Semiconductor ambitions get a boost

India’s semiconductor ambitions have got a boost and some concrete shape with the Union cabinet approving three chip manufacturing projects worth Rs 1.26 lakh crore.

These include the setting up of the country’s first semiconductor fabrication unit in Dholera, Gujarat, by the Tata Group. It will be set up in partnership with the Powerchip Semiconductor Manufacturing Corporation (PSMC) in Taiwan, and is estimated to cost Rs 91,000 crore. A semiconductor assembly and test plant will be set up in Assam, again by the Tata Group, at a cost of Rs 27,000 crore. A third semiconductor unit will be set up in Sanand, Gujarat, by CG Power, in partnership with Japan’s Renesas Electronics Corporation and Thailand’s Stars Microelectronics, with an investment of Rs 7,600 crore.

Last year, the government had approved the proposal for American memory chip-maker Micron Technology’s assembly and test facility in Gujarat. All of these will benefit from generous subsidies from the state and central governments. There is also a plan to modernise the SCL (Semiconductor Laboratory) in Mohali, Punjab, at a cost of Rs 10,000 crore. 

The semiconductor industry is a key sector of modern industry and is technology- and capital-heavy. A few companies and countries control the manufacturing, distribution and supply chains of the industry. Considering its strategic importance, there is a race among technologically advanced countries to be at its forefront.

South Korea, Taiwan and China account for around 70% of the global chip manufacturing capacity. The US and Japan account for the balance. India is not on the semiconductor fab map at all currently but has begun a determined effort to build capacity. The government had announced a Rs 76,000-crore chip manufacturing incentive scheme in December 2021 which envisaged the central and state governments offering fiscal incentives, apart from other support, to proposals. In the case of Micron, the central government contributes 50% and the Gujarat government 20% of the $2.75 billion cost of the project. The incentive schemes are on offer for all areas of the semiconductor industry like packaging units, assembly and testing projects, and foundries.

The chips to be manufactured at the plants approved will be for the automotive industry, consumer electronics, defence, telecom, power electronics, displays, etc. The chips to be made at the Tata-PSMC plant, for instance, will be primarily of 28 nanometre process nodes, along with 50 nm and 55 nm.

None of these plants are meant to produce cutting-edge compute logic, GPU or AI chips, but they are a good start for the country on the semiconductor manufacturing path and are aimed at significant markets. They will help Indian industry insert itself into global semiconductor supply chains. The country has to move quicker and on a bigger scale on semiconductors. India is already a significant player in chip design and that must be strengthened. There should be a clear focus on R&D, too.