India’s Semiconductor Manufacturing Journey: Key Insights for 2023

India's Entry into Semiconductor Manufacturing

India is taking significant steps into the semiconductor manufacturing industry by producing its first locally made chips. These chips are vital components in a range of electronic devices, including smartphones, computers, cars, and artificial intelligence (AI) systems. Historically, India has relied on imports for these essential components, which are often expensive and monopolized by a few countries, such as Taiwan, South Korea, and the USA.

Why is India Investing in Chip Manufacturing?

• Reducing Imports and Strengthening the Economy: Annually, India spends billions on importing semiconductor chips. By establishing domestic manufacturing, the country can conserve funds and redirect investments into various technological sectors.
• Job Creation and Industrial Growth: The chip manufacturing sector will necessitate skilled labor, engineers, and technicians, thereby creating thousands of direct and indirect job opportunities.
• Boosting AI and Advanced Technology: Semiconductor chips are the backbone of AI systems, 5G networks, electric vehicles, and defense technology. Establishing a robust semiconductor industry is crucial for India to assert its leadership in these areas.

Why Did India Start Late?

India's journey into semiconductor manufacturing has not been without its challenges:

• 2007 & 2013 Plans Failed: Previous attempts to set up semiconductor fabrication plants (fabs) were unsuccessful due to high costs, inadequate infrastructure, and governmental policy obstacles.
• Global Competition & Complexity: The chip manufacturing process demands advanced machinery, pure silicon wafers, and a highly skilled workforce. Establishing fabs is capital-intensive and may take years to reach profitability.
• Revival in 2021: In a significant turnaround, the government introduced a ₹76,000 crore Production-Linked Incentive (PLI) scheme aimed at attracting investments in the semiconductor sector.

Current Semiconductor Projects in India

India has garnered ₹1.5 trillion in investments from prominent companies such as Micron, Tata Electronics, and Powerchip Semiconductor Manufacturing Corporation (PSMC). Key projects include:

• Micron’s $2.75 Billion Memory Chip Plant (Gujarat): Scheduled to commence production by late 2024.
• Tata Semiconductor Plant (Assam): Expected to produce 48 million chips daily by mid-2025.
• Tata-PSMC AI-Enabled Fab: Aiming to manufacture 50,000 wafers monthly for industries including automotive, computing, and telecommunications.

With these initiatives, India's semiconductor production capacity is anticipated to reach 180,000 wafers per month in the near future.

The Future of India's Chip Industry

India's focus is on manufacturing 28-110 nanometer (nm) chips, which are widely utilized in various electronic devices. However, the development of more advanced chips (2-3 nm), essential for high-end smartphones and AI applications, necessitates substantial investment and time. Presently, India is adopting a pragmatic approach similar to Singapore, starting with mature nodes (28-110 nm) before advancing to high-end chips.

What Does This Mean for India?

• Stronger Electronics & AI Industry: Domestic chip production will position India as a key player in the global semiconductor supply chain.
• Lower Costs & Increased Self-Reliance: Manufacturing chips locally will decrease expenses and enhance the competitiveness of Indian technology products.
• Geopolitical Advantage: Amid rising global tensions surrounding chip supply, domestic production will provide India with greater strategic independence.

Although India is still in the nascent stages of semiconductor manufacturing, these investments signify a crucial step toward technological self-reliance. With ongoing efforts, India has the potential to evolve into a global hub for chip production in the coming decades.

Frequently Asked Questions (FAQs)

Q1. Why is semiconductor manufacturing important for India?
Answer: Semiconductor manufacturing is vital for India as it reduces import dependency, boosts economic growth, and generates skilled job opportunities in the technology sector.

Q2. What challenges did India face in semiconductor manufacturing?
Answer: India faced high costs, infrastructural deficits, and policy hurdles in previous attempts to establish semiconductor fabs, delaying its entry into the industry.

Q3. What are the major semiconductor projects in India?
Answer: Major projects include Micron's memory chip plant in Gujarat, Tata's semiconductor plant in Assam, and a collaboration with PSMC for AI-enabled fabs.

Q4. How will chip manufacturing impact India's economy?
Answer: Chip manufacturing will significantly impact India's economy by creating jobs, reducing costs of electronic products, and enhancing the country's technological capabilities.

Q5. What is the future focus of India's semiconductor industry?
Answer: India's future focus is on producing 28-110 nm chips while gradually moving towards the development of advanced chips for high-end applications like AI and smartphones.

UPSC Practice MCQs

Question 1: What is the primary goal of India's semiconductor manufacturing initiative?
A) To enhance import dependency
B) To improve economic self-reliance
C) To decrease job opportunities
D) To focus solely on imported technology
Correct Answer: B

Question 2: Which company is involved in a major semiconductor project in Gujarat?
A) Tata Electronics
B) Powerchip Semiconductor
C) Micron
D) Samsung
Correct Answer: C