The Semiconductor Industry in India

India is currently looking to ramp up its semiconductor industry following the United States’ sanctions and restrictions on the Chinese semiconductor industry. China was in the process of becoming a giant in this industry as well and had to be slowed down considering how quickly Chinese products captured the market. India has a huge opportunity in this sector, but will it be able to make the most out of it?

Image courtesy: Semiconductors are everywhere in our daily lives:

Before we move ahead and look into the Indian semiconductor industry, let’s understand what a semiconductor is, why it is needed and how did India get into manufacturing semiconductors in the first place. A semiconductor, by definition, is a material which can conduct electricity and falls between a conductor like copper and an insulator like glass. A semiconductor is very useful because it can easily pass current from one direction to another and hence devices with semiconductors can be used for energy conversion, amplification etc. Now, in layman terms, semiconductors are materials that can easily pass current. From phones to refrigerators to fitness tracking devices, a semiconductor is a very important component for the functioning of the modern and digital world we live in. 

Image Courtesy: Uses of semiconductors in the digital world

Bringing India in this entire equation, we discover that until now India had no manufacturing plants for semiconductors but was well adept in the research and design. But for a country to manufacture semiconductors, metals are of high demand. So, to begin production in this industry, India could either import the metals needed or mine its own (which it can because India has 6% of the world’s rare metal reserves). Next, the government would have to bring in funds and offer tax incentives in order to make the manufacturing ecosystem function. 

Setting up native semiconductor fabrication plants is an issue that India faces because there are not many companies that are into chip-making. The Indian government therefore feels the need to rely on foreign firms for the manufacture of semiconductors in the country by giving incentives and investing hefty amounts in the industry.

Another factor that could cause the government a muddle is the need of gallons of ultrapure water required on a daily basis to make semiconductors. Considering the fact that there is a drought situation in several parts of the country, supply of ultrapure water seems like a far-fetched target. 

One of the advantages in sight in this industry is the huge consumption market that India is (population!). Several experts have looked into how incentivisation of firms as well as manpower will be effective in the country due to the presence of English-speaking engineers and cheap labor force in large numbers which will make the industry cost effective. Pranay Kothasthane, chairperson of the high tech geopolitics program at the Takshashila Institution, said, “India has semiconductor humanpower. Semiconductor design requires large numbers of skilled engineers and this is where India’s strength lies”.  According to Kothasthane, of the largest semiconductor firms in the world, eight firms have design houses in India. Therefore it is evident that India does have the manpower and skills but is yet to begin the production of semiconductors in full swing.

The Indian Semiconductor Mission was introduced by the Indian government in order to build a semiconductor industry of its own to make itself a global electronic hub. As India buckles up to enter this industry, big countries like China, Taiwan, South Korea and USA await its competition. Ashwini Vaishnaw (the Minister of Railways, Communications and Electronics & Information Technology) recently mentioned that the government is open to invest more in the semiconductor industry and it also has seen interest from top companies like the Tata Group, who are willing to enter the manufacturing industry. 

As the Indian government looks into successfully setting up the semiconductor industry in the country, it is of utmost importance to check whether the resources at our disposal and other factors, like government ‘s approach and private companies’ interest etc., are aligned. The Indian government does have goals for this particular industry but they also need to be grounded and understand the needs of the industry and hence act in accordance. It is indeed a positive sign that India is looking forward to exploring an industry which has the potential to become one of the core industries in the country, gaining India a remarkable position in the chip-manufacturing industry.

-Rukmini Salodkar 

SYBSc (2021-24)

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