Semiconductor Crisis

Semiconductors is a material product usually composed of silicon, which conducts electricity more than an insulator, such as glass, but less than a pure conductor, such as copper or aluminium.

Semiconductors are critical technological components for emerging technologies viz. artificial intelligence (AI) and internet of things applications, 5G communications, cloud computing, etc.

Challenges

• The world is facing a chip shortage because of its limited supply.
• The semiconductor manufacturing capacities are concentrated in a few geographies.
• Nearly all leading edge (sub 10nm) semiconductors manufacturing capacity is limited to Taiwan and South Korea, with nearly 92 per cent located in the former.
• Further, 75 per cent of the semiconductor manufacturing capacity is concentrated in East Asia and China. • India is ready in just one of the three parameters of chip self-reliance.
• According to government data, India imports 94 per cent of its electronics and 100 per cent of its semiconductors.
• India currently imports all chips and the market is estimated to touch $100 billion by 2025 from $24 billion now.

Challenges for India in developing a robust Semiconductor Industry

• Raw Materials: Dependence on imports for raw materials.
• Production: Presently India lacks the high grade production facilities required for large scale chip manufacturing.
• Water Supply: Semiconductor manufacturing consumes large quantities of water for a variety of purposes ranging from equipment cooling to wafer surface cleaning. India lacks such a facility presently.
• Irregular power supply and frequent power cuts.
• Technological Challenges: The making of a semiconductor chip involves some technological skill.
• Inadequate logistics and absence of proper waste disposal have further exacerbated the poor state of its production.

Government Initiatives

• The Union Cabinet has allocated an amount of Rs. 76,000 crore for supporting the development of a ‘semiconductors and display manufacturing ecosystem’.
• India has also launched the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) for manufacturing of electronics components and semiconductors.
• In December 2021, India invited an “expression of interest” from chipmakers for setting up fabrication units in the country or for the acquisition of such manufacturing units.
• The MeitY also launched the Design Linked Incentive (DLI) Scheme to nurture at least 20 domestic companies involved in semiconductor for next 5 years.
• The recently announced Semicon India programme which provides $10 bn fiscal support and other non-fiscal measures is a step in the right direction.
• Recently, Indian oil-to-metals conglomerate Vedanta and global manufacturing giant Foxconn have signed a memorandum of understanding with the Indian state of Gujarat to set up a $20 billion semiconductor and display unit.