Context: India's escalating demand for electronic devices has led to a significant increase in semiconductor chip imports.
Relevance of the topic:
Prelims: Semicon India Programme; Import trends.
Mains: Challenges of high import Dependence.
Major Highlights:
- Data from the Ministry of Commerce and Industry shows that in the past 10 years, imports for semiconductor chips such as monolithic integrated circuits (ICs), memories, amplifiers, and other ICs have increased significantly.
- In FY24, the total value of Monolithic IC imports was ₹1.05 lakh crore, a 2,000% increase compared to FY16.
- In FY24, import of memory chips increased by 4,500% compared to FY16.
- Imports of amplifiers, which are utilised in wireless communication and audio equipment, increased by 4,800% in FY24 from FY16.
- In the past 10 years, except FY19, China has been the major supplier of semiconductor chips to India, accounting for nearly one third of the import value every year. Hong Kong, Japan, South Korea, Singapore, and Taiwan have also been major suppliers to India.
Challenges associated with High Import Dependence:
India's heavy reliance on semiconductor chip imports presents several challenges that impact its economy, technological advancement, and national security.
- Supply Chain vulnerabilities: Dependence on external sources for semiconductors exposes India to global supply-chain disruptions. E.g., the global semiconductor shortage in recent years led to production delays in various industries, including automotive and electronics.
- Economic Implications: Importing semiconductors contributes to a significant outflow of foreign exchange, affecting the country's trade balance.
- Technological Lag: High import dependence can hinder the development of a domestic semiconductor industry, limiting innovation and technological self-reliance. This reliance may prevent India from keeping pace with global advancements in semiconductor technology.
- National Security Concerns: Dependence on foreign-made semiconductors can pose national security risks, as these components are integral to defense and critical infrastructure.
To address these challenges and enhance self-reliance, India is focusing on developing a robust domestic semiconductor manufacturing ecosystem.
Government Initiatives in this regard:
As per industry estimates, the size of the Indian semiconductor market was about $38 Billion in 2023 and is expected to reach $109 Billion by 2030.
1. Manufacturing Facilities:
- Five manufacturing facilities are under construction for the manufacturing and assembly of semiconductor chips, backed by the Semicon India Programme. These include- Tata Semiconductor Assembly and Test facility in Morigaon (Assam); Dholera (Gujarat) semiconductor fabrication facility (fab) by Tata Electronics in collaboration with the Taiwan-based Powerchip Semiconductor Manufacturing Corporation.
- With the new facilities, India will be able to add value in the assembly, testing, and packaging, and fab segments of the global value chain for semiconductors.
- India is yet to make major strides in EDA (software used for designing chips), Core IP (patents), wafers (semiconductor materials), fab tools and ATP tools (machinery), and design of chips.
Also Read: Assam Semiconductor Plant to start making Chips in 2026
2. Semicon India Programme:
- Launched in 2021 with an outlay of ₹76,000 crores for the development of semiconductors and display manufacturing ecosystem in India.
- Aim: To provide financial support to companies investing in semiconductors, display manufacturing and design ecosystem.
- Implementing Agency: India Semiconductor Mission under Ministry of Electronics and Information Technology (MeitY).
- Following four schemes have been introduced under the programme:
- Modified Scheme for setting up of Semiconductor Fabs in India extends fiscal support of 50% of the project cost for setting up of Silicon CMOS based Semiconductor Fabs in India.
- Modified Scheme for setting up of Display Fabs in India extends fiscal support of 50% of Project Cost for setting up of Display Fabs in India.
- Fiscal support of 50% of the Capital Expenditure for setting up of Compound Semiconductors / Silicon Photonics / Sensors (including MEMS) Fab/ Discrete Semiconductor Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP)/ OSAT facilities in India.
- ‘Design Linked Incentive (DLI) Scheme’: Product Design Linked Incentive of up to 50% of the eligible expenditure subject to a ceiling of ₹15 Crore per application.
Also Read: India-US semiconductor Partnership