Why in the News?
At the World Economic Forum in January, Electronics and IT Minister Ashwini Vaishnaw announced that India will produce its first locally made semiconductor chip this year.
What is the primary goal of India’s Semicon India Programme?
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How will it reduce import dependency on semiconductor chips?
- Local Production of Semiconductor Chips: Domestic manufacturing of chips will reduce the need to import critical components used in electronics and communication. Example: India’s first indigenously manufactured semiconductor chip is expected to be produced in 2024, cutting reliance on imports from countries like China and South Korea.
- Building Fabrication (Fab) Facilities: Establishing semiconductor fabrication plants allows India to produce advanced chips domestically. Example: The Dholera fabrication facility in Gujarat by Tata Electronics, in collaboration with Taiwan’s Powerchip Semiconductor Manufacturing Corporation will reduce the need for importing high-end chips.
- Developing Assembly, Testing, and Packaging (ATP) Capabilities: Setting up ATP units enables India to process raw semiconductor wafers into finished products locally. Example: The Tata Semiconductor Assembly and Test facility in Morigaon, Assam, will handle large-scale chip assembly and packaging, decreasing dependence on foreign ATP services.
- Diversifying Supply Chains and Strengthening Indigenous Innovation: Promoting research and development will encourage innovation in chip design and technology. Example: Investments in EDA software (Electronic Design Automation) and Core IP (patents) will enable India to design proprietary chips instead of relying on external technologies.
- Attracting Global and Domestic Investments: Incentives and policy support under the Semicon India Programme will attract both domestic and foreign semiconductor companies to manufacture locally. Example: Government partnerships with industry leaders like Tata Electronics and Foxconn encourage private investment in chip manufacturing, reducing future import needs
Where are the major semiconductor manufacturing and assembly facilities being constructed under the Semicon India Programme?
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Why has the actual spending under the Semicon India Programme consistently fallen?
- Delays in Project Approvals: Lengthy evaluation and approval processes for semiconductor projects have slowed fund disbursement. For instance, the Tata and Micron projects faced regulatory and environmental clearance delays.
- High Capital-Intensive Nature: Semiconductor manufacturing requires significant upfront investment, and the government has struggled to allocate sufficient funds. For example, the revised estimate for FY24 dropped to ₹1,503.36 crore from the budgeted ₹3,000 crore due to financial constraints.
- Limited Domestic Expertise: India’s lack of advanced technological expertise in areas like chip design and fabrication has slowed implementation, resulting in underutilized budgets.
- Complex Global Partnerships: Collaboration with international firms, such as Powerchip Semiconductor Manufacturing Corporation, involves lengthy negotiations and compliance with global standards, delaying fund utilization.
- Infrastructure Bottlenecks: Inadequate supporting infrastructure (like power and water supply) at manufacturing sites has caused delays. For example, the Dholera facility required significant investments in infrastructure before full-scale construction could begin.
Way forward:
- Streamline Approval Processes and Policy Support: Implement faster clearance mechanisms and provide consistent policy incentives to accelerate project approvals and fund disbursement.
- Invest in Skill Development and Infrastructure: Enhance domestic expertise through specialized training programs and improve infrastructure at manufacturing hubs to ensure timely project execution.
