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India and the Semiconductor Mission 2023

India and the Semiconductor Mission 2023

As part of the China-Plus-One diversification strategy, India is well positioned to participate significantly in the manufacturing of electronics and semiconductor products, according to Rajeev Chandrasekhar, minister of state for electronics and IT.

China-Plus-One, often known as Plus One, is a business strategy that encourages diversification of activities outside of China as opposed to focusing only on Chinese assets. It gained popularity in 2018 and became well-known after the Covid pandemic.

Chandrasekhar declared on Thursday evening at the Bengaluru Tech Summit that “people worldwide do not want to rely solely on China.” He stated, “China-Plus-One diversification is underway. India is in a strong position given the last 5–6 years of efforts made by the country to establish itself as a significant player in these global value chains (GVCs).

Given that the electronics and semiconductor industries are worth $1.5 trillion, India has fantastic potential. But China has controlled the market for 20 years and has around 75% of it. The globe wants to grow less reliant on one another. Chandrasekhar thinks that India is well-positioned to take part.

According to him, India’s plans to play a big role in the electronics value chain are closely tied to its semiconductor-centric national strategy. For instance, 66% of all FDI in the last three years for electronics production has gone to India. Chandrasekhar went on to explain that more and more countries and companies see India as a trustworthy partner for the design and production of electrical products.

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Over 92% of all mobile phones used in the country in 2014, according to Chandrasekhar, were imported, but over 97% of them are currently made in India. He asserted that no products relating to the manufacture of electronics were exported by the country in 2014. Currently, the country exports machines worth Rs 70,000 crore.

The value of the Indian electronics market has increased from $10 billion in 2014 to $75 billion now. It is anticipated to be worth $300 billion by 2025 or 2026, which would signify an increase in electronics production of about 26 times over the course of ten years. On September 12, 2008, the world celebrated the arrival of silicon chips, commonly known as semiconductor-based integrated circuits (ICs), after 50 years.

In a Forbes article from a little over a year ago, it was stated that “India lost out on a multi-billion-dollar chip facility because the government held its feet on crafting an investment strategy on semiconductors.” It has happened multiple times over the past 20 years that media headlines claiming that “India’s first semiconductor chip production fab will come up shortly” have generated a lot of anticipation without ever happening.

During Prime Minister Narendra Modi’s first term (2014–19), this area also did not advance; however, in his second term, the commitment to launch an incentive program for semiconductor fabs was announced in the Budget Speech on July 5, 2019.

The Ministry of Electronics and Information Technology (MEITY) opened an “Expression of Interest” on December 15, 2020, to ascertain who could be interested in constructing chip fabs in India if incentives are provided and what kinds of incentives they are seeking. One year later, on December 15, 2021, the Union Cabinet authorized an incentive program for silicon fabs, other types of semiconductor fabs, semiconductor design, and display fabs with an initial overlay of Rs 76,000 crore.

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The incentive plan announcement was not made to address the severe chip scarcity that was at its peak at the time because the most significant silicon-based fabs will take at least three years to build, outfit, and be ready for production. It is noteworthy that the assessment and approval process for the initial batch of applications—including three for silicon fabs—has not yet been completed a year after the scheme’s start.

“The government will undergo a detailed review of applications it has collected in regard to the mega semiconductor program,” said Union Minister Ashwini Vaishnaw on February 24. “It expects to complete the whole procedure and negotiate deals with enterprises in the following 8-10 months.”

In countries like Japan and the United States that started putting together semiconductor incentive schemes about the same time or even after India started planning, there have already been multiple examples of new fab buildings taking off, and some of them are ready for equipment move-in.

More than three years after making a financial commitment, nearly two years after expressing interest, and a year after a planned rollout, India still seems to be struggling with making decisions. On November 21, Vaishnaw was again quoted as saying, “The Center will also approve at least two semiconductor fab proposals in the next two months,” but he omitted to determine a time frame or specify whether the two facilities would be silicon fabs or other, more compact ones like compound semiconductor fabs.

The minister responsible for India’s semiconductor project has made contradictory statements, the global semiconductor sector has slowed as a result of recession worries, and there is a dispute between the United States and China over chips, leading many to question if India would once again miss the ship.

The applicant fab may theoretically be able to acquire the technology from a global fab that is already employing it in large-volume production by the middle of the decade, even if the application is approved by the beginning of 2023.

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Most likely, the first contracts for such an Indian factory will involve using it as a supplementary supplier for the same chips as the main factory. These early Indian commercial chips may later be imported as a component of items, but they are more likely to be exported until both the chip packing and the assembly of the final product are carried out in India.

Clients can design new chips using the same PDK as the parent fab, which means the India fab can potentially acquire new orders from the same global fabless consumers as the fab from whence the knowledge transfer was done, either in the future or simultaneously. The third round of orders flooding into the Indian fab is most likely Indian fabless design companies, and the chips may be used locally or internationally.

Practically speaking, though, all of this necessitates a tenacious commitment to upholding commitments and a laser-sharp execution focus. The top-five foundries in the world may not have submitted applications to India’s semiconductor fabs in the first round, but they will be keeping an eye on how the current applications — including one from a foundry that is listed among the next five top foundries — are handled, how quickly decisions are made, and how easily execution is carried out before they declare an interest when the scheme opens for a second round.

The semiconductor industry is anticipated to grow almost flat in 2022 and possibly negatively in 2023, but the second part of this decade is predicted to once again experience significant growth. Breaking ground on one or more silicon fabs by early 2023 can put India on the map of the world’s semiconductor fabs by the time the next upswing is forecast, even if they are not the best in the world or employing the most advanced technology node.

Vaishnaw says that the India Semiconductor Mission is a long-term purpose that will take 20 years to reach. A long-term perspective is helpful, but it needs to be balanced by immediate, concrete steps.

edited and proofread by nikita sharma

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