Editorial: Challenges galore

To be a global hub for chip manufacturing, India must strengthen its supply chain and address infra limitations

The recently concluded conference — Semicon India 2024 — to showcase India’s strategies to emerge as a global hub for chip manufacturing offered an opportunity for an honest reflection on the challenges the country needs to overcome to reach the goal. Though Prime Minister Narendra Modi, who inaugurated the three-day event, presented a rosy picture while inviting leading global semiconductor companies to invest in the country, ground realities suggest that there are many lessons to be learnt from international experiences. Several areas need improvement. Most important among them is that India lacks a robust and integrated supply chain for the semiconductor industry, which involves the availability of raw materials, equipment, components, testing facilities and skilled manpower. The complexity and capital-intensity of semiconductor manufacturing is a major barrier, with a new fab costing over $1 billion to build. Setting up fabrication plants requires cutting-edge technologies, sophisticated materials and a meticulous production process. India has a shortage of skilled talent and lacks access to high-end technologies, which are licensed from patent holders at a high price. Apart from restrictive bureaucratic procedures, infrastructure limitations, such as power supply, water availability and logistics, can pose significant hurdles for semiconductor manufacturing. Also, India faces stiff competition from established semiconductor manufacturing hubs like China, Taiwan and South Korea. There is also an argument that the Centre’s incentives are not sufficiently attractive compared to what other nations are offering. There are also apprehensions about policy stability in India.

India imports all chips and only a few elements of the semiconductor supply value chain are indigenously available. There is a need to promote research collaborations between academic institutions and industry players to develop cutting-edge chip technologies to keep pace with the ever-changing consumer demands, market trends and technological advancements. While the country boasts a large pool of engineering and technical talent, there is a need for specialised skills in semiconductor manufacturing. Though India traditionally had a strong base for semiconductor design industry, hardware manufacturing has remained elusive. Over the last 15 years, several consortiums made multiple attempts at chip making but without success. The global semiconductor industry is poised for a decade of growth to become a trillion-dollar industry by 2030. India aspires to be one of major drivers of this growth by providing generous fiscal support, creating a conducive manufacturing environment and forging more international collaborations. The Indian semiconductor market, currently valued at about $23.2 billion, is projected to reach $80.3 billion by 2028. India is a key partner in the QUAD Semiconductor Supply Chain Initiative and has signed multiple agreements to strengthen global semiconductor co-operation. Initiatives like the India Semiconductor Mission (ISM) offer crucial support through fiscal aid, fostering innovation and building a strong supply chain. The ISM can play a pivotal role in making India a competitive force in the global semiconductor market, driving economic progress and technological advancements.

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