed as discrete components in solid-state lasers, optical sensors, and power devices.
The Necessity of India Semiconductor Mission
Prior to the COVID-19 pandemic and the Russian invasion on Ukraine, the semiconductor industry was primarily dominated by few countries such as United States of America, Taiwan, South Korea, Japan and the Netherlands.
However, since the second quarter of 2020, the global industry has been experiencing a severe chip shortage. These hurdles have largely emerged due to the fact that the number of people using the work-from-home paradigm expanded, and the demand for tech products grew exponentially. The supply constraints got worse as a result of frequent lockdowns in South Asian nations that deal with downstream processes like testing and packing. Thus, creating supply side bottlenecks. Given the incentives offered by governments, people are now requesting electric automobiles at an increasing rate. These vehicles put even greater burden on the system by requiring more chips as each brand-new automobile requires around 300 unique chips.
Thus, the growing need for semiconductor chips around the world posed an opportunity for Indian economy which led to the inception of India Semiconductor Mission (ISM).
Overview of India Semiconductor Mission (ISM)
Under the oversight of the Ministry of Electronics and IT (MeitY), the ISM was introduced in 2021 with a total financial commitment of Rs76,000 crore. It is a component of the all-encompassing plan for the nation’s sustainable semiconductor and display ecosystem growth.
Within Digital India Corporation, the India Semiconductor Mission (ISM) has been established as a separate business division. ISM is in charge of driving the India Semiconductor ecosystem in production, packaging, and design and has complete administrative and financial authority for the same. ISM has an advisory board made up of some of the most prominent industry professionals in the world. The programme for the development of the semiconductor and manufacturing ecosystem in India is being implemented effectively and coherently, by ISM, which is acting as the nodal agency.
The key objectives of India Semiconductor Mission include:
- To create a thorough, long-term plan with input from the government’s ministries, departments, and agencies, business, and academia, for the development of the nation’s semiconductor manufacturing and display eco-system.
- Encourage the development of a reliable semiconductor supply chain and the adoption of secure microelectronics, including the use of raw materials, specialized chemicals, gases, and manufacturing tools.
- Providing the necessary assistance in the form of Electronic Design Automation (EDA) tools, foundry services, and other acceptable mechanisms for early-stage companies to enable a multiplied expansion of the Indian semiconductor design sector.
- Establish Centers of Excellence (CoEs) in academia, industry, and other organizations to facilitate groundbreaking research in the semiconductor and display industries, including work on both evolutionary and revolutionary technologies.
- To encourage cooperative research, commercialization, and skill development, enable partnerships and collaborations with national and international organizations, businesses, and universities.
- To encourage and support the creation of indigenous intellectual property (IP) and promote, facilitate, and reward the transfer of technologies.
Four Pillars of India Semiconductor Mission
- “Modified Scheme for Setting Up of Semiconductor Fabs in India“, This scheme attempts to entice significant investments for the establishment of semiconductor wafer fabrication facilities in the nation to support the ecosystem of electronics manufacturing and aid in the establishment of a reliable value chain. The Scheme provides financial support equal to 50% of the project costs on a pari-passu basis for the establishment of an Indian silicon CMOS semiconductor fab.
- To boost the ecosystem of electronics manufacturing, the “Modified Scheme for Setting Up of Display Fabs in India” is intended to draw significant investments for the production of TFT LCD or AMOLED based display panels in the nation. The scheme provides financial support equal to 50% of the project cost for the establishment of display factories in India.
- The “Modified Scheme for Setting Up Compound Semiconductors, Silicon Photonics, Sensors, Discrete Semiconductors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / OSAT Facilities in India” will provide financial support equal to 50% of the capital expenditure on a pari-passu basis for the establishment of Compound Semiconductors, Silicon Photonics (SiPh), Sensors (including MEMS) Fab, Discrete Semicon
- The “Semicon India Future Design: Design Linked Incentive (DLI) Scheme” provides financial incentives and design infrastructure to support for semiconductor designs for integrated circuits (ICs), chipsets, system on chips (SoCs), systems and IP cores, and semiconductor linked designs at various stages of development and deployment. The programme offers “Deployment Linked Incentive” of 6% to 4% of net sales turnover over 5 years up to a ceiling of $30 Crore per application and “Product Design Linked Incentive” of up to 50% of the eligible expenditure subject to a ceiling of 15 Crore per application.
In addition to the following provisions ISM has also authorized that the Semiconductor Laboratory (SCL), Mohali, shall take the necessary steps to be modernized and commercialized by the Ministry of Electronics and Information Technology. In order to modernize the brownfield fab plant, MeitY will investigate the potential of a joint venture between SCL and a commercial fab partner.
The Roadblocks to India Semiconductor Mission
Setting up a semiconductor manufacturing facility is expensive, and investors may find India less appealing due to the country’s high expenses of land, power, and labor. Hence, the huge capex expansion may prove to be a substantial roadblock in the process of development. Incentives and subsidies from the government are necessary to provide a conducive environment to make India a desirable location for semiconductor manufacture.
The absence of suitable infrastructure, such as fabs, test and assembly facilities, and research and development centers, is one of the major problems facing India’s semiconductor sector.
Such infrastructure requires a substantial financial commitment, and the government must offer incentives to draw in private capital and encourage possibilities of joint ventures and public-private partnerships. The semiconductor business needs competent personnel to perform the highly technical and specialized tasks. Hence, a greater investment in cultivating talent in the fields of chip design, production, and testing poses yet another hurdle for the growth of semiconductor industry in India.
Setting up successful manufacturing hubs takes at least three to five years or even a decade however it will significantly contribute to India’s goal to achieve a $5 trillion economy by 2025 and act as an accelerator for multiple industries. Overall, continued effort and cooperation between the government, industry, and academia will be necessary to build a robust domestic semiconductor industry.
India can establish itself as a significant player in the global semiconductor market by enacting the appropriate policies.
- Modified Programme for Semiconductors and Display Fab Ecosystem, Ministry of Electronics and Information Technology
- Ministry of Electronics and Information Technology, Government of India
- India Semiconductor Mission. December 21.
- India’s Semiconductor Mission: How India is trying to meet the huge talent demand. Business Today. June 02,2023.
- India’s semiconductor mission might need a compass. Insights IAS. https://www.insightsonindia.com/2023/04/01/editorial-analysis-indias-semiconductor-mission-might-need-a-compass/ .
Savleen Kaur is a Research Intern at IMPRI.
Read more by the author: India Space Policy, 2023: The Way Forward.