Relevance: GS-3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment; Awareness in the fields of IT, Space, Computers, Robotics, Nano-technology, Bio-technology and issues relating to Intellectual Property Rights

Key Phrases: Fab manufacturing, Fab clustering, SPECS, emerging technology, Quad Semiconductor Supply Chain Initiative

Why in News?

• Due to recent pandemic and other geo-political changes, the supply chains of Semiconductors have been disturbed. The U.S. and other countries have started incentivising companies to invest in semiconductor manufacturing

What are Semiconductors?

• These are a group of crystalline solids which have intermediate electrical conductivity between that of a conductor and an insulator.
• They have found various applications due to their compactness, reliability, power efficiency, and low cost.

Key highlights of the article

• Supply side issues
  • The pandemic has brought to the fore the fragility of the global supply chain of semiconductor manufacturing. The situation is exacerbated by the overdependence of the world on East Asia for fab manufacturing, the rising price of silicon, and the China-U.S. trade war. No wonder, countries are scampering to safeguard their interests by introducing attractive packages to attract more chip manufacturing.
• The U.S. has announced a $50 billion package to create foundries there.
  • Intel is adding two more foundries to its Arizona campus and also developing its own foundry business to compete with chip-makers such as TSMSC and UMC.
  • TSMC, which controls 24% of the semiconductor supply chain, is setting up a $12 billion facility in Arizona.
  • Japan and Germany have got TSMC to start specialty technology fabs in their respective countries.
• Steps by Government of India
  • India has approved a $10 billion package to incentivise the manufacturing of semiconductors in the country.
  • The government has drawn out a list of incentives to get leading international manufacturers to set up their manufacturing unit in India either by themselves or with the help of a local partner.
• Fab manufacturing
  • Getting fab manufacturing will also build on India’s strength in design.
  • We have the largest number of chip designers outside of the U.S. who are working on state-of-the-art systems and technologies.
    • Karnataka boasts of over 85 fabless chip design houses of various global companies.
    • The strong expertise of our semiconductor design professionals in EDA (Electronic Design Automation) tools provides solid ground to move towards manufacturing.
  • To create the ecosystem for fab manufacturing, it is important to lock in the demand for semiconductors produced within the country.
    • The total demand for semiconductors stands at $24 billion. This is expected to grow to $80-90 billion by 2030.
    • However, this demand is for different categories of semiconductors used in various electronic devices and applications.
    • Considering that initial manufacturing would be in mature tech, it would be ideal to enter into an agreement with the consumers of such semiconductors like automotive manufacturers to ensure that whatever is produced is consumed.
    • Better still is to get established fab companies to come on their own as they bring with them their demand base.
• Developing raw material supply capabilities.
  • The India Electronics and Semiconductor Association is exploring the opportunity to start supplying processed raw materials like minerals and gases to the fab and ATMP (Assembly. Testing, Marking, and Packaging) industry.
  • This will give a fillip to the Indian gas, materials, and mines industry and also expand opportunities for semiconductor equipment, spares, and service industry.
• Fab clustering to build holistic ecosystem
  • Refers to the idea to derive benefits of agglomeration, where key semiconductor supply chains and related businesses are in one place to create backward and forward linkage.
  • Such a site should be chosen purely on the ability of the location to act as a force multiplier for the development of such an ecosystem.
  • Power - It needs to ensure high-quality infrastructure along with uninterrupted power availability with more than 99.7% uptime, connected to two different grids to ensure redundancy
  • Ultra high grade Water availability - The availability of semiconductor grade Ultrapure Water to the extent of 10 MLD per fab is also a key requirement.
  • Additionally, a conducive environment needs to be created for women to work night shifts along with zero labour disputes.

Way Forward

• Building holistic ecosystem from design to fabrication and packaging to design Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors was launched in April 2020. MeitY (Ministry of Electronics and Information Technology) has approved
  • A comprehensive Program for the Development of Semiconductors and Display Manufacturing Ecosystems in the country
  • To provide incentives worth Rs 76,000 crore for the development of semiconductors and display manufacturing ecosystems over the next six years
• Leveraging international initiatives
  • Quad Semiconductor Supply Chain Initiative can be instrumental in this
  • Government of India must also strive for Quad Semiconductor Supply chain resilience fund
• Research and Development
  • There is a need to focus on encouraging Indian manufacturers and start-ups to enter and master complex R&D and manufacturing verticals. We can then ensure that valuable Intellectual Property is created and owned by Indian companies.
• Need to incentivise more FDI in electronics to deepen our supply chains through incentive schemes
• Utilising the Indian talent
  • Indian engineers have contributed immensely to this area in multinational companies. We must encourage them to set up their design start-ups with handsome government grants and tax incentives.
• Utilising the research institutions’ capacity
  • Premier research institutions such as the Indian Institute of Science should also be asked to work aggressively on R&D in chip designing and manufacturing.
• Working aggressively in new cutting-edge technologies
  • The government must focus on emerging technologies like LiDAR and Phased Array in which incumbents do not have a disproportionate advantage and the entry barrier is low.

Conclusion

• The growing demand for semiconductors provides an opportune moment for India to secure its strategic and security interest and realise its dream of Atma Nirbhar Bharat.

Source: The Hindu

Mains Question:

Q. Bring out the issues and suggest a way forward for India’s semiconductor needs.