India Semiconductor Mission (2021): Fostering A Self-Reliant Semiconductor Industry – IMPRI Impact And Policy Research Institute

Policy Update
Deepankshi Agnihotry

Introduction

Moore’s law is pushing the boundaries of chip design, reducing transistors, boosting efficiency, and raising demand as the Fourth Industrial Revolution revolutionises the world economy. As a result, the global supply chain has changed to prioritise bolstering the semiconductor sector. India’s semiconductor market, valued at $45 billion is expected to grow over $100bn billion by 2030. Currently, India imports approximately 65%-70% electronics components from Asian giants like China, Taiwan, Singapore and South Korea.The US is also a key player dominating the market with semiconductor giants like INTEL and QUALCOMM. In order to solidify its position in the semiconductor industry and with a desire for greater self-sufficiency, India launched the National Semiconductor Mission (NSM).

Following is the picturesque depiction of Moore’s law made made by Intel cofounder Gordon Moore , that set pace for digital revolution

                                                  Source-Intel page

India Semicondutor Mission

The India Semiconductor Mission (ISM) was launched in 2021 in the first edition of  SEMICON INDIA  with a total financial outlay of Rs 76,000 crore under the Ministry of Electronics and Information Technology (MeitY). It has been established as an independent business division within Digital India Corporation, with administrative and financial autonomy to formulate and drive India’s long-term strategies for semiconductor and display manufacturing, as well as the semiconductor design ecosystem and to further the mission of Atmanirbhar Bharat.

The key objectives of the ISM includes-

1. Formulation of a Holistic Long-Term Strategy: To develop a sustainable semiconductor  design ecosystem with participation of all stakeholders, including the government, academia, and industry.
2. Boosting Presence in the Global Supply Chain: Particularly in the areas of raw materials, manufacturing equipment, special chemicals, and gases.
3. Overhauling the Semiconductor Design Industry: By providing support in the form of Electronic Design Automation (EDA) tools, foundry services, and mechanisms for early-stage start-ups.
4. Creating Centers of Excellence: To evaluate and promote cutting-edge technologies, while enabling grants, global collaborations, and other mechanisms in academia, research institutions, and industry.
5. Incentivizing IoT and Collaborative Research: To establish mechanisms that harness economies of scale and foster national and international collaborations for research, commercialization, and skill development.

Components of ISM

1.Scheme for setting semiconductor fabs-Under this fiscal support to set up semiconductor manufacturing units in India will be provided by the government.Equity of Government not exceeding 49% will be given , ensuring innovation and participation of private players while still providing necessary financial support

                                                          Source-wikipedia images

2.Scheme for setting up Display Fabs-Provides fiscal support to eligible applicants for establishing TFT LCD/AMOLED-based display fabrication facilities in the country.

3.Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / OSAT facilities in India:This initiative aims to strengthen India’s semiconductor ecosystem, focusing on compound semiconductors, silicon photonics, MEMS sensors, and semiconductor assembly and testing.

4.The Design Linked Incentive (DLI) Scheme offers financial incentives and design infrastructure support to boost the development and deployment of semiconductor designs, including Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores, and related designs. The scheme spans 5 years, aiming to strengthen India’s semiconductor design ecosystem.The DLI Scheme, managed by CDAC as the Nodal Agency, seeks to offset challenges faced by domestic semiconductor design companies.

                                                       Source- TECH DEMAND

Impact and Progress of the Indian Semiconductor Mission

In order to make ISM a progress, government has launched various schemes and initiative let’s examine that in detail-

1. Strategic Infrastructure Development and Investments: Substantial strides has been taken place to develop semiconductor manufacturing units across india –

• Modernisation of the Semi-Conductor Laboratory (SCL), Mohali- Transforming this into a brownfield fab.
• Tata Electronics Projects:

1. Semiconductor Fabrication (Fab) Unit:An investment of ₹91,526 crore for a new fab in Dholera, Gujarat, with a capacity of 50,000 wafer starts per month (WSPM), focusing on high-performance chips for industries like electric vehicles (EVs), telecom, and consumer electronics. This has been in collaboration with PSMC, Taiwan.
2. OSAT Facility: With an investment of ₹27,120 crore and a capacity of 48 million units per day, this will cater to the assembly and packaging, targeting consumer electronics.

• Micron’s Semiconductor Plant:  In June 2023, the Union Cabinet approved Micron’s semiconductor plant in Sanand, Gujarat. This facility will enhance India’s semiconductor fabrication capabilities.

2. Expansion and Strengthening of Semiconductor Manufacturing:The Electronics Manufacturing Clusters (EMC 2.0) Scheme, launched in April 2020, has played a critical role in establishing state-of-the-art infrastructure for semiconductor and electronics manufacturing:

• Key Infrastructure Developments includes-

1. Hyderabad Knowledge City, Telangana:₹104.63 crore investment for a prototyping facility 
2. Divtipally Village, Telangana (New Energy Park): ₹10,574 crore investment with an expected production value of ₹22,500 crore and the creation of 19,164 jobs.This will also boost exports significantly
3. Tamil Nadu (Pillaipakkam Village EMC): ₹424.55 crore investment, which will generate 36,300 jobs and attract ₹8,737 crore in expected investments.
4. Kochanahalli Village, Karnataka: ₹221.54 crore investment expected to create 19,500 jobs and attract ₹1,560 crore in additional investments.

3. Investment and Production Growth Through Key Schemes

•  Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS)-Since its introduction in April 2020, the scheme has attracted ₹8,803.14 crore in investments, leading to a production value of ₹18,083.55 crore. It offers financial incentives of 25% on capital expenditure for sectors such as electronic components, e-waste recycling, and micro/nano-electronics.
• PLI Scheme for Large Scale Electronics: The scheme, also launched in April 2020, has attracted ₹8,390 crore in investments and contributed to a production value of ₹5,14,960 crore, particularly focusing on mobile phone manufacturing and semiconductor packaging.

4. Development of Semiconductor Talent and Innovation

• Chips to Startup (C2S) Program:This initiative is aimed at promoting innovation and entrepreneurship in the semiconductor industry. The programme is being implemented across 113 academic institution , R&D, startups and MSMEs.The initiative will train 85,000 engineers in fields such as VLSI, embedded systems design, and ASIC development, focusing on developing 175 ASICs, 20 SoCs, 30 FPGA-based designs, and 30 IP Cores over the next five years
• Academic Programs in Semiconductor Domains: In February 2023, the AICTE introduced new degree and diploma programs in VLSI Design and Technology and IC Manufacturing, aiming to create a skilled talent pool.

5. New Semiconductor Units and Strategic Developments

• Semiconductor ATMP Units: Two ATMP units will be set up in Assam and Sanand, Gujarat, with a combined production capacity of 63 million units per day.These units are aimed at advanced packaging and specialized chip manufacturing.
• CG Power and Industrial Solutions: In partnership with Renesas Electronics and STARS Microelectronics, CG Power received approval for a semiconductor OSAT facility in Sanand, Gujarat.
• Kaynes Technology India Limited (KTIL): In September 2024, KTIL received approval for an OSAT facility with a capacity of 6.33 million units per day in Sanand, Gujarat, specializing in wire bond interconnects and substrate-based packages.

Apart from all these initiative government that made changes in its regulatory and tariff policies to promote ease of doing business in fab industry

• An amendment to the Customs Tariff Act(20230 has been made that made 18% IGST on goods in customer bonded warehouses, exempting semiconductor and electronics manufacturing sectors.

For boosting R&D 2.5% of the total funding from Semicon 2.0 has been allotted for the purpose of research and designs in areas supporting the ISM.Further India Semiconductor Research Center (ISRC) has been set up for a world class semiconductor research facility.

Emerging Issues in India’s Semiconductor Mission

1. Massive Investment Challenges-

• High Capital Requirements:For setting up foundries investment of $3-$4 billion is required , while Micron is only investing $4825 million . This highlights the massive investment gap.
• Infrastructure Shortcomings: Infrastructure in India is not according to the global standards. The high class well developed infrastructure of countries like Singapore and South Korea made them an important player in the global value chain in semiconductor industry. India has a long way to go before competing with such nations.

2. Manpower and Employment Dynamics:

• Limited Employment Creation:According to Professor V Ramgopal Rao,VC of BITS Pilani campus, full-fledged semiconductor foundry with the capacity to process 50,000 wafers per month may hire only about 1,500 employees, as the semiconductor industry doesn’t require the large workforce India has to offer.While the jobs are created in auxiliary sector, small number of jobs and infrastructure gap don’t attract enough investments.
• Shortage of skilled workforce which is a must in this sector is a big hindrance.

3. Industry-Academia Collaboration Gaps

• India currently ranks 66th in Industry-Academia collaboration among 130 countries. While research is taking place but doesn’t cater the demands of industries like agriculture, healthcare and security
• Significant Brain Drain occurs as many students end up working abroad due to lack of opportunities in fabrication and technology as well as research areas.

4. Insufficient R&D Investment-

•  India ranks 56th in research spending as a percentage of GDP among 130 countries.Significant Brain Drain occurs as many students end up working abroad due to lack of opportunities in fabrication and technology as well as research areas.
• Red Tapism-Researchers face challenges in utilizing research funds due to bureaucratic hurdles thus delaying research and hampering innovation.

5. Industry and Government Support for R&D

• There is a lack of co-funding mechanism between the government and industry which hampers delivery of substantial funds in R&D. All this halts innovation in AI  and semiconductor industry

6.Investment Hesitancy- Companies are hesitant in making substantial investment due to policy stability issues.Foxconn’s withdrawal from a joint venture to establish a semiconductor facility due to difficulties in securing technology suppliers and a fab-manufacturer is one example of the challenges India faces in this area.

7. Dependence on Critical Raw Materials-

• Critical raw material market which fuels the semiconductor as well as the AI market is dominated by China. An in depth examination of import data of 30 critical elements between 2019-2024, highlights India’s vulnerability to China’s supply, particularly for six critical elements where dependency exceeds 40% including bismuth, titanium, lithium, silicon, tellurium and graphite.

Last but not the least, the semiconductor industry uses large quantities of hazardous chemicals like hydrochloric acid, toxic metals, and volatile solvents—which pose additional challenges for the industry.

Way Forward for the India Semiconductor Mission (ISM)

1. Mineral Security and Strategic Partnerships:-India needs to diversify its import moving away from dependence on China on raw materials and supply of critical elements.India’s mineral diplomacy is the step in right direction which includes-

• Bilateral Partnerships Australia: In March 2022, KABIL signed a Memorandum of Understanding with Australia for a critical mineral investment partnership and established the Australia-India Critical Minerals Research Hub. These initiatives focus on lithium and cobalt projects.
• Lithium Triangle partnership-India-Argentina- $24 Billion Pact Signed (January 2024) signed for  lithium exploration, granting access to five lithium blocks.  With Bolivia and Chile a Facilitating Asset Acquisition is taking place where KABIL is actively working on securing critical mineral assets in these countries.
• With US india recently signed Mineral Security Partnership to enhance supply in cobalt nickel and lithium.

2.. Supply Chain Resilience and Diversification-India’s effort should focus on supply chain diversification, creating resilient and flexible supply chains that work regardless of location.For this India must digitize transportation and logistics systems.

3. Government Support for R&D:Being world’s five largest economy India’s expenditure in R&D is meagre 0.64% far lower than China(2.41%) and  US(3.47%). Research and development in semiconductors require substantial investment, and India needs to significantly increase its spending in this area.

4. Fostering Global Partnerships and Strengthening “Chip Diplomacy”-Strategic Collaboration and technology partnership  with semiconductor giants will help overcome the capital expenditure. The recently signed the India-US Commercial Dialogue (iCET), a historic agreement aimed at enhancing cooperation on key technology areas, including semiconductors, will bolster Indian semiconductor ambition.

5. Focus on Niche Technologies .By investing in these areas, niche technologies and deep tech areas like quantum computing where researchers have massive hopes. Further there has to be a check to stop substantial delays in utilizing the funds allocated to these areas. Through this India can focus on emerging markets like autonomous vehicles, 5G and smart cities. 

Conclusion 

The government of India has started working on the second phase of semiconductor policy, with SEMICON 2 expected to be  in place soon. This will enhance financial support to the firms establishing chip facilities. Uttar Pradesh under this will soon become the fourth state to have semiconductor facilities after Gujarat, Assam and Maharashtra . Union Minister Mr. Ashiwini Vaishnaw while addressing at SEMICON 2 said equal focus will be on ecosystem partners, equipment manufacturing, fab, ATMP (assembly, testing, marking, and packaging), and other segments for the overall semiconductor ecosystem.Further he also said the new scheme will focus on 3 major areas-

• Attracting equipment manufacturers
• Promotion of development of specialized material
• Securing chemical supplies

The current value of India’s electronics manufacturing stands at $101 billion as of FY23.The Business As Usual(BAU) scenario projections indicate it could escalate to $278 billion by FY30.India’s ambition to become the third largest global economy needs vision for technology driven sectors. A conducive business environment, robust policy support can lead to massive boost in electronics manufacturing capabilities amounting to $500 billion by FY30. This will cater employment opportunities for approximately 5.5 million to 6 million people and allow electronics exports to reach about $240 billion.

Combined with Make in India and Assemble in India programmes and with capitalizing on opportunities and enhancing value chain integration India can surely be a global leader in the semiconductor industry.

                                                               Source-linkedin

References

1. Press Information Bureau. (n.d.). In a Business As Usual scenario, India can achieve a potential of USD 25 billion from components manufacturing. Retrieved from https://pib.gov.in/PressReleasePage.aspx?PRID=2034096
2. Ministry of Electronics and Information Technology. (n.d.). Semiconductors and Display Fab Ecosystem. Retrieved from https://www.meity.gov.in/esdm/Semiconductors-and-Display-Fab-Ecosystem
3. Press Information Bureau. (n.d.). India Semiconductor Mission (ISM). Retrieved from https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1896018
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17. The Hindu. (n.d.). India’s reliance on China for critical minerals explained. Retrieved from https://www.thehindu.com/business/Industry/indias-reliance-on-china-for-critical-minerals-explained/article69020390.ece#:~:text=An%20in%2Ddepth%20examination%20of,%2C%20and%20graphite%20(42.4%25).

About The Contributor: Deepankshi Agnihotry is an intern at IMPRI and holds a postgraduate degree in Electronics, is curious and passionate about sustainability and impactful policy solutions.

Acknowledgement: The author would like to express sincere gratitude to Dr.Vaishali Singh, Aasthaba Jadeja and the IMPRI team for giving the opportunity for writing the article.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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