Semi Conductor Manufacturing

A semiconductor is a material that allows electrical conductivity between a conductor and an insulator. Semiconductors are made from pure elements like silicon or germanium, or compounds such as gallium arsenide. Sometimes their conductivity is changed through doping. 

Doping is a process of adding small amounts of impurities to these pure elements, causing large changes in the conductivity of the material.

Semiconductors make the devices more compact, less expensive, and more powerful. For instance, mobile phones weighed about 2 lbs, cost around $4,000, and held a charge for only about 30 minutes of talk time during their initial phase. However today an individual can buy a smartphone for 5000 rupees that would give a 1-day charge.

LOCATION FACTORS FOR SEMI-CONDUCTOR MANUFACTURING INDUSTRY

• Workforce: Technically skilled workforce is required. Along with this lawyers, accountants, and management consultants are also very important.
• Cost: Cost of labour, operations and services is important.
• Financial incentives and subsidies: They attract the investors to set up the plant.
• Transportation: to ensure forward-backward linkages. Continuous supply of end products to consumers is very important. 
• Infrastructure: water, electricity, internet access.
• Market availability- lifestyle. 

SIGNIFICANCE OF SEMICONDUCTOR MANUFACTURING INDUSTRY

Economic development: 

• Semiconductors are the building blocks of today’s technology. 
• Indigenous manufacturing of chips will build its smartphone assembly industry and strengthen its electronics supply chain. 
• This will create numerous employment opportunities for the Indian youth.
• Indigenous capacity would attract local taxes and boost the export potential. 
• Further, India would be required to import fewer semiconductor chips which would decrease the import bill.

Key growth drivers

Meet the rising demand:

• Experts estimate that around 50 crore people will join the internet in the next decade thereby demanding more phones and laptops. 
• Work from home culture warrants an enhanced demand for servers, internet connectivity, and cloud usage.

Geopolitical Benefits: driven by data and the digital revolution. Further self-sufficiency will decrease reliance on Chinese chip imports especially during hard times like the recent Galwan Valley border clash.

Enhanced Security: Chips made locally will be designated as “trusted sources” and can be used in products ranging from CCTV cameras to 5G equipment. This would improve the national cybersecurity profile.

INDIA’S POSITION IN SEMI-CONDUCTOR MANUFACTURING

Globally, the entire value chain has seeped in the interdependence between a handful of countries like the USA, Taiwan, Japan, China, and some European nations. 

• India has done well in design and verification for the semiconductor industry. Most of the global semiconductor companies having an R&D footprint in India.
• However, 100% of our chips, memory, and display are imported into the country. In 2020, India spent $15bn on electronic imports, with 37% coming from China.
• Although India has two fabs — SITAR, a unit of the Defence Research and Development Organisation (DRDO) in Bengaluru, and a semiconductor laboratory in Chandigarh. These build silicon chips for strategic purposes like defense and space and not for commercial use.

INITIATIVES TAKEN TO PROMOTE INDIGENOUS SEMICONDUCTOR CAPACITY

• National Policy on Electronics 2019: It envisions positioning India as a global hub for Electronics System Design and Manufacturing (ESDM) sector. It aims to encourage the development of core components, including chipsets. 
• Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): 
• The government will provide a financial incentive of 25% on capital expenditure for a list of products that constitute the supply chain of electronic products. This includes products such as electronic components, semiconductors, and specialized sub-assemblies.
• India would be offering more than $1 billion in cash to each semiconductor company that sets up manufacturing units in the country.
• Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme: Under this, the government will provide support for the setting up of Electronics Manufacturing Clusters (EMCs) and Common Facility Centers (CFCs).
• Production Linked Incentive Scheme(PLI): Under this, the government will provide an incentive of 4% to 6% on goods manufactured in India and covered under target segments to eligible companies for a period of five years.
• Foreign Direct Investment: The Government of India has allowed 100 percent (FDI) under the automatic route in the Electronics Systems Design & Manufacturing sector. 

WHAT ARE THE CHALLENGES IN FRONT OF INDIA?

• 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. 
• Low Ease of doing business: The process of establishing an indigenous semiconductor facility requires clearances and approvals from multiple government departments. 
• 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 constraint: 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.
• Unstable power supply: The smooth production of semiconductors requires the availability of an uninterrupted 24*7 power supply. 

SUGGESTIONS

• The government should provide adequate funding to augment the research and development potential of technical institutes. For instance, IIT Madras developed a microprocessor named ‘Moushik’ with funding support from the Ministry of Electronics and Information Technology.
• The proposed 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.
• 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.
• 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.