Daily News Analysis 1st April 2023

India’s semiconductor mission might need a compass


Relevance in UPSC:

GS Paper 3: Growth

Important For

Prelims: About Semiconductor Industry

Mains: Challenges in Semiconductor Industry



The United States Department of Commerce and its Indian counterpart have recently concluded a memorandum of understanding in March 2023 to ensure that subsidies by each country do not come in the way of India’s semiconductor dreams, as espoused by the much publicised semiconductor policy launched in December 2021.

The U.S. Department of State has also engaged with India to beef up sector-specific export control laws in the semiconductor space — which India has agreed to, as in recent media reports.

How big is the semiconductor industry?

  • The semiconductor is the basic thumbnail-sized building block of almost all modern electronic devices, from smartphones to connected devices in the Internet of Things (IoT).
  • They provide computing power to these devices.
  • The basic building block of a semiconductor chip is a block of silicon on which billions of tiny transistors are etched and projected onto specific minerals and gases, forming patterns to control the flow of electricity in different computer instructions.
  • The most advanced semiconductor developed in 2020 is called 5nm and has 16 billion transistors. Semiconductors with higher nanometer (nm) values are used in consumer electronics, automotive, etc.
  • Lower values are used for devices such as smartphones and laptops. The world\’s semiconductor industry is currently worth between $50 billion and $600 billion.
  • This is aimed at the global electronics industry, which is currently worth around $3 trillion.

How global major such as Intel to invest in India in order to set up a greenfield 300mm wafer fabrication plant costing over $10 billion?

Intel and Indian government ministers who were seen courting the Intel CEO at Davos, and New Delhi hoping that Intel Foundry Services (a business unit within Intel formed after Intel’s takeover of the U.S.-Israel based Tower Jazz Speciality Foundry) will build a greenfield plant, most likely in Dholera, Gujarat.


Where does Indian semiconductor policy need to go?

  • Semiconductor Laboratories (SCL) was established in Mohali in 1983 by the then central government with the aim of creating an electronic ecosystem at a time when Keltron, Uptron and Webel were young entities in pre-liberal India aimed at consumer electronics.
  • Opening up of markets for consumer goods in 1991 and a fire that broke out in 1989 at the SCL, dashed these hopes.
  • Some funding from the central exchequer to revive the plant to a 180 nm node pilot line to meet the strategic needs of the country did come by but the facility has, by and large, remained an unfulfilled dream in its mission of creating a domestic semiconductor ecosystem.
  • SCL Mohali can be viewed as a technology stack similar to others such as Aadhaar, Aarogya Setu and the Unified Payments Interface (UPI) acting as a force multiplier effect, encouraging many integrated circuit design startups in India to consider designing for India.


Investments in India?

  • According to the government, the PLI and DLI programs have attracted many global semiconductor companies to set up factories in India and the revised program will accelerate these investments and attract more applicants.
  • Vedanta and Taiwanese chipmaker Foxconn have signed a memorandum of understanding for an investment of Rs crore. 15,400 crore semiconductor factory in Gujarat.
  • The international consortium ISMC (a joint venture between Abu Dhabi-based Next Orbit Ventures and Israel\’s Tower Semiconductor) has proposed a $3 billion factory in Karnataka. Singapore-based IGSS Ventures is offering to raise $3.

Challenges Facing the Semiconductor Industry: 

  • Huge Investment Needs– It takes billions of dollars to build a good manufacturing facility. Therefore, the conversion of raw water to ultrapure water is an important and costly activity for all semiconductor manufacturers.
  • Water and Electricity – Semiconductor manufacturing uses large amounts of water for a variety of purposes, from cooling equipment to cleaning wafer surfaces.
  • Technical Skill Manufacturing semiconductor chips involves certain technical skills.
  • Inadequate logistics and no proper waste Inadequate logistics and no proper waste disposal further aggravated its poor state of production. High quality uninterrupted power supply.
  • Covid-19 The trigger was the start of the Covid-19 pandemic and subsequent lockdowns around the world, forcing the closure of vital chipmaking facilities in countries like Japan, South Korea , China and the United States. Covid-19 chip shortages cost automakers $110 billion in lost revenue in 2021.
  • Russia-Ukraine conflict and its impact on supply chain raw materials value of semiconductors has also prompted chipmakers to invest in strengthening the semiconductor supply chain.

Way Forward

  • Transfer of SCL back to the Ministry of Electronics and Information Technology (MeITy) after a 15-year stint as a laboratory within the Department of Space, as part of the new semiconductor policy announcement in December 2021.
    • No joint venture partner has been found, keeping SCL employees in limbo
  • The focus at MeITY seems aimed at attracting Intel into India to set up a fab. This can be inferred from the wording of the request for proposals and signalling from MeITY Ministers. However, Intel primarily operates at <22nm node and 300mm, requiring over $10 billion in upgrade cost to the SCL.
  • An alternate approach
    • Leverage human and capital assets at the SCL to build on what exists in a targeted manner, to jumpstart the semiconductor mission by taking advantage of recent technological breakthroughs in a class of semiconductors that do not need advanced lithography equipment.
    • The “More than Moore” segment of >180 nm node involving mixed signal analog (BCD and SiGe), wide bandgap (GaN, GaAs, Silicon Carbide) for RF and power markets leveraging existing lithography capability already in place at the SCL.
  • An investment of $50-$100 million may result in the development of Indian solutions for automotive electronics (EV traction inverters/on board chargers), PV-Inverters, 5G infra-power amplifiers, railway electronics (traction inverters), creating the Indian equivalent of Bosch, Siemens, ABB, Mitsubishi Electric, Thales and ELTA.
  • Upgrade has to be backed by subsidies aimed at fabless design houses with proven design (sales of >$100 million per year) willing to fabricate at the SCL in the 180nm+ node (and possibly transfer process intellectual patents if they have any).
  • The subsidies have to be aimed at global design companies with products aimed at India-specific markets such as motor drives for BLDC fans or e-bike chargers. Unfortunately, the existing DLI/PLI schemes provide no such incentives to proven global fabless design companies.



Recent efforts by the Indian Semiconductor Mission to open grants to global SMEs in the upstream supply chain have been welcomed, as existing facilities like SCL stand to benefit. But this is not enough unless combined with the incentives defined above and upgrades for different groups of players.

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