India embarked on its semiconductor journey in the 1970s, heavily relying on imported semiconductor chips for electronics manufacturing. Recognizing the need for technological self-reliance, the Indian Cabinet authorized the establishment of Semiconductor Complex Limited (SCL) in 1976. Despite its mission to enhance semiconductor and electronics manufacturing capabilities, SCL faced challenges, notably a setback in 1989 due to a destructive fire.
Resilience and Restructuring: SCL’s Transformative Journey
Following an eight-year hiatus, SCL resumed operations in 1997, producing DRAM chips and diversifying into the manufacture of other semiconductors. In 2006, the Indian government restructured the company as a research and development center within the Department of Space, rebranding it as the “Semiconductor Lab.” Despite these changes, SCL remains India’s sole semiconductor fab, manufacturing legacy chips.
Current Landscape and Future Projections
Government Initiatives: Paving the Way for Innovation
The ‘Make in India’ initiative, inaugurated in 2014, is a pivotal step in India’s strategic plan to elevate its manufacturing capabilities and emerge as a global hub. As part of this overarching initiative, the Production Linked Incentive (PLI) scheme for the electronics sector has been introduced, offering a groundbreaking $1.7 billion incentive package. This substantial incentive is specifically designed to encourage companies to establish semiconductor manufacturing facilities within India’s borders.
In tandem with the PLI scheme, additional initiatives like the Design Linked Incentive (DLI), Chips to Startup (C2S), and the Scheme for Promotion of Electronic Components and Semiconductors (SPECS) have been rolled out to provide comprehensive support to the semiconductor industry. A notable component of this strategy is the “Semicon India program,” strategically crafted to address the global chip shortage.
Integral to this initiative is the Independent Semiconductor Mission (ISM), operating as a specialized division under the Digital India Corp. Established in 2021 with a substantial financial commitment of $10 billion (₹76,000 crore) under the Ministry of Electronics and Information Technology, ISM has a multifaceted mission. It aims to cultivate a robust semiconductor and display ecosystem while positioning India as a leading global hub for electronics manufacturing and design.
Underlining its significance, ISM takes on the responsibility of reviewing applications for semiconductor manufacturing setup in India. Through a meticulous selection process, it identifies candidates eligible for subsidies, playing a pivotal role in shaping and supporting the growth of the semiconductor industry within the country.
Global Collaboration: U.S. Semiconductor Giants Invest in India
Major American semiconductor firms, including Micron Technology, are making substantial investments to strengthen India’s semiconductor sector. Micron Technology unveiled plans for an investment exceeding $800 million to construct a new semiconductor assembly and test facility in Gujarat, India. Additionally, Applied Materials and Lam Research Corporation are set to establish collaborative engineering centers, contributing to India’s role in the global chip ecosystem. A collaborative interim readiness assessment between the US Semiconductor Industry Association and the India Electronics Semiconductor Association seeks to identify immediate industry opportunities and facilitate long-term strategic development.
Infrastructure Investment Challenges and Global Competition
Setting up semiconductor manufacturing plants in India requires substantial infrastructure investment in power, water, and transportation facilities. While countries like China, Taiwan, and South Korea have established themselves as semiconductor manufacturing hubs, India faces global competition. Establishing a complete domestic value chain for semiconductors may require considerable time and investment due to a significant portion of the value chain operating outside India. Efforts to reduce reliance on imports include developing a local value chain for semiconductor manufacturing, incentivizing the production of raw materials, and promoting the development of semiconductor equipment suppliers and contract manufacturers. The semiconductor industry is dynamic, with new materials, processes, and technologies continually emerging. The Semiconductor Industry Association reported on August 4 that global semiconductor sales totaled $124.5 billion in the second quarter of 2023, showing a 4.7% increase from the first quarter but a 17.3% decrease from the second quarter of 2022. June 2023 saw global sales of $41.5 billion, a 1.7% increase from the previous month. Delhi-based Continental Device India Limited (CDIL), a semiconductor manufacturer since 1964, produces over 250 million units with around 70% consumed locally. Previous attempts in India often focused on capital-intensive mega-fab projects. The current understanding emphasizes the importance of Assembly, Test, Mark, and Tape (ATMP) or backend manufacturing, considering it integral to the semiconductor value chain and a cornerstone for India’s strategic position in the market. To sustain momentum, experts recommend prioritizing ease of doing business and providing incentives for semiconductor manufacturing.
Concluding Remarks:
The semiconductor industry, complex and requiring precision at an atomic level, necessitates global partnerships for India to fully realize its domestic potential. Beginning with mature nodes, especially for applications like automotive, and gradually advancing to more sophisticated nodes will be essential. The global semiconductor industry’s growth, expected to nearly double in revenue by the end of the decade, emphasizes the need for multiple manufacturing hubs and a diversified supply chain. Addressing the talent gap is crucial, and workforce development programs and skills training will play a key role. Despite genuine efforts from the government, state-of-the-art infrastructure labs in Indian universities are needed to support research in the semiconductor sector. Fab facilities have proven to be game-changers for economies, generating employment and substantial revenues. Continuous investment in the semiconductor industry is imperative for India to secure its benefits.
