Q. India aims to become a semiconductor manufacturing hub. What are the challenges faced by the semiconductor industry in India? Mention the salient features of the India Semiconductor Mission.

Model Answer:

India envisions becoming a global semiconductor hub to ensure strategic digital autonomy and capture a share of the $500 billion global market, transitioning from import-dependence to indigenous manufacturing.

1. Challenges Faced by the Semiconductor Industry in India

• High Capital Outlay: Fabs require massive upfront investment (often $10B+) and endure 4–5 year gestation periods.
• Resource Intensity: Manufacturing demands uninterrupted, high-capacity power and millions of gallons of ultra-pure water daily.
• Technological Complexity: India currently lacks indigenous Intellectual Property (IP) and R&D maturity in advanced node engineering.
• Raw Material Dependency: Over-reliance on imports for critical inputs like neon gas, rare earth elements, and specialized chemicals.
• Skilled Talent Deficit: Acute shortage of specialized fabrication and metallurgical engineers, despite a strong VLSI design workforce.
• Fierce Global Competition: Competing against established, highly subsidized global ecosystems (US CHIPS Act, Taiwan, South Korea).
• Ancillary Ecosystem Void: Absence of a robust domestic supply chain for specialized equipment delays end-to-end production.

2. Salient Features of the India Semiconductor Mission (ISM)

• Massive Financial Outlay: Dedicated ₹76,000 crore ($10B) comprehensive package to catalyze the ecosystem.
• Pari-Passu Fiscal Support: Flat 50% financial support of project cost for setting up Semiconductor and Display Fabs.
• OSAT/ATMP Incentives: 50% capital expenditure support for Assembly, Testing, Marking, and Packaging facilities (Micron’s ATMP facility, Sanand).
• Design Linked Incentive (DLI): Financial incentives up to 50% of eligible expenditure for domestic semiconductor design and IP creation.
• Node-Agnostic Approach: Pragmatic support spanning mature nodes (28nm+) crucial for automotive/telecom sectors (Tata-PSMC Dholera Fab).
• Autonomous Nodal Agency: ISM operates as an independent division under Digital India Corporation to appraise and negotiate proposals.
• SCL Modernization: Focused upgradation of the Semi-Conductor Laboratory (SCL), Mohali, for advanced R&D and commercial prototyping.

By aggressively bridging infrastructure deficits and leveraging ISM’s targeted incentives, India can successfully pivot from a passive chip consumer to a resilient node in the global semiconductor value chain.