In a recent move, the Indian government has pledged a total of Rs. 2,30,000 crore ($30 billion) to establish India as a global powerhouse for electronics manufacturing, with semiconductors serving as the cornerstone. Adding on, the government has decided to set up the Indian Semiconductor Mission (ISM) - will act as the nodal agency for efficient implementation of schemes on semiconductors and display ecosystem. The agency will be led by global experts in the semiconductor and display industry.  

The decision is in line with the self-reliant goal as India's semiconductor consumption is increasing at a 15% annual rate, attributable to the country's developing electronics manufacturing industry. Further to that, artificial intelligence permeates the entire Industry 4.0 ecosystem and semiconductors being the lifeforce of the ongoing tech revolution have become strategic resources for countries to stay ahead in their race for digital dominance.  

Clearing the roadblocks 

Till now, India has excelled in chip design and electronics manufacture, however, establishing Semiconductor Wafer Fabrication (FAB) units in the country has long been a challenge and multiple factors can be attributed. From lack of allocated resources in the country to stiff competition from neighbouring countries such as China and Vietnam which have become the preferred destinations for global chip manufacturers due to their cost-efficiency. 

To that end, the scheme for setting up of Semiconductor Fabs and Display Fabs in India with extended fiscal support of up to 50% of project cost on a pari-passu basis to applicants who are found eligible and have the technology as well as capacity to execute such highly capital intensive and resource incentive projects are noteworthy. To set up at least two greenfield Semiconductor Fabs and two Display Fabs in the country, the Government of India will work closely with the state governments. The aim is to establish High-Tech Clusters with requisite infrastructure in terms of land, high-quality power, semiconductor grade water, logistics and research ecosystem. 

What holds the key for AI leadership – Semiconductors! 

Lessons need to be learnt from the recent “chip shortage” or “chip crisis” the world has witnessed amid the pandemic. The entire supply-chain disruptions and the excessive reliance on a handful of countries for one’s own market needs was a shocking alarm. Moreover, for a country like India, where AI has the potential to add US$957 billion, or 15 per cent of India’s current gross value in 2035 - missing the semiconductor race will not just be a costly affair but against the call for ‘Aatmanirbhar Bharat’. 

Consider for instance where the National Security Commission on Artificial Intelligence of the United States released a paper arguing that in order to stay ahead of AI competitors, the country needs to safeguard domestic semiconductor chip manufacturing. Further to this, China is already building an indigenous chip programme to use local semiconductors in 70% of its products, up from the current 16 per cent by 2025. It will not be an exaggeration to point to semiconductor manufacturing as a strategic necessity for India. 

For the better part of the last decade, the semiconductor industry has been heavily reliant on the smartphone and mobile device markets. As the smartphone market begins to plateau, the enormous demand from both the public and private sectors, and AI applications, particularly in the fields of big data, industrial robotics and autonomous vehicles - the ground is fertile enough for the semiconductor industry to put their next big-bet. With the rolling out of a robust plan of action and the commitment to infuse massive funding, the government seems keen to encash the visible opportunities. 

To conclude, it seems clear to me “whosoever controls the semiconductor market will control the AI domain,” and the Indian government is stepping up its efforts in every manner possible to boost the country's semiconductor manufacturing industry. 

Image from Unsplash