India aims to become a semiconductor manufacturing hub. What are the challenges faced by the semiconductor industry in India? Mention the salient features of the India Semiconductor Mission.

Challenges faced by India's semiconductor industry

• Limited fabrication ecosystem: India has strong chip-design capabilities but historically lacked commercial-scale semiconductor fabs, limiting domestic manufacturing.
  • Example: India's strength in semiconductor design has not been matched by a comparable domestic wafer-fabrication ecosystem.

• High capital and infrastructure requirements: Semiconductor fabrication requires very high investment, uninterrupted electricity and large quantities of ultra-pure water. Even small disruptions can cause significant production losses.
  • Example: A fabrication plant requires continuous power and ultra-pure water for wafer-cleaning and manufacturing processes.

• Concentrated global ecosystem: Semiconductor manufacturing is dominated by a few countries and firms, particularly Taiwan and South Korea, creating high entry barriers for India.
  • Example: India's entry into fabrication requires competing with established global semiconductor manufacturing clusters.

• Skill and talent gap: India has a large engineering workforce, but advanced semiconductor manufacturing requires specialised skills in fabrication, process engineering, packaging and equipment.
  • Example: Engineering talent needs specialised industry-oriented training for semiconductor fabrication and process engineering.

• Weak R&D ecosystem: Limited domestic original semiconductor research and technology development constrain India's ability to move beyond design and assembly.
  • Example: Strengthening institutions such as the Semiconductor Laboratory (SCL), Mohali is important for building domestic capabilities.

• Complex clearances: Semiconductor fabs require multiple technological, environmental and governmental clearances, increasing project complexity and gestation periods.
  • Example: Large semiconductor projects must coordinate technological requirements with multiple regulatory approvals.

• Import-dependent supply chain: Critical equipment, chemicals, components and technologies remain dependent on imports, exposing the industry to geopolitical and supply-chain disruptions.
  • Example: Dependence on specialised imported equipment and inputs can affect production when global trade or geopolitical conditions change.

Salient features of the India Semiconductor Mission

• ₹76,000 crore financial support: The Semicon India Programme provides substantial fiscal support for developing semiconductor and display manufacturing capabilities.
  • Example: The programme supports the development of semiconductor and display fabrication capacity in India.

• Support across the value chain: ISM supports semiconductor fabs, display fabs, compound semiconductors and ATMP/OSAT facilities, rather than focusing only on wafer fabrication.
  • Example: ATMP/OSAT facilities strengthen the downstream assembly, testing and packaging segment of the semiconductor value chain.

• Design support: The mission includes a Design Linked Incentive (DLI) to support domestic semiconductor design companies and strengthen India's existing design capability.
  • Example: DLI helps India leverage its existing strength in chip design while expanding domestic semiconductor capabilities.

• Compound semiconductor ecosystem: Support for compound semiconductors such as SiC and GaN helps develop capabilities relevant to EVs, power electronics and telecommunications.
  • Example: SiC and GaN are important for power electronics and advanced telecommunications applications.

• Attracting global investment and technology: 100% FDI under the automatic route in electronics and semiconductor manufacturing helps attract global capital, technology and expertise.
  • Example: Global investment can bring capital, technical expertise and manufacturing know-how into India's semiconductor ecosystem.

• Domestic manufacturing ecosystem: ISM aims to develop an integrated ecosystem covering fabrication, packaging, testing, design and associated supply chains, thereby improving technological sovereignty and supply-chain resilience.
  • Example: Developing fabs alongside ATMP/OSAT and design capabilities reduces dependence on a fragmented external supply chain.

• Strategic partnerships: India is pursuing international cooperation, including the Quad Semiconductor Supply Chain Initiative, to diversify supply chains and strengthen technological partnerships.
  • Example: Cooperation with Australia, Japan and the United States can help strengthen and diversify semiconductor supply chains.