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Electronics & Semiconductor Manufacturing in India

2024 FEB 26

Mains   > Industry and infrastructure   >   Industrial Policies   >   Industry 4.0

Syllabus: GS 3> Industry and infrastructure   >   Industrial Policies 


  • Minister of State for Electronics and IT Rajeev Chandrasekhar recently confirmed that Tata Group and Tower Semiconductor have submitted separate proposals to set up semiconductor foundries in India. These proposals represent a combined investment of about USD 22 billion. 


  • Tower Semiconductor aims to establish a plant with the capability to produce chips with technology nodes of 65 nm, 40 nm, and 28 nm, with an investment of USD8 billion. The Tata Group's proposal is in collaboration with either Taiwan-based United Microelectronics Corporation (UMC) or Powerchip Semiconductor Manufacturing Corporation (PSMC).
  • India is competing with some of its key allies – the US and Europe – to attract chipmakers. It is offering a 50% capital expenditure subsidy to successful applicants at the central level under its USD 10 billion incentive scheme. Additionally, state governments are offering extra incentives to further enhance the appeal of establishing operations within their jurisdictions.
  • If the proposals are cleared by the government’s India Semiconductor Mission (ISM), it could pave the way for the country to finally have a fabrication plant after decades of failed attempts.


  • A semiconductor material has an electrical conductivity value falling between that of a conductor, such as metallic copper, and an insulator, such as glass. Common elemental semiconductors are silicon and germanium.
  • Chipsets are the most commonly used semiconductor component. A chipset is a group of integrated circuits that control the flow of data and instructions between the central processing unit (CPU) and external devices.
  • Their design and development occur in various stages:
    • wafer is designed and manufactured in wafer fabrication (FAB) units, also called foundries, by companies as per the requirements of chip manufacturers like Samsung and Qualcomm.
    • The chipmakers then package, test and sell the chips to equipment manufacturers such as Xiaomi and Cisco.
  • End-use industries that depend on semiconductors include mobile and telecommunication devices, industrial machinery, automobiles, automation (workplace, healthcare, manufacturing etc.), the Internet of Things (IoT) and other industries that have applications for computing in some form or other.


  • The current production of electronic components in India is valued at USD 11 billion and is expected to reach USD 18 billion by FY 26.(Source: Invest India)
  • The Indian semiconductor market, which is valued at approximately USD 23.2 billion and is projected to reach USD 80.3 billion by 2028, is growing at a compound annual growth rate (CAGR) of 17.10%.(Source: Invest India)
  • India has the requisite expertise in software and chip design. Yet, India lags in the establishment of semiconductor wafer fabrication (FAB) units.


  • Boost domestic manufacturing and Supply Chain Resilience:
    • India seeks to become self-reliant in manufacturing capabilities under Atmanirbhar Bharat and aims to emerge as a global hub for electronic system design and manufacturing.
    • For instance, the COVID-19 pandemic highlighted the vulnerabilities in global supply chains, particularly in the semiconductor industry. By enhancing domestic manufacturing capabilities, the country can reduce its dependence on international suppliers, thereby improving supply chain resilience against global disruptions.
  • Attract investment:
    • Through efforts like globally competitive incentive package to companies, the government hopes to attract large global chip makers to make India their production base.
  • Employment generation:
    • In the era of industry 4.0, a strong domestic electronics industry will create highly skilled employment opportunities to harness the demographic dividend of the country.
  • Reap benefits of chip shortage:
    • The world has been reeling under the shortage of semiconductor chips affecting production targets across almost all industries. If the recent policies can lure some of the fabrication units, it would go a big way in making our country self-reliant.
  • Strategic significance:
    • Manufacturing and supply capability are concentrated in few countries like Taiwan, South Korea, U.S., Japan and China. Any geopolitical tension can disrupt the supply chain and adversely affect India.
    • Eg: Taiwan is the world’s leading chip producer and its growing tension with mainland China can impact India’s import. Here, attaining self sufficiency can alleviate any threat of Chinese aggression.
  • National Security:
    • Semiconductors are critical for defense technologies. Having a domestic supply of these components ensures that a country's security apparatus is not dependent on potentially unreliable foreign sources, thus enhancing national security.
  • Technological Sovereignty:
    • Control over semiconductor technology and manufacturing is synonymous with technological sovereignty. It allows countries to set their own standards and regulations, ensuring that they are not beholden to foreign entities for critical technologies.
  • R&D Ecosystem Development:
    • A strong semiconductor manufacturing sector fosters a vibrant ecosystem of research and development, attracting talent and investments in cutting-edge technology areas.
    • Silicon Valley in the United States exemplifies how a strong semiconductor industry can foster a vibrant ecosystem of research and development.
  • Economic Diversification:
    • Investing in the electronics and semiconductor manufacturing sectors helps diversify a country's economy. It reduces reliance on traditional industries and can pave the way for sustainable economic growth by tapping into the rapidly growing tech industry.
    • For instance, Taiwan's economy illustrates the benefits of economic diversification through its semiconductor industry.
  • Promote circular economy:
    • A circular electronics system - one in which resources are re-used in countless ways creates a sustainable system and improves cost effectiveness of the industry. The development of such a system requires reliable domestic manufacturing capability.


  • Capital intensive industry:
    • A semiconductor fabrication facility can cost multiples of a billion dollars to set up even on a relatively small scale. They also have high operating costs and need frequent technology replacement. This makes it a viable industry for only a few corporate giants.
  • Power demand:
    • Chip fabs require extremely stable power supply. But this is a challenge in India.
    • Eg: India recorded a power supply shortage of 1,201 million units in October 2021 — the highest in 5.5 years — due to coal shortage in thermal plants.
  • Concerns over water use:
    • Semiconductor manufacturing requires large volumes of ultra-pure water to avoid the contamination of electronic devices. For a water stressed country like India, such levels of water usage are unsustainable. 
    • Eg: Taiwan Semiconductor Manufacturing Company uses around 60 liters of water per layer of chip and the recent severe drought in Taiwan has affected production.
  • Stiff competition:
    • India has a weak ecosystem and shortage of resources as compared to more competitive bases like China and Vietnam. Hence, it would require immense government support to attract the industries to the country.
  • Challenges and Previous Attempts:
    • Previous attempts to establish semiconductor fabrication facilities in India faced challenges. Notably, a joint venture between Foxconn and Vedanta, aimed at setting up a USD 19.5 billion chip plant, was dissolved
    • Additionally, Tower Semiconductor's initial proposal for a USD 3 billion plant in Karnataka was stalled due to its then impending merger with Intel, which was eventually cancelled due to regulatory hurdles.
  • Environmental concerns:


  • India Semiconductor Mission(ISM)
    • India Semiconductor Mission (ISM) has been setup as an Independent Business Division within Digital India Corporation. 
Digital India Corporation has been set up by the Ministry of Electronics & Information Technology, Government of India, to innovate, develop and deploy ICT and other emerging technologies for the benefit of the common man. It is a ‘not for profit’ Company under Section 8 of the Companies Act 2013. The Company has been spearheading the Digital India programme of the Government of India, and is involved in promoting use of technology for eGovernance/ e-Health / Telemedicine, e-agriculture, e-Payments etc
  • ISM has all the administrative and financial powers and is tasked with the responsibility of catalysing the India Semiconductor ecosystem in manufacturing, packaging and design.  
  • ISM has been working as nodal agency for the Schemes approved under Semicon India Programme. The applications were received by ISM and are being appraised by ISM. ISM has also been engaging with various stakeholders of Semiconductors and Display ecosystem to attract the investments in India.
  • Semicon India Programme:
    • The government has approved the Semicon India programme with a total outlay of INR 76,000 crore for the development of semiconductor and display manufacturing ecosystems in the country.
    • The following four schemes have been introduced under the programme:
  1. Modified Scheme for setting up of Semiconductor Fabs in India.
  2. Modified Scheme for setting up of Display Fabs in India.
  3. Modified Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab / Discrete Semiconductors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / OSAT facilities in India.
  4. Semicon India Future Design: Design Linked Incentive (DLI) Scheme.
  • National Policy on Electronics 2019 (NPE 2019):
    • The National Policy on Electronics 2019 (NPE 2019) aims to establish India as a global hub for Electronics System Design and Manufacturing (ESDM). Key highlights include:
  • Creating a competitive ESDM sector ecosystem.
  • Offering incentives for core electronic components manufacturing and mega projects like semiconductor and display fabs.
  • Developing schemes for new and existing unit expansion.
  • Encouraging industry-led R&D and innovation across electronics sub-sectors.
  • Enhancing skilled manpower availability through incentives and re-skilling.
  • Focusing on the Fabless Chip Design, Medical Electronics, Automotive Electronics, and Strategic Electronics industries.
  • Establishing a Sovereign Patent Fund (SPF) for IP development and acquisition in ESDM.
  • Promoting trusted electronics value chain initiatives to bolster national cyber security.
  • PLI Scheme for Large Scale Electronics Manufacturing:
  • Under the scheme, electronic manufacturing companies will get an incentive of 4 to 6% on incremental sales (over base year) of goods manufactured in India and covered under target segments, to eligible companies over a period of next 5 years.
  • scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS):
  • Under the scheme, a financial incentive of 25% of capital expenditure has been approved by the Union Cabinet for the manufacturing of goods that constitute the supply chain of an electronic product.
  • Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme:
  • The scheme will provide financial assistance up to 50% of the project cost subject to a ceiling of Rs 70 crore per 100 acres of land for setting up of Electronics Manufacturing Cluster projects.


  • Fast-track Approvals: Expedite government approvals for semiconductor projects to maintain momentum and interest from global players.
  • Infrastructure Development: Focus on building requisite infrastructure such as stable power supply, water availability, and logistics to support semiconductor manufacturing.
  • Skill Development: Invest in specialized training programs to create a skilled workforce capable of meeting the demands of the semiconductor industry.
  • R&D Support: Increase funding and support for research and development in semiconductor technology to foster innovation and reduce dependence on foreign tech.
  • Partnerships and Alliances: Encourage joint ventures and partnerships between Indian companies and global semiconductor leaders to transfer knowledge and technology.
  • Sustainability and E-Waste Management: Implement sustainable practices in manufacturing and waste management to address environmental impacts.
  • Global Supply Chain Integration: Position India as a key player in the global semiconductor supply chain through strategic partnerships and trade agreements.

Top of Form


  • India's effort to develop its own semiconductor and display industry aligns with the growing importance of electronics in daily life. By focusing on indigenous capabilities and sustainable growth, India aims to become a key player in the global semiconductor supply chain. This is crucial not only for economic growth but also for enhancing India's strategic position in the technology sector, which is both highly competitive and geopolitically sensitive.


Q. Discuss the significance of electronics and semiconductor manufacturing for India, and what efforts has the government made to promote this sector? (15 marks, 250 words)

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