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Semiconductor manufacturing plant

  • Category
    Polity & Governance
  • Published
    23rd Feb, 2024

Context

The resurgence of proposals for semiconductor fabrication facilities in India, with applications from the Tata Group and Tower Semiconductor, has reignited interest and hope in the country's semiconductor manufacturing sector.

Basics of Semiconductor industry

  • The semiconductor industry has four main segments —

China has a monopoly in raw materials and packaging, whereas the US leads in fab-less jobs and Taiwan leads in foundry technology.

  • raw materials
  • foundry
  • fabless design
  • packaging
  • To be totally self-dependent in the semiconductor supply chain, India needs to master all four segments.
  • One of the most important aspects of manufacturing advanced semiconductor chips is packaging and testing, also known as Outsourced Semiconductor Assembly and Test — an area currently dominated by China and Taiwan. 
  • ATMP (Assembly, Test, Mark, and Pack) and OSAT are good starting points for India.

“THE Chip”

  • The high-end semiconductor chips, which are nowadays normally of the size of 20-30 microns, are now being produced in the smallest 7-micron size.
  • Micron size can be compared to the size of thousands times less than the width of a human hair.
  • These tiny electronic components power devices ranging from smartphones, computers, and televisions to medical equipment and automobiles.  
  • The production of these invisible chips requires a supply of uninterrupted electricity and water in its purest form.

 Challenges for India

  • Capital requirement: The semiconductor industry is extremely labour, technical and capital-intensive, requiring several billions of dollars. 

China produces 80 per cent of the world's Gallium and 60 per cent of Germanium

  • Critical dependency on China: Being a Quad member, India is engaged in talks with the US, Japan and Australia for together working in the field of semiconductor chips production and if leading advanced semiconductor countries wants to adopt India under its China plus One strategy, India needs to be in the Chinese good books also to get a regular uninterrupted supply of Gallium and Germanium.
  • Alternatives: To avoid Chinese imports for these critical raw materials supply, India and partner countries need to find alternate sources of Gallium and Germanium. Until then, India and other partner countries will be critically dependent on China.
  • Late Entry: India missed early opportunities to establish itself in the semiconductor industry. This delay has made it challenging to catch up with countries that started developing their semiconductor industries decades ago, such as Taiwan??.

How India is attracting companies to establish semiconductors fabs?

  • Incentives: India is offering an array of financial and other incentives, including infrastructure development and streamlined regulations, to attract global companies to establish semiconductor fabs in the country.
  • Financial support (50%): India will extend financial support equal to 50% of a fab construction project cost "to applicants who are found eligible and have the technology as well as capacity to execute such highly capital and resource intensive projects.
  • Notable initiatives in this endeavor include the:
    • National Policy on Electronics (NPE) 2019
    • Production Linked Incentive (PLI) Scheme for Large Scale Electronics Manufacturing
    • Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) 
    • Semicon India Programme

Significance of the move

  • By promoting local manufacturing, India can reduce its dependence on imports and increase its ability to withstand global supply chain disruptions.
    • The pandemic caused chip supply disruptions, which led to a global semiconductor shortage and a hike in prices.
  • This can also generate employment opportunities and promote economic growth.
  • The Industrial Revolution 5.0 would not be here without the semiconductor chips.
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