Title : SEMICONDUCTOR MANUFACTURING IN INDIA
Date : Dec 18, 2021
Based on a News Article published in the ‘The Hindu’ on 16th December 2021 on Page Number 1
Useful for UPSC CSE Prelims and Mains (GS Paper II)
- The Covid-19 pandemic and related lockdowns are affecting semiconductor chip production all around the world. It is causing shortages for buyers in India, such as automobile and consumer electronics makers. As a result, firms have been obliged to reduce their output levels, lowering their profit potential.
- The Chip Famine provides an opportunity for India to expand its semiconductor chip manufacturing capacity. It would minimise the country's reliance on imports while also assisting in meeting future demand.
About the Semiconductors:
- Semiconductors are a modern marvel, an engineering and human ingenuity feat unmatched by any other industry. As a result, significant reforms are required to establish India's domestic semiconductor manufacturing capacity.
- Semiconductors are a type of material that allows for electrical conductivity between a conductor and an insulator.
- The materials or substances that allow electricity to flow through them are known as conductors. They conduct electricity because electrons can easily move from atom to atom inside them. Gold, silver, mercury, seawater, and other conductive materials are examples.
- A material that does not conduct electrical current is known as an insulator. Paper, plastic, rubber, glass, and air are all good insulators.
- They have a lower resistivity than insulators but a higher resistivity than conductors. As the temperature rises, the semiconductor's resistance decreases, and vice versa.
- Pure elements like silicon and germanium, as well as compounds like gallium arsenide, are used to make semiconductors. Doping can alter their conductivity in several cases.
- It is a procedure that involves adding minute amounts of impurities to these pure components, resulting in significant alterations in the material's conductivity.
The importance of semiconductor chips:
- Semiconductors are the fundamental components of today's technology. They, for example, control the computers we use for business, the phones and mobile devices we use to communicate, the cars and planes that transport us, the machines that diagnose and treat illnesses, the military systems that protect us, and the electronic devices we use to listen to music, watch movies, and play games.
- Semiconductors allow electronics to be smaller, cheaper, and more powerful.
- During their early stages, mobile phones, for example, weighed about 2 lbs, cost around $4,000, and only retained a charge for about 30 minutes of speaking time. Today, however, a smartphone with a 1-day charge can be purchased for 5000 rupees.
- Semiconductors will continue to be at the heart of the world's most significant breakthroughs. Entire industries will be transformed, from aerospace and consumer electronics to energy and medicine.
Sources for India's Semiconductor Requirements:
- To begin, semiconductor manufacturing includes front-end fab manufacturing as well as back-end assembly, which includes packaging and testing. Only a few companies execute front-end manufacturing at scale on a worldwide scale.
- Second, this entire value chain has resulted in interdependence between a small number of countries, including the United States, Taiwan, Japan, China, and a few European countries.
- Third, India has excelled in the semiconductor industry's design and verification. The majority of global semiconductor companies have an R&D presence in India.
- Fourth, we import all of our chips, memory, and displays from outside the country. India will spend $15 billion on electronic imports in 2020, with China accounting for 37%.
- Fifth, India has two fabs: SITAR, a DRDO plant near Bengaluru, and a semiconductor laboratory in Chandigarh. These companies make silicon chips for strategic applications such as defence and space exploration, rather than for commercial purposes.
Why does India require its own semiconductor chip production capacity:
- Deal with supply shocks:
- The pandemic and consequent lockdowns had an impact on chip supply to India. Due to the shortfall, automakers such as Mahindra & Mahindra and the Tata Group were forced to cut output.
- To keep up with the increased demand, Experts predict that 50 crore people will access the internet in the next decade, necessitating the purchase of additional phones and laptops.
- Similarly, in the aftermath of the epidemic, there is a growing trend toward work-from-home culture. As a result, there will be a higher need for servers, internet connectivity, and cloud computing.
- Job Creation:
- Chip fabrication on the island will help to grow the smartphone assembly industry and boost the electronics supply chain. This will provide a plethora of job chances for Indian youngsters.
- Increased revenue:
- Indigenous capacity would increase revenue by attracting local taxes and increasing export potential. In addition, India would be needed to purchase less semiconductor chips, lowering the country's import cost.
- Benefits to Geopolitics:
- Countries with an adequate supply of chips will be better able to shape the future direction of geopolitics, which will be shaped by data and the digital revolution. Increased self-sufficiency will reduce dependency on Chinese chip imports, especially during difficult periods like the recent border confrontation in the Galwan Valley.
- Enhanced Security:
- Chips created in the United States will be classified as "trusted sources" and can be utilised in a variety of goods, including CCTV cameras and 5G equipment. This would help to raise the country's cybersecurity profile.
Initiatives to promote indigenous peoples Capacity of semiconductors:
- National Electronics Policy for 2019:
- It aspires to make India a global centre for Electronics System Design and Manufacturing (ESDM). Its goal is to promote the development of core components (such as chipsets) and to establish a competitive environment for the industry on a global scale.
- The government would provide a financial incentive of 25% on capital expenditure for a list of items that make up the supply chain of electronic products under the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS).
- Electronic components, semiconductors, and specialised sub-assemblies are examples of this.
- India will pay each semiconductor manufacturer that establishes a production facility in the nation more than $1 billion in cash.
- EMC 2.0 (Modified Electronic Manufacturing Clusters) Scheme:
- The government will assist in the formation of Electronics Manufacturing Clusters (EMCs) and Common Facility Centres under this programme (CFCs).
- PLI stands for Production Linked Incentive Scheme. For a period of five years, the government will pay qualifying enterprises with a 4 percent to 6% incentive on items created in India and covered by target segments.
- Foreign Direct Investment (FDI) in the Electronics Systems Design & Manufacturing industry is now approved at 100% through the automatic route by the Indian government.
What are the challenges that India faces:
- To begin with, the high cost of establishment: According to government estimates, establishing a chip production unit in India would cost between $5 and $7 billion.
- Second, inefficiencies in the bureaucracy: developing an indigenous semiconductor facility necessitates clearances and approvals from a number of government agencies. Furthermore, there are significant bureaucratic delays at each stage, which deters the formation of industrial units.
- Third, an unstable power supply is required for the smooth manufacture of semiconductors, which necessitates the availability of an uninterrupted power supply 24 hours a day, seven days a week. Many regions in the country, however, do not meet this standard. This limits production to a small number of locales.
- Fourth, there is a technological constraint: producing semiconductors in-house necessitates the employment of high-end technologies. Patent holders charge a hefty fee to licence these technology.
- Fifth, structural flaws: Because of a scarcity of skilled personnel, delays in land acquisition, and an uncertain tax environment, FDI in electronics accounts for less than 1% of total FDI inflow.
- The government should provide appropriate resources to help technical institutes expand their research and development capabilities.
- For example, with assistance from the Ministry of Electronics and Information Technology, IIT Madras created the 'Moushik' microprocessor.
- The microprocessor is a semiconductor chip that comprises a few million transistors (semiconductor-based electrical devices).
- Under the National Policy on Electronics, the proposed Sovereign Patent Fund (SPF) should be formed as soon as possible. It's a government-backed organisation that strives to boost domestic enterprises by acquiring and licencing patented technologies.
- Apart from that, manufacturers must be guaranteed a minimum level of local procurement by both the government and the private sector. The emphasis should be on producing cost-effective and technically viable choices such as 28nm chips.
- The government should also assist companies in acquiring semiconductor manufacturing facilities in other countries. This is less complicated than establishing a domestic facility and may be completed quickly to ensure a steady supply of chips.
- The twenty-first century will be marked by a digital revolution, which will see a surge in the usage of mobile phones and computers.
- This increased demand can only be satisfied if semiconductor chips are readily available and continue to work.
- As a result, in order to realise its digital potential and emerge as a strong force in the modern era, India must focus on domestic semiconductor development.
Tags : mobile phones and computers