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Prospects and Realities: India's Path to becoming a Semiconductor Superpower

In an era driven by technological innovation and digital transformation, semiconductors have become the bedrock of modern economies. The demand for these tiny electronic components has surged exponentially, underpinning critical sectors such as telecommunications, automotive, healthcare, and consumer electronics. Recognizing the strategic importance of a robust semiconductor industry, India is fervently striving to emerge as a semiconductor superpower.

Reasons for India's ambition to become a semiconductor superpower

Semiconductors form the backbone of nearly every contemporary device, ranging from smartphones to sophisticated defense systems, not to mention cutting-edge artificial intelligence-powered machinery. However, the production of chips, a pinnacle in advanced technology, is limited to a select few nations.

Over the past couple of years, since the emergence of the COVID-19 pandemic, worldwide chip scarcity has persisted. Typically, such cyclic shortages endure for a year at most, but the ongoing one is projected to persist until early 2024. The genesis of this shortage traces back to the pandemic's onset, wherein automobile manufacturers reduced their orders for these chips in response to declining sales. Additionally, the shift to remote work for many employees escalated the necessity for digital devices. This surge in demand extended beyond phones to various electronic products like PlayStations, as individuals increasingly spent their time indoors during the lockdown.

Another reason is that it would reduce the country's reliance on imported semiconductors. “The current demand for semiconductors in India is around $24 billion, which is met entirely through imports. This demand is expected to reach $100 billion by 2025,” Chandranath Dey, India Head of operations  and business development at JLL, told Forbes.

Moreover, the rise of the Internet of Things (IoT), artificial intelligence (AI), 5G, and electric vehicles (EVs) has propelled the demand for semiconductors worldwide.

 Steps taken by India in this regard

India has made significant progress in its efforts to become a semiconductor superpower in recent years. Firstly, the first semiconductor manufacturing facility in India is expected to start production in 2024. This facility is being built by a consortium of Indian companies led by Anil Agarwal’s Vedanta in Dholera, Gujarat.

The facility is expected to produce 28-nanometer chips, which are used in several products, such as smartphones, laptops, and televisions.

Secondly, India is investing heavily in research, development, and infrastructure. In recent years, the Indian government has launched several initiatives to promote the development of the semiconductor industry in the country. Incentives such as production-linked incentive (PLI) and design-linked incentive (DLI) schemes have been designed to support companies' set up semiconductor manufacturing facilities in India. Additionally, tax benefits and eased regulations are being offered to attract investments in the sector.

Challenges faced by India

Despite India’s progress, there are still several challenges that the country faces in its quest to become a semiconductor superpower. One of them is the high cost for setting up semiconductor manufacturing facilities. Semiconductor manufacturing is a capital-intensive industry, and it requires a significant investment to set up a new fabrication plant.

India's quest to emerge as a semiconductor superpower is an essential step toward achieving technological independence and global competitiveness. The semiconductor industry not only fuels technological advancements but also drives economic growth and job creation. By investing in research, fostering collaborations, and incentivizing domestic production, India is laying a strong foundation to realize its semiconductor ambitions and position itself prominently on the global technological stage.

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