India’s Semiconductor Mission Might Need a Compass : Daily Current Affairs

Date: 05/04/2023

Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Key Phrases: Semiconductor Market, High costs, Providing tax incentives, local supply chain, intellectual property rights, Encouraging collaboration, domestic semiconductor industry.

Context:

  • India’s semiconductor mission is at a crucial juncture, with the country needing to take the right steps to attract global investment and build a strong domestic semiconductor ecosystem.
  • Despite recent efforts by the Indian government to attract investment and establish a favourable policy environment for the semiconductor industry, much work remains to be done.

About Semiconductor:

  • A semiconductor is a material that has electrical conductivity in between that of a conductor (such as copper or aluminium) and an insulator (such as rubber or glass).
  • Semiconductor materials are the foundation of modern electronics and are used to make electronic components such as diodes, transistors, and integrated circuits.
  • Semiconductors can be made of a variety of materials such as silicon, germanium, gallium arsenide, and indium phosphide.
  • Silicon is the most widely used semiconductor material due to its abundance, stability, and relatively low cost.
  • The conductivity of the semiconductors increases when impurities are added.
  • At zero kelvin, semiconductors behave as insulators.
  • Semiconductor technology has revolutionized modern life by enabling the development of computers, smartphones, tablets, and other digital devices. Semiconductors have also been used in other fields such as renewable energy, aerospace, and healthcare.

Indian Semiconductor Market:

  • The Indian semiconductor market is to reach $55 billion by 2026 with more than 60% of the market being driven by three industries:
    • smartphones and wearables,
    • automotive components,
    • and computing and data storage, according to a report by Deloitte.
  • This market will expand to as much as $85 billion and generate six lakh employment opportunities by 2030, the firm predicted in its 2023 TMT (Technology, Media, and Entertainment, Telecom) report.

Challenges Faced By Semiconductor Industry

  • Lack of infrastructure:
    • One of the significant challenges facing the semiconductor industry in India is the lack of adequate infrastructure such as fabs, test and assembly facilities, and research and development centres.
    • Building such infrastructure requires significant investment, and the government needs to provide incentives to attract private investments.
  • Skilled workforce:
    • The semiconductor industry is highly specialized and requires a skilled workforce.
    • India needs to invest in developing talent in the areas of chip design, manufacturing, and testing.
    • The government needs to encourage partnerships between academia and the industry to provide specialized training to students and professionals.
  • High costs:
    • Setting up a semiconductor manufacturing unit is an expensive affair, and India's high costs of land, power, and labour make it less attractive to investors.
    • The government needs to provide tax incentives and subsidies to make India an attractive destination for semiconductor manufacturing.
  • Intellectual Property Rights:
    • Protecting intellectual property rights is crucial for the semiconductor industry's growth and development.
    • The government needs to strengthen the legal framework for IP protection and enforcement.

What Steps can be Taken?

  • Establishing semiconductor fabs:
    • The government should take steps to establish semiconductor fabs in India, either through public-private partnerships or by providing incentives for foreign companies to set up fabs in India.
    • This will help in developing a local supply chain for the semiconductor industry.
  • Providing tax incentives:
    • The government should provide tax incentives for companies that invest in semiconductor manufacturing and research and development.
    • This will attract more investment in the sector and help in building a strong domestic semiconductor industry.
  • Developing talent:
    • The government should invest in developing talent in the semiconductor industry by setting up training programs, scholarships, and other initiatives.
    • This will help in building a skilled workforce and attract more investment in the sector.
  • Creating a supportive regulatory environment:
    • The government should create a supportive regulatory environment that encourages the growth of the semiconductor industry.
    • This can include policies such as simplifying regulations, providing faster clearances, and reducing bureaucratic hurdles.
  • Encouraging collaboration:
    • The government should encourage collaboration between domestic and foreign companies in the semiconductor industry.
    • This can help in building a strong domestic ecosystem and promoting knowledge sharing and innovation.

  • Note: “FAB test" refers to the testing of a semiconductor device in a fabrication facility after it has been manufactured to ensure that it meets the required specifications and performs as expected.

Conclusion:

  • Overall, developing a strong domestic semiconductor industry will require sustained effort and collaboration between the government, industry, and academia.
  • By adopting the right policies, India can position itself as a major player in the global semiconductor industry.

Source: The Hindu

Mains Question:

Q. What are the challenges that India's semiconductor industry is facing, and what steps can be taken to address them? (250 Words).