Semi Conductor Shortage India is finalising plans to manufacture semiconductor chips in a big way, as a part of its ‘Make in India’ initiative. The nation is offering more than USD 1 billion in cash to each semiconductor company that sets up manufacturing units in the country. Chips made locally will be designated as “trusted sources” and can be used in products ranging from CCTV cameras to 5G equipment. In December 2021, India invited an “expression of interest” from chipmakers for setting up fabrication units in the country or for the acquisition of such manufacturing units.

Semi Conductor Shortage Emerging technologies, especially, Internet of Things, artificial intelligence, augmented and extended reality and blockchain are gaining prominence across industries. With these applications gaining traction across sectors, the need for specialised sensors, integrated circuits, improved memory, and enhanced processors is increasing.

The 21st century will be an era of Digital revolution signifying an increased use of mobile phones and computer devices. This enhanced usage can be met only with a robust availability of semiconductor chips that sustains their functioning. Therefore India needs to focus on the indigenous development of semiconductors in order to realize its digital potential and emerge as a strong power in the present era.

Intial Focus on back-end of manufacturing- Semiconductor foundries are the world’s most expensive factories, accounting for 65% of industry capital expenditure but only 25% of the value addition. Therefore, to lower the risks of investment, India should especially look at back-end of manufacturing such as assembly, packaging and testing. Once it stabilises and an ecosystem develops, front-end of manufacturing will follow. Proactive cooperation of states- Areas like stable power, large quantities of pure water and land, are state subjects, and the state governments should also create the right climate for easy implementation of semiconductor projects.

Ways to boost Semi Conductors in India Domestic procurement assurances- The manufacturers need to be given an assurance of minimum domestic procurement by the government and the private sector. The focus should be on manufacturing economical and technically viable options like 28nm chips. Support of businesses- The government should also support businesses in the acquisition of semiconductor manufacturing units in other countries. This is easier than setting up a domestic facility and can be done swiftly for ensuring a continuous supply of chips. Hand-holding startups of entrepreneurial engineers can also produce large payoffs.

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Ways to Semi Conductors in India Provision of adequate funding- Adequate funding must be provided to augment the research and development potential of technical institutes. For ex- IIT Madras developed a microprocessor named ‘Moushik’ with funding support from the Ministry of Electronics and Information Technology. Expeditious execution of Sovereign Patent Fund (SPF)- The Sovereign Patent Fund (SPF) under National Policy on electronics should be established expeditiously. It is a wholly or partly Government-backed entity that aims to bolster domestic businesses through the acquisition and licensing of patented technology.

Unstable power supply- The smooth production of semiconductors requires the availability of an uninterrupted 24*7 power supply. However, this requirement is not fulfilled by many regions in the country. This restricts production to very few locations. Technological Constraint- The indigenous manufacturing of semiconductors requires the use of high-end technologies. These technologies are licensed from patent holders at a very high price. Structural Flaws- FDI in electronics is less than 1% of the total FDI inflow because of the dearth of skilled labor, delays in land acquisition, and the uncertain tax regime.

challenges in the semiconductor industry in India 1. High Cost of establishment- As per a government estimate, it would cost roughly $5-$7 billion to set up a chip fabrication unit in India. 2. Bureaucratic inefficiencies- The process of establishing an indigenous semiconductor facility requires clearances and approvals from multiple government departments. Further, there exists a considerable degree of bureaucratic delays at each stage that discourages the establishment of manufacturing units.

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