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The second edition of Semicon India, the annual conference by India Semiconductor Mission (ISM), comes at a critical time. The global semiconductor industry is going through changes forced by rapidly advancing technologies, evolving supply chains and a shifting geopolitical landscape. This conference will further the remarkable progress made in Indian semiconductor design and manufacturing, reflecting a clear vision — nurturing a thriving domestic ecosystem to ensure self-sufficiency and make India a key player in the global semiconductor value chain. The government recognises the economic and geopolitical significance of this industry and its vision is now matched with concrete action. It is actively engaging with the industry and committing to unprecedented fiscal support. It is evident that India has resolved to not miss the “semiconductor” bus again. Instead, in this decade, it will lay down the foundation of a robust global semiconductor industry.
India’s journey in the field is sadly littered with some missed opportunities. From missing out on the Fairchild Semiconductor fab (manufacturing plant) in the 60s to regulatory and bureaucratic hurdles hindering a global semiconductor company’s interest in the mid-2000s, to then missing out on Intel’s global expansion in the late 2000s to Vietnam — India repeatedly missed the bus due to opacity of the then government’s functioning, inordinate delays in articulating a vision and drafting a formal policy on semiconductor manufacturing.
Despite a promising start by public sector undertakings in this sector, India failed to capitalise on the immense potential demonstrated in the early days. Bharat Electronics Ltd (BEL) and some other labs and institutions were not able to achieve the volume needed for competitiveness, nor did they have the state-of-the-art technology to be a leader in the industry. India’s major VLSI fabrication plant at the Semiconductor Complex Limited in Chandigarh started production well before Taiwan’s foray into semiconductor manufacturing. But, after a massive fire in 1989, it remained shut for many years. The inability of successive governments to swiftly restart operations at SCL is a stark reminder of how a lack of strategic vision and policy failure prevented India from keeping up with the leading semiconductor nations.
These missed opportunities have proved to be immensely costly for India in the age of digitalisation, as we have remained heavily dependent on imports for semiconductor and electronic products. This reality highlights the strategic importance of the mammoth task that the government led by Prime Minister Narendra Modi has set out to achieve through the India Semiconductor Mission (ISM). Unlike other industries, where programmes like Production Linked Incentives bolster existing domestic industries, the semiconductor industry is being built almost entirely from scratch.
In the fast-paced industry, countries seldom get a second chance. However, with the ISM, India has instilled confidence in its capability among global semiconductor giants at a time when the industry is facing headwinds. Today, industry-leading semiconductor companies realise that India not only has complete clarity on the need for a domestic ecosystem but is also willing to extend unwavering support and provide a much-needed commitment of resources.
The ISM reflects the Indian government’s understanding that a robust domestic semiconductor ecosystem is vital for bolstering economic growth, safeguarding domestic industry from global disruptions, and ensuring national security. Policymakers in India have understood that the semiconductor industry is a foundational and core industry that directly and indirectly powers the growth of multiple industries and contributes immensely towards job creation. The Government of India identified opportunities from the global semiconductor shortage, which disrupted supply chains across industries globally and realised the urgency of achieving semiconductor self-reliance. Finally, domestic manufacturing is necessary to ensure “digital sovereignty”, a critical aspect of national security in today’s digitally connected world.
The government’s unprecedented commitment to fiscal incentives and regulatory support is the most significant catalyst behind the overwhelming global interest in India as a destination for semiconductor manufacturing. Recognising huge strategic and economic benefits, even major economies and mature ecosystems such as the US and Europe are attempting to attract new investments in semiconductor manufacturing. We are competing with these major economies with one of the best fiscal incentives globally. Critics of such massive outlays and incentives under ISM fail to comprehend that government assistance has always been instrumental in building the semiconductor industry globally. No country, including global giant Taiwan, established a semiconductor ecosystem entirely through private investment. Such is the case even today for mature ecosystems like the US, Germany, and Japan which are increasing incentives and planning outlays to attract and retain future investments. Government policy, incentives and political will are key to success and India is well placed on this commitment today.
The development of this sector requires long-term support. The government has provided impetus across the value chain, starting from semiconductor design to final assembly and test. The first set of startups to be supported through the Design Linked Incentive (DLI) scheme have been selected. Approval has been granted for the modernisation of the Semiconductor Complex Limited (SCL) in Chandigarh to transform it into a brownfield chip manufacturing unit. The government has also signed agreements with the US and Japan for cooperation on semiconductor development, manufacturing, research, design and talent development. The approval of Micron’s proposal to set up semiconductor packaging and testing in the country is a significant step that will be the first of many more global investments in India.
These are testament to the tremendous progress ISM has made in the past 15 months by proactively driving the sector’s growth, learning from the past and preparing for a rebalancing of the global supply chain amid significant geopolitical considerations. The global semiconductor industry is also entering an era where its high energy and water consumption is a concern for the environment and sustainability. This challenge provides an opportunity for India to focus on sustainable semiconductor manufacturing through innovations and investments in green technologies, efficient water and natural resource usage, reduced factory emissions and giving back to communities and society.
The launch of ISM in December 2021 was a momentous and much-needed, critical event in India’s semiconductor journey. The active interest of global giants and leading domestic companies in establishing semiconductor manufacturing facilities in India reflects the programme’s commendable progress. We are confident that in the coming years, the Indian semiconductor industry’s evolution from a virtually non-existent domestic ecosystem to a thriving sector will be a global case study in building sectors from scratch through appropriate policy interventions and political will. Today, India has an opportunity to enter the global value chain with the intention to lead the global race rather than follow it. As Prime Minister Narendra Modi reminded the audience at Semicon 2022, “a New world is forming, and India is seizing the opportunity.”
The writer is former Intel India head and Managing Director and CEO of Invest India
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