News Highlight
In a bid to make India’s $10 billion semiconductor initiative more attractive to investors, the government approved changes to the Production-Linked Incentive (PLI) scheme.
Key Takeaway,
- The government recently announced an outlay of Rs 76,000 crore (around $10 billion) under its production-linked incentive (PLI) scheme, separately for developing a semiconductor and display manufacturing electronics ecosystem.
Semiconductors
- It 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.
- They are the basic building blocks that serve as the heart and brain of all modern electronics and information and communications technology products.
Need for Promoting the Semiconductor Industry
- 4th Industrial revolution:
- The Fourth Industrial Revolution, 4IR, or Industry 4.0, conceptualises rapid change to technology, industries, and societal patterns and processes in the 21st century due to increasing interconnectivity and intelligent automation.
- Semiconductor chips are the lifeblood of the modern information age. They enable electronic products to compute and control actions that simplify our lives.
- Critical infrastructures:
- Semiconductors are used in critical infrastructures such as communication, power transmission, etc., that have implications for national security.
- The deeper integration into the global value chain:
- Development of the semiconductor and display ecosystem will have a multiplier effect across different sectors of the economy with deeper integration to the global value chain.
- High consumption:
- India’s semiconductor consumption is expected to exceed $80 billion by 2026 and reach $110 billion by 2030.
- Geopolitical benefits:
- Countries having a sufficient supply of chips would be in a better position to mould the future course of geopolitics, driven by data and the digital revolution.
- Enhanced security:
- Chips made locally will be designated as “trusted sources” and can be used in products ranging from CCTV cameras to 5G equipment.
- Revenue boost:
- Indigenous capacity would attract local taxes and boost the export potential. Further, India would be required to import fewer semiconductor chips, decreasing the import bill.
Government initiatives
- PLI Scheme:
- The government also recently announced the Production Linked Incentive (PLI) and Design Linked Incentive (DLI) schemes as significant steps towards building a semiconductor ecosystem in the country.
- India Semiconductor Mission:
- It has been set up as an Independent Business Division within Digital India Corporation, having administrative and financial autonomy to formulate and drive India’s long-term strategies for developing semiconductors and display manufacturing facilities and semiconductor design ecosystem.
- Semicon India programme:
- It aims to provide $10 bn fiscal support and other non-fiscal measures for companies/consortia.
Issues and challenges
- High Investments Required:
- Semiconductors and display manufacturing is a very complex and technology-intensive sector involving substantial capital investments, high risk, long gestation and payback periods.
- Just setting up one semiconductor fab requires an investment of between $3 and $7 billion.
- Minimal Fiscal Support from the Government:
- The level of financial support currently envisioned is minuscule. The new scheme provides equal funding for all steps of the process; the outlay of the scheme remains $10 billion.
- Ecological impact:
- Chip making requires gallons of ultra-pure water in a single day, which may enhance the drought conditions which often prevail in large parts of the country.
- Inadequate logistics and absence of proper waste:
- Inadequate logistics and absence of proper waste disposal have further exacerbated the poor state of its production.
Way forward
- Funding:
- The government should provide adequate funding to augment the research and development potential of technical institutes.
- For example, IIT Madras developed a microprocessor named ‘Moushik’ with funding support from the Ministry of Electronics and Information Technology.
- Sovereign Patent Fund (SPF):
- It should be established expeditiously to bolster domestic businesses through the acquisition and licensing of patented technology.
- Minimum domestic procurement:
- The manufacturers need to be given an assurance of minimum domestic procurement by the government and the private sector.
- Proactive cooperation of states:
- Areas like stable power and large quantities of pure water and land are state subjects. It will be up to state governments to create a suitable climate for easy implementation of semiconductor projects.
- Semicon diplomacy:
- Semicon diplomacy is pivotal to India’s Act East Policy, which aims to build resilient ties in the Asia Pacific region.
- India must seize the opportunity and become an attractive alternative destination for semiconductor manufacturing.
Pic Courtesy: The Hindu
Content Source: The Hindu