Semiconductor manufacturing in India

Semiconductor manufacturing in India

News: Recently, the government approved proposals to set up three semiconductor units in Gujarat and Assam with an estimated investment of Rs 1.26 lakh crore.

Background:
•  A semiconductor fabrication plant will be set up by Tata Electronics and Taiwan’s Powerchip Semiconductor Manufacturing Corp. (PSMC) in Gujarat’s Dholera.
• The Tata Group will also set up a chip assembly plant in Morigaon, Assam at a cost of Rs 27,000 crore.
• CG Power and Japan’s Renesas will also set up a semiconductor plant in Gujarat’s Sanand at an estimated cost of Rs 7,600 crore.

What is a semiconductor?
• A semiconductor is a substance that has specific electrical properties that enable it to serve as a foundation for computers and other electronic devices. It is typically a solid chemical element or compound that conducts electricity under certain conditions but not others. This makes it an ideal medium to control electrical current and everyday electrical appliances.
• A substance that can conduct electricity is called the conductor and a substance that cannot conduct electricity is known as the insulator. Semiconductors have properties that sit between the conductor and insulator. A diode, integrated circuit (IC) and transistor are all made from semiconductors.
• Some examples of semiconductors are silicon, germanium, gallium arsenide, and tin. Silicon is the most widely used semiconductor material because of its abundance, low cost, and favourable electrical properties.

Manufacturing scenario of Semiconductors
• About 70% of the current global manufacturing capacity is confined to South Korea, Taiwan and China, with the US and Japan making up for much of the rest.
• Taiwan and South Korea make up about 80% of the global foundry base for chips.
• Only one company, the Netherlands-based ASML, produces EUV (extreme ultraviolet lithography) devices, without which it is not possible to make an advanced chip.

Significance of project
• Job Creation: The semiconductor industry is highly labor-intensive, requiring skilled engineers and technicians. Semiconductor manufacturing facilities in India will create many direct and indirect employment opportunities.
• Reduced Dependence on Imports: Establishing a domestic semiconductor industry will enhance the country’s self-reliance and resilience in times of geopolitical tensions or disruptions in global supply chains.
• Export Opportunities: With a competitive semiconductor industry, India can export chips and related products to other countries, generating revenue and improving its trade balance.
•  Strategic Importance: Semiconductor chips are critical components in various strategic sectors such as defense, aerospace, and telecommunications.

What are challenges in semiconductor manufacturing faced by India?
• High Capital Investment
• Lack of infrastructure: Semiconductor manufacturing requires reliable and uninterrupted supply of power, water, gas, and chemicals, as well as efficient transport and logistics systems. India suffers from frequent power outages, water scarcity, poor road connectivity, and customs delays that can hamper the smooth operation of fabs.
• Lack of skilled manpower: India has shortage of talent in domains such as design, fabrication, testing and quality control.
• India’s close allies, like the US and EU, also sense the semiconductor opportunity and have rolled out more lucrative incentive schemes than India.
• Water intensive: Chip-making also requires gallons of ultrapure water in a single day. This requirement could be a task for the government to provide to factories, compounded also by the drought conditions which often prevail in large parts of the country.

Government of India initiatives
• The Government of India has recently launched the Semicon India Program (Program for Development of Semiconductors and Display Manufacturing Ecosystem in India), with an outlay of INR 760 billion.
• India Semiconductor Mission to drive long term strategies for developing sustainable semiconductors and display ecosystem.
• The Design Linked Incentive (DLI) scheme for promoting domestic chip design and innovation in the semiconductor sector.
• QUAD Semiconductor Supply Chain Initiatives: To assess the capacity, pinpoint vulnerabilities, and enhance supply chain security for semiconductor and its critical components.