“The government is committed to supporting establishing the
Semiconductor Industry in the country which will also help in reducing foreign exchange outflows,” Union Minister, Piyush Goyal said on August 19, 2021.
Microprocessor chips, which is the brain behind computing in modern electronic appliances, and the central component in any
electronics are produced/manufactured in high-technology units known as the semiconductor fabrication units of the FAB units.
A shortage in these semiconductors not just affects the automobile industry but the complete consumer electronics industry as well, unfortunately. Operations at major mobile phone manufacturers such as Lava and Micromax who are trying to make a great comeback in the smartphone market have almost stumbled to a stop owing to a shortage of chipset supplies from Media Tek – a Taiwanese firm.
The aforementioned instances show how the Indian electronic industry has a heavy dependence on imported components. Therefore, the industry bought components worth USD 50 billion in 2019 from other countries. Knowing about the dangers of such huge import reliance, the government of India has rolled out PLI schemes in order to boost the manufacturing of a host of these components in India.
However, the most crucial component here is chips, which is the central element of any and every electronics item. The country has negligible semiconductor production. As the industry grows significantly – the market is assured to grow twice in figure and reach over USD 500 billion by the year 2025. This is because smart devices have become inherent to a group of various other industries such as autonomous/electric cars for instance and the demand for chips will increase multiple times.
Challenges
Huge Investments, Natural Resources & Highly Skilled Manpower
“Semiconductor manufacturing not only requires huge investments, and natural resources but it also requires highly skilled manpower. In India, we are deficient in all these due to which no significant semiconductor manufacturing is happening," says Sanjeev Agarwal, Chief Manufacturing Officer at Lava Mobiles. "The government will have to come up with policies which can overcome these deficiencies. This may require co-investment in the beginning. Local manufacturing of semiconductors like processor,
memory, etc., which are major constituents of mobile phones and other electronic products, will play a major role in making us Atmanirbhar."
Driving Factors
While there is a surge in demand for electronic devices, globally, the Indian electronics and semiconductor industry also predicts the outlook to remain bright in this financial year. Furthermore, the PLI scheme offering tailored incentives for players in the semiconductor industry acts as a huge boost that is anticipated for both chip manufacturing and electronic component as well as equipment manufacturing in India. Owing to the COVID-19 pandemic, the Indian Electronics and Semiconductor Association anticipates a higher growth this financial year since there has been a surge in demand for electronics devices as well as digital services has increased.
Indian Government to support building the Semiconductor Industry
In an event organized by the commerce industry, the union minister stated that “Creating the semiconductor industry and strengthening the shipping industry will help push the ‘Aatmanirbhar’ or self-reliance initiative of the government.”
"There is a worldwide shortage of semiconductors and the government is very much focused on bringing the semiconductor industry to India... the government is committed to supporting both these sectors," Piyush Goyal, specifying that the other sector to be supported is the shipping industry.
The commerce and Industry stated that after Tata Group made the announcement of its plan to get into the semiconductor industry, amidst a great shortage of semiconductors globally which has also begun to impact numerous other industries.
N Chandrasekaran, the Chairman of Tata Sons, recently made an announcement that the conglomerate is considering the production of critical components in the semiconductor sector. Also, the Tata Son’s auto business is facing a shortage of semiconductors.
On August 19th, the union minister also hoped that “large corporates” will be showing interest in the shipping industry, which would provide the right momentum to the important industry for India’s foreign trade.
The Road Ahead
Demand for semiconductors in the country is mainly owing to the result of the growing smartphone market. The Indian smartphone market is the 2nd largest in the world and India exported around 145 million smartphones in the year 2020. Also, the demand for PCs and laptops increased last year owing to WFH and education from home use cases.
Prakash Mallya, vice president and managing director, sales, marketing, and communications group, Intel Technology India Pvt. Ltd said the country’s “trajectory for all forms of semiconductor devices" is enormous.
“And, I am not talking about cloud, data center, storage, edge, 5G. If you put all that into such a large market like India, it’s a significant semiconductor, plus overall infrastructure opportunity," Mallya added in an interview with Mint.
The Central government’s plan for promoting semiconductor production is predicted to have a great future. According to sources, the Government of India has been working to bolster semiconductor manufacturing. Also, it will provide USD 1 billion in cash to every individual firm that will set up semi-conductor manufacturing units, as per a March report by Reuters.
Therefore, with the PLI scheme set to drive the semiconductor space, the outlook for this financial year is bright and the requirement for electronics will not decrease, according to the chairman of IESA.
