Industry

The chip-making industry is a highly concentrated one, with the big players being Taiwan, South Korea, the US, among others. The global chip shortage, US-China tensions over Taiwan, and the supply chain blockages owing to the Russia-Ukraine conflict have led major economies to enter the chip-making sector with a renewed push.
Considering the fast-developing electronics manufacturing and innovation ecosystem going forward, India is in a good position to take advantage of the current circumstances. The global market for producing semiconductors is expected to reach $1 trillion by 2030 and India has the chance to take home nearly $80 billion of the market according to the India Electronics and Semiconductor Association.
However, given its relative inexperience in the field, India still has a lot of obstacles/challenges to clear before it can play a significant role in the chip-making supply chain, such as:

• Need of massive capital investment: Semiconductor manufacturing is a very complex and technology-intensive sector involving huge capital investments, high risks and long gestation and payback periods requiring technology adaptation. For instance, just the setting up of one semiconductor fab requires an investment of anywhere between $3 to $7 billion.
• Lack of adequate fabrication capacity: Despite having formidable chip design talent, India did not aggressively build-up its chip fabrication capacity. ISRO and the DRDO have their respective fab foundries but they are primarily for their own requirements and are also not as sophisticated. As of now, India has only one old fab which is located in Mohali, Punjab.
• Resource-intensive industry: Chip-making requires gallons of ultrapure water in a single day and uninterrupted supply of power is central to the process, which could be a task for the government to provide to factories/industries. Further, a lot of land and development of a highly skilled workforce is required.
• Lack of ecology and expertise: Majority of India’s semiconductor production has been focused on the nation’s state-run defence and space industries. There is a need for government and business collaboration in order to scale up to the potential required.

Although the government has taken several steps such as production-linked incentive (PLI) scheme, design-linked initiative (DLI) scheme, establishing semiconductor plants in different states, etc., various steps can be taken to give a push to the chip design industry in India. These include:

• Creating a chip design ecosystem in the country and formulating a plan on how it can train, retain and productively utilize the Indian talent and engage engineers constructively on projects of national importance rather than allowing them to seek employment elsewhere.
• Establishing the Semiconductor Authority of India (SAI), an entity under the Ministry of Electronics and Information Technology (MeitY), to establish a world-class Integrated Chip Design Centre (ICDC).
• Identifying national projects for chip design, looking for Indian and export markets and providing funding for their implementation and delivery.
• Procuring legacy chip designs’ IPs from potential sources rather than reinventing.
• Coordinating with fabless and semiconductor companies for joint development of chips.
• Modulating the industrial, import and taxation policies to enhance chip designing and manufacturing.
• Nurturing a semiconductor laboratory with adequate funding to grow it into a large manufacturing facility, irrespective of the private companies entering the Indian semiconductor industry and staying competitive.

Due to the rising demand for digital products, semiconductor sales on a global scale reached $152.5 billion in the second quarter of 2022. Concerted efforts are required to set up India’s own ‘Silicon Valley’ as India transitions from chip-taking to chip-making.