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As the name suggests, Semiconductor also known as microchips & integrated circuits is somewhere in between a conductor and an insulator. Because of this property, Semiconductor is used to manufacture almost every electronic item in the world including smartphones, gaming consoles, cars and medical equipment TVs, solar panels and a lot of other electronics.
Manufacturing semiconductors requires a significant investment in infrastructure and technology. The plant requires a lot of Capex and after setting it up, it requires uninterrupted power supply, significant amounts of water & a highly skilled workforce to run it. India is surrounded by water bodies and Indian engineers are extremely skilled but inspite of that manufacturers have been reluctant in setting up fab units in India till 2014 as India didn’t have a steady supply of electricity & there was very low government support to the Industry. Therefore since Independence until 2014 India has been importing 100% of its semiconductor needs from the world.
Since 2014 under the leadership of the honourable Prime Minister Narendra Modi, the Indian government has initiated multiple exciting initiatives to drive the manufacturing of semiconductors in India under its Aatmanirbhar & Make in India schemes. Before we delve into the initiatives it is important to understand that semiconductors isn’t a commodity which can be easily manufactured at scale. It primarily involves three broad stages of evolution before we see a semiconductor being manufactured.
Design: The design phase involves creating the blueprint of the semiconductor device using specialized software and tools.
Semiconductor Fabless Accelerator Lab (SFAL): The Semiconductor Fabless Accelerator Lab is a government initiative launched in 2020 to support semiconductor startups in India. The lab provides a range of services, such as access to design tools, fabrication facilities, and mentorship, to help startups bring their products to market.
Fabrication: The fabrication phase involves the manufacturing of the semiconductor device using specialized equipment and processes.
Semiconductor Wafer Fabs: The Indian government has established multiple semiconductor fabrication facilities, such as the SCL Semiconductor Complex in Mohali and the Semiconductor Laboratory in Chandigarh, to cater to the domestic demand for semiconductors.
Production-Linked Incentive (PLI) Scheme: The Production-Linked Incentive Scheme is a government initiative launched in 2020 to boost the domestic manufacturing of electronics in India.
Assembly: The assembly phase involves the integration of the semiconductor device into a finished product, such as a smartphone or a laptop.
Electronics Manufacturing Clusters (EMCs): The Indian government has established multiple electronics manufacturing clusters across the country to promote the domestic manufacturing of electronics, including semiconductor devices. These clusters provide a range of infrastructure and support services to electronics manufacturers, including assembly and testing facilities.
Phased Manufacturing Programme (PMP): The Phased Manufacturing Programme is a government initiative launched in 2016 to promote the domestic manufacturing of electronics in India. The programme aims to increase the domestic value addition in electronics manufacturing, including the assembly of semiconductor devices.
But the game changer under the leadership of Narendra Modi was the PLI scheme. The PLI scheme was launched in the year 2021, the year where the entire world was looking for alternate supply chains and there was a huge shortage in the production of chips across the world. The PLI scheme will be reaping a lot of revenue for the govt in the coming years but it drove a lot of investments in 2022 and is continuing to play a key role to establish India as one of the leading semiconductor manufacturers.
The PLI scheme for the semiconductor industry in India has a budget of INR 76.5 billion (approximately $1.02 billion) over a period of five years. Under the PLI scheme, companies will receive a financial incentive of 6% of their incremental sales of products manufactured in India. The incentive will be provided for a period of five years from the date of commencement of commercial production. The government has set a target of increasing the domestic value addition in the electronics manufacturing sector to 35-40% by 2025. The PLI scheme is also expected to lead to a reduction in imports of semiconductors in India. India currently imports around $8 billion worth of semiconductors annually, and the government aims to reduce this by around 25% in the next five years.
The Indian government has approved 14 companies for the PLI scheme for the semiconductor industry, as of February 2022. Here are the names of the companies that have been approved
These companies are expected to invest around INR 215 billion (approximately $2.8 billion) in setting up semiconductor manufacturing facilities in India over the next five years.
US-based Micron Technology Inc Wednesday signed a Memorandum of Understanding (MoU) with the Gujarat government to set up a Rs 22,500-crore semiconductor unit at Sanand near Ahmedabad. The Assembly, Test, Marking and Packaging (ATMP) facility, to be set up on 93 acres looks to create 5,000 direct jobs and is expected to be commissioned within 18 months.
On the other side “Japan and India have signed a memorandum for semiconductor design, manufacturing, equipment research, talent development and to bring resilience in the semiconductor supply chain,” Ashwini Vaishnaw said, Electronic Minister of India.
This will lead to delivering on the huge demand India will have for semiconductors in the coming years, reduce dependency on foreign imports and also lead to higher exports. With exports touching $400 Billion already India can become the hub for semiconductors in the future. The PM has played a smart move by first building Foxconn’s confidence after they started assembling/manufacturing iPhone in India. With the kind of govt support they witnessed in Apple iPhone manufacturing, they are now venturing into building all the ecosystem of mobile manufacturing in India itself.
Recently, NXP CEO Kurt Sievers met with PM Modi to discuss strengthening the semiconductor ecosystem, developing STEM workforce and startup ecosystem in India. Prime Minister Modi’s recent visit to the US has bolstered the semiconductor supply chain.
The honourable PM Narendra Modi’s belief in Indian business, Indian skilled youth & India’s ease of doing business will surely be a major driving factor to propel India into becoming a leader in production of the entire ecosystem of semiconductor manufacturing. Soon, we will lose reliance on imports and therefore dependencies on non-friendly countries. Aatmanirbhar Bharat in the semiconductor industry is another step towards a total Aatmanirbhar Bharat.
Author : Vaidyanathan Iyer
Author Description : Vaidyanathan Iyer is a marketing professional with 5 years of experience in the domain and currently is working as a marketing strategist in a MNC in Bangalore. He completed his engineering from Navrachana University & then pursued his MBA in Strategic Communications from MICA. He is passionate about contributing towards policy and research. He is also an active proponent in analyzing the projects of the government and how it impacts the last person it intends to reach.
Disclaimer : The views, thoughts, or opinions expressed in this blogs belong solely to the author, and do not necessarily reflect the views of author’s employer, organisation, committee or any other group or individual.
