India is moving towards becoming a semiconductor chip hub. Major steps are taken in this area by the government to make the country self-reliant. This topic is a part of science and technology and also the current affairs section, hence it has all the chances of coming in exams and aspirants have to focus on this topic thoroughly and cover all the relevant aspects concerning this topic.
Semi-Conductors: An Introduction
- Semiconductors are key components of electronics that control the flow of electrical current within a device. The basic component of a semiconductor chip is a silicon chip etched with billions of tiny transistors forming patterns that control the flow of electricity according to various computational instructions.
- These chips are commonly used in electronic devices such as cars, smartphones, medical devices, airplanes, and weapons.
- These chips are manufactured in a complex process by chip factories commonly known as fabs.
- There are different types of chips. More advanced semiconductors, such as 5 nanometers (nm) chips, can pack more computing power while consuming less power because they can fit smaller transistors on a silicon wafer. These are typically used in cutting-edge technology.
- Other chips with larger transistors are considered “late” and are used in consumer and everyday products.
- Another important component of semiconductor chips is the substrate that connects the chip to the circuit board that holds the chip within personal computers and other devices. Substrates consisting of thin copper wires embedded in resin help transmit user instructions to the computer chip and relay responses. They are necessary because the fine wires coming out of the chip do not allow direct solder connections to the printed circuit board.
- Substrate manufacturing is therefore considered the backlog of the global chip supply chain. Substrate supplies are very tight and any small disruption in this underinvested sector is a big concern for chip makers.
Global Semi-Conductor Industry:
- Currently, the global semiconductor industry is valued at US$500-600 billion.
- The chip manufacturing process is complex and highly precise, involving several other steps in the supply chain such as B. Design software for the chip and patent it through core intellectual property (IP) rights.
- This also includes the manufacture of chip-making machines. Setting up a fab or factory.
- The chip industry is concentrated with major players such as Taiwan, South Korea, and the United States. The New York Times estimates that 90% of Taiwan’s 5nm (nanometer) chips are mass-produced by Taiwan Semiconductor Manufacturing Company (TSMC).
- So a global chip shortage, US-China tensions over Taiwan, and a stalemate in supply he chains due to conflicts between Russia and Ukraine have prompted major economies to enter the chip-making sector with renewed vigor.
Indias Push for Semiconductor Industry
- It is difficult to pinpoint which factors are more important to the global economy. Although India has notable strength in chip design, it does not manufacture semiconductors domestically and relies mainly on imports.
- This became a problem during the pandemic when a shortage of chip supplies slowed down production in key industries such as automobiles. Indian automakers alone, for example, were unable to get their hands on relevant semiconductors, so in December 2021 he had 7,000 backlog orders.
- Additionally, ongoing cross-strait tensions are making India uneasy. Taiwanese companies like TSMC control over 60% of the semiconductor manufacturing market and hold a staggering 90% market share in advanced chips.
- As China closes in on Taiwan, it is becoming increasingly clear that India’s 100% import dependency on chips is no longer sustainable.
- India has announced its 76,000 kroner (US$10 billion) Production Linked Incentive (PLI) program to attract major semiconductor manufacturers to India. As part of the program, the government will fund 50% of the project costs for manufacturing all types of semiconductors domestically.
- The country also announced financial support for the Design Linked Initiative (DLI) program to foster global and domestic investment in areas such as design software and intellectual property.
- In recent months, Vedanta and Taiwanese manufacturing giant Foxconn signed a memorandum of understanding with the Gujarat government to invest Rs 154,000 to set up a factory in the state. Two other projects were also announced. His $3 billion facility in Karnataka by international consortium ISMC and his $3.5 billion facility in Tamil Nadu by Singapore-based IGSS Ventures.
- Major companies such as TSMC and UMC are also visiting India looking for potential investment locations.
Tata is also making inroads into the semiconductor supply chain. Tata Motors partners with Japanese semiconductor manufacturers to design and manufacture automotive chips.
Challenges:
1. Avoid repeating the mistakes of the past:
This is not the first time India has built a semiconductor manufacturing base in the country. In the 1980s, India stole profits from Taiwanese companies by setting up state-owned semiconductor factories. This ambitious attempt failed
After the factory caught fire. Subsequent attempts stalled due to bureaucratic inertia. This is the mistake India is trying to avoid this time around.
2. Lack of Financial Assistance:
While this scheme is a promising step, chip production is a resource-intensive and expensive process. In particular, the construction of a semiconductor factory alone requires an investment of $3 billion to $7 billion. The new program provides equal funding for all steps of the process, but program spending remains at $10 billion.
3. Prioritize multiple focus areas:
Analysts are bullish but concerned that much of the current program spending is not left to support other elements such as display fabs, packaging and test facilities, and chip design centers. They also argue that initial funding should focus on areas such as design and research and development, where India already has an established talent pool.
4. Huge water requirements:
Also, chip manufacturing requires gallons of ultrapure water a day, which could work for the government to provide for factories, and the drought conditions that plague much of the country.
5. Need for Innovation:
Moreover, the Indian government and private industry must invest billions of dollars over decades to keep innovating relentlessly in a rapidly evolving industry.
6. Dependence on subsidies:
Another challenge for governments is to ensure that semiconductors and related electronics do not end up in a situation where these ventures cannot thrive until taxpayers are forced to fund the necessary subsidies. It is to stimulate consumer demand in the industry.