Semiconductors: The Key to Establishing India’s Technological and Global Voice
Semiconductors form a vital foundation for the technological edifice across multiple applications, spanning sectors like Defence, Artificial Intelligence(AI) and Telecommunications. Integration of semiconductors in those fields has transformed the way we interact with technology and will play a pivotal role in reshaping the broader landscape in future.
Semiconductors – A Key to Global Dominion
Semiconductors are imperative in setting up a narrative of “technical and political dominance” in today’s global parlance as they find their usage in sectors critical for carving a nation that is perceived as a global heavyweight. Semiconductors are crucial in the development and deployment of advanced AI systems. Advanced AI systems are dependent on high-performance chips, which are manufactured by cutting-edge processes. These chips are made from transistors that fall into the category of 5nm to 7nm design rules. Those chips allow more transistors to fit in enabling higher processing power and efficiency and facilitating complex calculations, advanced processing, low latency and real-time decision-making. Semiconductors are particularly useful in high-speed communication networks, especially 5G networks. The telecom sector depends on semiconductors to create the infrastructure necessary for high-speed communication networks. Semiconductors are integral to the functionality of advanced military systems. Sophistication in advanced microelectronics is a necessity for upholding military superiority. Microelectronics play its part in communications, weapons technology and intelligence. Some of the major areas in defence are – Computing Power for Command and Control Systems, Precision Guided Munitions and Advanced Weaponry and Reconnaissance capabilities.
The global semiconductor crisis during the COVID-19 pandemic underscored the importance of maintaining self-reliance in semiconductor production. Vulnerabilities in supply chains highlighted the necessity to invest heavily in fortifying domestic capabilities. Global chip shortage impacted industries from Automotive to Consumer Electronics leading to major cost escalations and project delays. A strategic realignment of priorities was markedly visible across most of the major powers vis-a-vis semiconductors, both for economic and security purposes. The pandemic served as a clarion call for Indian policy-makers as it exposed major fallacies in India’s semiconductor supply chain and a lot of initiatives towards self-sufficiency have been taken by the government.
Semiconductor Sectoral Evolution in India: Initiatives, Milestones and Challenges
The semiconductor sector in India has been marked by a complex journey tracing back to the 1960s. The country has had its fair share of achievements and setbacks.
The origin can be traced back to 1954, with the establishment of Bharat Electronics Limited(BEL). BEL’s focus initially was on manufacturing electronics products for the Indian defence. With time and keeping in view the strategic necessity, the firm has pivoted towards an all-encompassing goal of “self-reliance in semiconductors”.
1980 saw the formation of Semiconductor Complex Limited(SCL). SCL has been historically involved in producing semiconductor devices used for various civilian, and defence applications and fabrication of integrated circuits for space and satellite applications. It began its operations with a focus on supplying chips to the Indian Space Research Organization(ISRO).
The 1980s and 1990s also witnessed significant progress in the form of Complementary Metal Oxide Semiconductor(CMOS) development by SCL. The adoption of CMOS by SCL was a significant achievement in India’s effort to build indigenous capabilities. CMOS had significant advantages over its predecessors owing to its ability to create integrated circuits that were energy efficient and found applications in both civilian and military applications.
Despite early strides, India’s journey was fraught with challenges. Lack of capabilities vis-a-vis established players like Taiwan, the United States and South Korea made it difficult for India to compete in this high-end manufacturing. The early 2000s saw policy paralysis and inadequate steps towards incentivizing investments and hence saw a missed opportunity in setting up an assembly and testing plant by Advanced Micro Devices(AMD). India’s IT policy in 2000 was marked by a significant focus on software and IT services. The policy narratives then lacked focus on the semiconductor manufacturing ecosystem. This also led to a lack of talent pool for chip manufacturing and a significant decline in investment. Although historically, the sector saw a lackadaisical approach, the current government has put its weight behind creating a supportive ecosystem.
Recent Policy Initiatives and Investment Announcements:
Some of the recent initiatives are the Production Linked Incentive(PLI) scheme and the Design Linked Incentive scheme(DLI). Both of them were launched in December 2021 as part of the India Semiconductor Mission(ISM). The ISM was launched to create an end-to-end capability that encompasses Research, Design and Manufacturing. The major goals of this mission are – Self-Sufficiency, Innovation and Jobs Growth. The PLI scheme is a part of ISM that offers financial incentives for companies to set up semiconductor manufacturing plants and to promote testing and packaging facilities. The DLI, which is also a part of the ISM focuses on creating design capabilities by incentivizing Indian companies and startups engaged in chip designing. The goal of the DLI is to build India’s prowess in research, development and innovation in semiconductor design.
The policy changes have also paved the way for collaboration with private players who have solicited interest in investing, developing and enhancing manufacturing capabilities. Intel plans to establish a design and manufacturing facility. Foxconn aims to establish fabrication facilities in India through collaboration with Vedanta. Micron Technology has announced a commitment of $800 million for a new testing and assembly facility in Gujarat. These developments are a part of the broader developments aimed at enhancing local capabilities and reducing dependence on foreign suppliers.
Semiconductor Sector’s Headwinds:
Despite some of these recent developments, there are significant headwinds that the sector encounters, the major being a Lack of Infrastructure, Supply Chain Constraints, Lack of Skilled Resources and Global Political Narratives. India still depends on critical components and raw materials from external sources. Silicon Wafers, Photomasks, Photoresists and Rare Earth Elements are some of the items that India sources for its semiconductor needs. For example, India imports Rare Earth materials from China, Australia and the US and ongoing trade tensions between China and the US affect the global supply chain ultimately affecting India. Market fluctuation of commodities like Silicon and Rare Earth Materials can escalate the cost of production making it harder for import-dependent countries like India to become cost-competitive. India’s manufacturing capabilities are still in a nascent stage and India lacks some of the major components necessary for fabrication. Although India has a good base in semiconductor design and software capabilities, the lack of full-fledged semiconductor manufacturing capability creates dependence on international suppliers. This places India in a spot of strategic vulnerability.
Conclusion:
Ensuring self-reliance in the semiconductor sector will be no mean task for India. The road gets, even more, steeper ahead as the global dynamics evolve at a faster pace. Increased funding for R&D, Focusing on creating a Localized Ecosystem, Skill Development and a focus on enabling Global Collaborations have already been identified as the ingredients towards self-sufficiency. However, much remains to be witnessed in terms of execution.