India’s evolution as Electronics Manufacturing Hub
Semiconductors and displays are the foundation of modern electronics that will drive the next phase of digital transformation under Industry 4.0. Couple of favourable factors for India in this challenging industry are talented manpower and now a clarity of vision of policy framers. Indian origin engineers and scientists make upto 20 percent of global talent pool of this complex and tech-challenging industry. In terms of policy, what seems to have changed now is that there is a focused engagement of SMEs into this domain.
India recently announced the ambitious PLI scheme for semiconductor and display board production in the country and also passed approval of Rs. 2,30,000 crore to make India the global hub for electronics manufacturing (with semiconductors being the foundational building block). The initiative will assist firms engaged in silicon semiconductor companies (also known as fab), display fabs, sensor fabs, silicon photonics, semiconductor packaging & design, etc. through incentives & other provisions. Under the scheme, the cabinet cleared Rs 76,000 crore for semiconductor production and will also allow setting up of more than 20 semiconductor design, components manufacturing and display fabrication (fab) units over the next six years. Such a subsidy is expected to drastically bring down the cost of production and encourage more players across the country to set up semiconductors producing and related facilities. With several countries including the US, Taiwan, South Korea and Japan trying to leverage the opportunity created by the fast-growing global demand for semiconductors, India is also aiming to grab a slice of the $500-billion business (2021-22).
Domestic semiconductor consumption has been consistently growing at a healthy rate and need of the hour is accelerated progress on setting up chip manufacturing companies. In addition to meeting the challenges of technical complexity, Investment requirement is huge for any semiconductor fab unit. Electronic sector is one of the domains where 100% FDI is allowed under automatic route. Chipmakers are likely to get support beyond normal PLIs if they are really committed to India.
So far India manufacture chips for defence and space research at fab present within IISc, SCL Mohali, and few others places. Large scale manufacturing for consumer electronics and other high tech industries though is altogether a different ball-game. Technical complexity of the domain, Huge Investment requirements, availability of purest form of silica (raw material), very stringent cleanliness requirements at manufacturing site as well as huge water and uninterrupted power supply needs of this industry pose real challenge for India to match the competition of Taiwan, South Korea and China.