India and Semiconductor Industry
Semiconductors are materials that have electrical conductivity between conductors (generally metals) and non-conductors or insulators (such as ceramics, wood, cloth etc). They are typically crystalline in structure and are made of materials such as silicon, germanium, or gallium arsenide. They are generally insulators, but in certain special conditions they behave as conductors. This unique electrical property of the materials makes them essential in the production of electronic devices, such as transistors, diodes, and integrated circuits (ICs), which are used in everything from computers and smart phones to automobiles and medical equipment. In a semiconductor, the ability of electrons to move through the material and conduct electricity is influenced by the presence of impurities, called dopants, which are intentionally added to the material during the manufacturing process.
It would not be wrong to say that semiconductors are an indispensable part of our lives today. This is because semiconductor chips are an integral and non-negotiable part of various entities, ranging from automobiles to electronic goods that we use in our daily lives. The tiny electronic chips (integrated circuits) are being used in everything tech today. From electronics to healthcare, multiple industries are dependent on these chips such as smart phones, computers, tablets, laptops, televisions, gaming consoles, and other personal devices that require semiconductors for processing, memory, and connectivity. The aerospace and defense industries rely on semiconductors for avionics, navigation systems, radar, communication systems, and other critical applications. Medical devices such as MRI machines, pacemakers, insulin pumps, and digital thermometers all use semiconductors for their processing, memory, and sensors. Semiconductors are also used in a wide range of industrial applications, including robotics, automation, sensors, and control systems. Communication networks, including wireless and wired networks, use semiconductors in their infrastructure and in devices such as routers, modems, and switches. Moreover, rapid developments in the capacity for intelligent computing and growth of artificial intelligence (AI) in these applications and related industries has further expanded the dependency on semiconductors.
The semiconductor industry is growing every year almost according to “Moore’s Law,” which states that the number of transistors on a microchip is doubling every two years. According to Fortune business insights, the global semiconductor market was projected to grow from $573.44 billion in 2022 to $1,380.79 billion by 2029, at a compound annual growth rate (CAGR) of 12.2 per cent in the forecast period, 2022-2029. In addition, the semiconductor industry is a major contributor to the global economy, employing millions of people and generating billions of dollars in revenue each year.
The US dominates the semiconductor market with a 46 per cent market share. South Korea came in second with a 21 per cent share and Japan and the European Union was in third place with 9 per cent market shares, each. The US firms had also commanded half of the Chinese market, which was the largest in the world and worth $192.4 billion. The ongoing trade war between the US and China forced the American companies moving their units from China to elsewhere. The U.S. passed the CHIPS Act last August, providing upwards of $280 billion in subsidies and investments to manufacturers making semiconductors in the U.S.
Semiconductor fabrication units, also known as fabs, turn raw elements such as silicon into integrated circuits that are fit to be a part of practically all electronic hardware in the world. The establishment of semiconductor units is a highly specialized, intricate, and costly undertaking. Fabs require sophisticated technology, involve significant risks, and demand substantial time and financial investments before yielding returns. They require highly reliable and high-quality supply of water and electricity. Japan has highest number of fabs (107) in the world followed by Taiwan (77), US (76), China (70) and Germany (20).
According to the India Electronics and Semiconductor Association (IESA), in 2021, the Indian semiconductor market reached a valuation of USD 27.2 billion, and it is projected to experience a robust compound annual growth rate (CAGR) of approximately 19 percent, reaching USD 64 billion by 2026. However, despite this growth, India has yet to establish its own semiconductor manufacturing capabilities. It imports around ₹3 lakh crore semiconductors annually from different countries.
India Semiconductor Mission (ISM) has been formed to establish semiconductor factory in the country. India is gearing up to become global semiconductor hub within 10 years. India has earmarked 20,000 MW of energy for sustainable semiconductor manufacturing. 106 Indian universities are already offering courses on semiconductors. A large part of semiconductor manufacturing involves design and intellectual labour. India has an advantage here, as a large portion of semiconductor design engineers globally are either Indian or Indian-origin.
Prime Minister of India during his official visit to the USA in June this year has invited American chip maker Micron Technology to establish semiconductor factory in India. On June 21, the cabinet had also sanctioned production-linked incentives worth 110 billion rupees ($1.34 billion) for Micron Technology for a chip assembling and testing unit, which is slated to be constructed in Gujarat. It was confirmed recently that Micron Technology, Inc, will spend more than $800 million on a new $2.75 billion semiconductor assembly and test plant in India, with funding from the Semiconductor Mission in the next five years. The company will employ a workforce of 5,000 and create an additional 15,000 community jobs over the same period of time.
Applied Materials has also announced that it would establish a Semiconductor Centre for Commercialization and Innovation in India to diversify the countries’ semiconductor supply chains. This will include a gross incremental investment of $400 million over four years.
It was also announced that Lam Research, a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry, will train 60,000 Indian engineers as part of its “Semiverse Solution” to help the country meet its semiconductor education and workforce development objectives.
The SRAM & MRAM Technologies and Projects India Pvt Limited, the Indian unit of UK-based SRAM & MRAM Group, had signed a memorandum of understanding (MoU) with the state government on March 26 to set up the semiconductor unit in the Ganjam district of Odisha. It will invest ₹30,000 crore and aims to provide direct employment to 5,000 people. The semiconductor unit will produce memory chips, used in mobile phones, television sets, laptops, air conditioners and ATMs. With the interests taken by multinational companies to establish semiconductor factories in India and the initiatives taken by the government, India will definitely be a hub for the semiconductor industry.
