Semiconductor and electronics manufacturing industry in India

In News

• The 25th edition of Bengaluru Technology Summit, Karnataka’s annual tech exposition was recently attended by the Union Minister of State for Electronics and Information Technology.
  • He highlighted the potential of India’s Semiconductor and electronics manufacturing industry.

Potencial of the Semiconductor and electronics sector in India

• India has a great scope to emerge as a sizable player in electronics and semiconductor products manufacturing as part of China-plus-one diversification strategy.
  • China Plus One

• The strategy is also known simply as Plus One, is the business strategy to avoid investing only in China and diversify business into other countries. 
• For the last 20 years, western companies have invested in China, drawn in by their low production costs, and enormous domestic consumer markets.

• Growth:
  • The country’s electronics and semiconductor products manufacturing sector has witnessed a quantum growth in the last almost a decade. 
  • Import & manufacturing:
    • In 2014 some 92% of the mobile devices sold in the country were imported while in 2022 some 97% of mobile devices were manufactured in the country. 
  • Potential:
    • In 2014, the country’s electronics ecosystem that comprises manufacturing, designing, innovation and production pegged $10 billion, and in 2022 it grew to $75 billion and expected to cross $300 billion by 2025-26.
  • FDI in the sector:
    • Electronics and semiconductor sector captured 66% of the FDI that came to India in the last three years.
• Sector specific production:
  • The electronic devices industry is segmented as Mobile Phones (24%), Consumer Electronics (22%), Strategic Electronics (12%), Computer Hardware (7%), LEDs (2%) and Industrial Electronics (34%) comprising Auto, Medical and other industrial electronic products.
• Demand:
  • Technology transitions such as the rollout of 5G networks and IoT are driving the accelerated adoption of electronics products. 
  • Initiatives such as ‘Digital India’ and ‘Smart City’ projects have raised the demand for IoT in the electronics devices market and will undoubtedly usher in a new era for electronic products.

Challenges

• China’s monopoly in the sector:
  • Elaborating on the opportunities for India currently, he said electronics and semiconductor products today was a $1.5 trillion industry with China solely accounting for almost 75% of it and having enjoyed a monopoly in the sector for over two decades now.
• India as a part of Global Value Chains (GVCs):
  • India is hopeful of becoming part of Global Value Chains (GVCs) for logic semiconductors, chip sets and other electronic products, said the Minister.
    • Chip shortages:
      • However, the pandemic has brought tectonic changes in the global electronics and semiconductor industry and they triggered huge chip shortages and a shift in GVCs.
• Chip production is a resource-intensive and expensive process
• Lagging-edge vs cutting-edge technology:

• Water intensive:Chip-making also requires gallons of ultrapure water in a single day. 
• Power supply issues 

Initiatives taken by Government

• India Semiconductor Mission
• Semicon India programme
• Production Linked Incentive scheme

Conclusion and Way Ahead 

• India must seize the opportunity and become an attractive alternative destination for semiconductor manufacturing.
• Government policies should also focus on assuring and securing access to foreign technology suppliers through trade and foreign policy to ensure a global level of collaboration.
•  The initial funding should focus on areas like design and R&D, for which India already has an established talent pool.