India's Path to Semiconductor Self-Reliance

Current Status of the Semiconductor Industry in India
India's semiconductor industry is currently valued at USD 26.3 billion (2022), with a projected growth to USD 271.9 billion by 2032, indicating a CAGR of 26.3%. Despite efforts to reduce reliance on imports, India remains a net importer of semiconductors, with USD 5.36 billion in imports (2021) and USD 0.52 billion in exports (2022).

The government has launched initiatives like the India Semiconductor Mission (ISM) and the Semicon India Programme to build a robust semiconductor and display ecosystem, providing fiscal support and incentives for semiconductor manufacturing.

International collaborations are also in place, such as the MoU with the European Commission and Japan to strengthen supply chain resilience.

Significance of Semiconductors for India

1. Economic Growth and Industrial Development: Semiconductors are critical for India’s economic growth, particularly in the electronics manufacturing sector. India aims to capture a significant share of the global semiconductor market, projected to reach USD 1 trillion by 2030. The government's initiatives are expected to generate 35,000 high-quality jobs and indirect employment for 100,000 people.
2. National Security and Strategic Autonomy: Semiconductors are essential for defense and telecommunications, powering everything from smartphones to military systems. By developing domestic semiconductor capabilities, India can ensure a secure and stable supply for critical sectors, enhancing national security.
3. Technological Self-Reliance and Innovation: India aims to reduce its import dependence (currently 65-70% of electronic components come from China) and boost innovation in emerging technologies like 5G, AI, and quantum computing. Initiatives like the Design Linked Incentive (DLI) scheme encourage domestic innovation.
4. Global Supply Chain Integration: India is striving to position itself as a key player in the global semiconductor value chain. With only a 3% global contribution to electronics manufacturing, India's efforts aim to integrate it more fully into international supply networks.
5. Job Creation and Skill Development: The capital-intensive nature of the semiconductor industry offers significant job creation potential, particularly in specialized fields like chip design, nanofabrication, and advanced packaging.

Key Roadblocks in India’s Semiconductor Push

1. Infrastructure Challenges: India faces infrastructure gaps such as unreliable power, water scarcity, and inadequate transportation facilities, which could hinder the establishment of semiconductor fabs. Natural disruptions like heatwaves further strain infrastructure.
2. Talent Gap: Despite a large pool of engineering talent, India faces a shortage of semiconductor professionals. A study suggests that by 2027, India may face a shortage of 250,000 to 300,000 semiconductor professionals, limiting its ability to develop a strong semiconductor ecosystem.
3. High Manufacturing Costs: Setting up and operating semiconductor fabs is costly, and India's high operational costs compared to established hubs like Taiwan and South Korea may deter global companies from investing in India.
4. Global Supply Chain Dynamics: The semiconductor industry is highly interconnected, and geopolitical tensions (e.g., Russia-Ukraine conflict) can disrupt supply chains, particularly in raw materials critical for semiconductor production.
5. Environmental Concerns: The energy-intensive nature of semiconductor production and its environmental impact (e.g., water usage and greenhouse gas emissions) are significant challenges for India’s sustainable development goals.
6. Competition from Other Emerging Markets: India faces stiff competition from Vietnam, Malaysia, and Indonesia, which are also attracting semiconductor investments due to favorable conditions like better infrastructure and talent.

Steps India Can Take to Realize Its Semiconductor Vision

1. Enhance Semiconductor Education and Training: India should focus on upgrading semiconductor engineering programs at universities and technical institutes, fostering hands-on learning through partnerships with global companies. Programs like those at IISc Bangalore could play a crucial role in developing a skilled workforce.
2. Develop Indigenous Chip Design Capabilities: India can leverage its software expertise to invest in chip design capabilities. Initiatives like Shakti, an open-source RISC-V processor, can lead to the development of India-specific chip designs for various applications.
3. Create a Robust Semiconductor Supply Chain: India should focus on building a comprehensive domestic supply chain, attracting investments in raw material production, chip design, and advanced packaging. Special economic zones (SEZs) for semiconductors can be established to streamline regulations and attract global players.
4. Establish a Sovereign Semiconductor Fund: A dedicated sovereign fund would provide long-term capital for semiconductor investments, similar to successful models in South Korea. This would help finance cutting-edge technologies like 3nm and 2nm chip fabrication.
5. Implement "Chip Diplomacy": India should leverage its geopolitical position and market size to establish strategic partnerships with leading semiconductor nations, facilitating technology transfers and joint research efforts.
6. Develop a “Green Semiconductor” Initiative: India could lead in sustainable semiconductor manufacturing, focusing on technologies that reduce water usage, lower energy consumption, and minimize chemical waste. Partnerships with companies like Applied Materials could help establish pilot fabs using renewable energy.
7. Establish a National Semiconductor Commons: A shared infrastructure model, similar to the National Nanotechnology Infrastructure Network in the US, would lower entry barriers for startups and foster collaboration between academia, industry, and government, accelerating innovation.

Key Takeaways
India’s semiconductor ambitions hinge on addressing key infrastructure and talent gaps, while building a comprehensive and sustainable semiconductor ecosystem. By strengthening educational frameworks, investing in indigenous chip design, enhancing supply chain resilience, and pursuing international collaborations, India can secure a pivotal role in the global semiconductor industry, ensuring technological self-reliance and bolstering national security.