Nations compete to gain a foothold in the production of these crucial components, which power everything from traffic lights to advanced weaponry, making semiconductors the new battleground in the high technology sphere. India has entered the competition in its bid to become a significant semiconductor manufacturing hub.?
A substance with specialised electrical properties, known as a semiconductor, can be used as the basis for computers and other electronic devices. Typically, it is a solid chemical element or compound that, in some circumstances, transmits electricity but not in others. Because of this, it is the perfect medium for controlling electrical current and common electrical appliances.
A semiconductor is a crucial component used in electronics that controls the flow of electrical current in a device. These are widely utilised in electronic devices such as cars, smartphones, medical equipment, aircraft, and weapons. These chips are produced using a sophisticated process by chip fabrication plants, also referred to as fabs.
Chips come in many different varieties. More advanced semiconductors, like the 5 nanometer (nm) chip, can fit fewer transistors on a silicon wafer, allowing them to carry more processing power while using less electricity. Modern applied sciences sometimes make use of these. Other chips, which feature more substantial transistors, are considered to be "lagging edge" and are utilised in common consumer goods.
The semiconductor industry is a hugely important sector for world economies, with semiconductor components found in a wide range of consumer and commercial products from vehicles to computers to mobile devices and personal electronics.
It is challenging to identify a factor that is more crucial to the world economy. Although India has several major advantages in chip design, it does not locally produce semiconductors and is heavily dependent on imports. This became a concern during the pandemic, when a lack of chips caused manufacturing for important sectors like the automotive industry to slacken. For instance, because they couldn't get their hands on the right semiconductors in December 2021, carmakers in India alone had 7 lakh pending orders.
India has also been concerned about the ongoing tensions surrounding the Taiwan Straits. Taiwanese companies like TSMC have a commanding 60% market share for semiconductor manufacturing and a whopping 90% market share for cutting-edge chips. China's threat to Taiwan has made it increasingly obvious that India's continued reliance on imports for all of its chip needs is unsustainable.
A $10 billion Production Linked Incentive (PLI) scheme was proposed by India to entice large semiconductor manufacturing companies to the country. The government will contribute 50% of the project costs for the domestic production of all types of semiconductors as part of the plan.
Vedanta and the massive Taiwanese manufacturing company Foxconn recently reached an agreement with the Gujarat state government to invest 1,54,000 crore in the construction of a facility there. Major companies like TSMC and UMC have also visited India to look for potential investment locations. Tata has also entered the supply chain for semiconductors. It has made investments to establish a position in the chip testing and packaging industry, while Tata Motors has partnered with a Japanese chip manufacturer to develop and manufacture automotive chips.
Aside from India's significant contributions to the semiconductor design process, current proposals for semiconductor manufacture, such as those from Vedanta-Foxconn, aim to produce less advanced chips in the 28 nm range. For comparison, the best chips currently being produced are 5nm processors, with a 3nm chip now under development. India would likely find it challenging to enter the high-end semiconductor market, which is dominated by Taiwanese competitors like TSMC and South Korean companies like Samsung, given the advanced technologies and significant capital needed.
Additionally required are Tata's efforts in packaging and testing. Although much less discussed due to the focus on semiconductor manufacturing, it is anticipated that the global chip packaging and testing market would reach a value of around $46 billion by the end of the decade. This can be a successful business strategy.
India has attempted to establish a domestic semiconductor manufacturing base before. Indian companies beat Taiwan's businesses to the punch in the 1980s by setting up a state-owned semiconductor manufacturing facility. This audacious attempt came to an abrupt halt when the production facility caught fire. Later makes an attempt that is delayed by organisational inertia. India may be eager to avoid making this mistake this time around.
Given the delicate nature and complexity of the production process, industrial plants may even require continuous supplies of water and electricity. Furthermore, in order to continuously innovate in a market that is growing swiftly, Indian government agencies and private companies may need to invest billions of dollars over an extended period of time.
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