Why is semiconductor manufacturing critical for India’s economic and strategic autonomy? Discuss the challenges and recent policy initiatives.

Today modern technology relies heavily on semiconductors which power everything from AI and military systems to smartphones and electric cars. As highlighted in Semiconductor Manufacturing in India UPSC discussions, the dependency on international chip supply chains poses significant strategic and financial risks for a digitally growing economy like India.

Concept & Background

Due to the concentration of semiconductor manufacturing in a few countries (South Korea, Taiwan and the United States), supply chains are vulnerable. So the disruptions can paralyse entire businesses as seen by the COVID-19 epidemic and the U.S.-China tech war.

Today more than 90% of India’s semiconductors are now imported resulting in a significant supply risk and trade vulnerability. It causes a higher rate of dependency if India looks forward to be completely self reliant in this domain.

Initiatives from the Government

•  India Semiconductor Mission (ISM): It was established in 2021 with the goal of creating a semiconductor design, its manufacturing and packaging ecosystem.

• The Production-Linked Incentive (PLI) Scheme is a ₹76,000-crore package designed to draw in multinational companies such as Tower Semiconductor, Foxconn and Micron.
• Dholera & Sanand Fabrication Plants: With fabrication facilities being built recently, Gujarat is quickly becoming India’s semiconductor hub.
• The Design Linked Incentive (DLI) Scheme promotes chip design among domestic start-ups and MSMEs.

Difficulties & Challenges:

•  Its Expensive initial outlay (about $10 billion per factory).
• The limited availability of skilled workers for nanofabrication.
• Its power- and water-intensive operations require a lot of skill and investment.
• There is huge competition from well-known global behemoths like Samsung and TSMC.
• The reliance of the supply chain on imported photolithography equipment and raw materials.
• Examples & Current Connections: India’s first significant semiconductor investment was the Micron plant in Gujarat in 2023.
• India’s position in global value chains is strengthened by the U.S.-India Semiconductor Partnership (2023).
• India’s Strategic Electronics Policy combines the upgrading of defence with chip production.

Semiconductor self-reliance is a strategic necessity as well as a technical objective. Growth Analysts have asserted that innovation-driven local manufacturing is increasingly essential to India’s long-term economic success. Therefore developing chip capability is a step towards Atmanirbhar Bharat for building a strong place in the global tech industry.

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About the Author: Jyoti Verma