As semiconductors are a capital-intensive business, fab plants cannot achieve scale if they focus only on domestic demand. To scale effectively and compete globally, however, they require robust local infrastructure in addition to the Centre’s financial muscle
The Union finance ministry has approved a budget proposal to spend Rs 1.25 lakh crore for the India Semiconductor Mission (ISM) 2.0, which is more ambitious than the first phase in both outlay and goals. Under this phase, the government seeks to boost self-reliance in the entire semiconductor value chain, spanning chip design, fabrication and packaging.
Currently, India imports over 90 per cent of its semiconductor requirements — worth up to $45 billion — from global supply chains in countries like Taiwan, South Korea, China, Singapore, and the United States. As the country shifts towards greater digitalisation over the next 10 years, the value of semiconductor imports is expected to touch $300 billion, which would be more than the total foreign exchange that India is expected to spend on crude oil imports.
India faces a unique dichotomy in the semiconductor space: While 20 per cent of semiconductor designers across the world are Indians, the country does not have a single world-class domestic fab plant. One of the reasons is the high capital expenditure and the lack of the necessary ecosystem to support such a facility. However, companies began to show interest after the government offered to fund 50 per cent of the cost.
Despite the total public-plus-private investment pipeline generated under ISM 1.0, the country could attract only one semiconductor fabrication unit — being set up by Tata Electronics at Dholera, Gujarat, in partnership with Taiwan’s PSMC — to manufacture mature legacy nodes (28nm to 90nm), which are used in automotive electronics, power management, and consumer appliances.
As semiconductors are a capital-intensive business, fab plants cannot achieve scale if they focus only on domestic demand. To scale effectively and compete globally, however, they require robust local infrastructure in addition to the Centre’s financial muscle. The Central government, therefore, should encourage states — which proved critical in India’s emergence as a software power — to play an active role in attracting them to the country.
