Context

• The semiconductor design ecosystem in India is getting stronger day by day. Startups supported under the Ministry of Electronics and IT’s (MeitY) Design Linked Incentive (DLI) Scheme and Chips to Startup (C2S) Programme are now gaining significant traction.

About the News and Schemes

• Netrasemi, a startup supported under the government’s chip design scheme, has received Venture Capital (VC) investment of ₹107 crore. The company is working on making chips for smart vision, CCTV cameras, and Internet of Things (IoT) applications.

Commitment of 234 Crore to Indian Startups

Since the launch of the DLI Scheme in 2022

• Government had committed the support of ₹234 crore for the chip design projects from 22 companies with a total project cost of ₹690 crore
• These chips will be used in CCTV cameras, mobile networks, satellites, cars, smart devices, etc.
• These startups have together raised over ₹380 crore from VC investors
• Five startups have already built and tested their chip designs with global chip manufacturers
• More than 72 companies have been given access to advanced software tools to help them design chips

About Semiconductors

• Semiconductors are materials with electrical properties that fall between those of conductors (like metals) and insulators (like rubber).
• They have a unique ability to conduct electricity under certain conditions while acting as insulators under others.
• They are sometimes referred to as integrated circuits (ICs) or microchips made from pure elements, typically silicon or germanium. 
• In a process called doping, small amounts of impurities are added to these pure elements, causing large changes in the conductivity of the material.
• Applications: Semiconductors are used in a vast range of electronic devices.
• Transistors, which are fundamental components of modern electronic circuits, rely on semiconductor materials. 
• They act as switches or amplifiers in everything from computers to cell phones. 
• Semiconductors are also used in solar cells, LEDs, and integrated circuits.

Semiconductor Market

• Industry estimates place the Indian semiconductor market at approximately $38 billion in 2023, with projections indicating growth to $109 billion by 2030.
• This growth is driven by strong demand and government initiatives like the production-linked incentive scheme. 
• According to a report by the India Electronics and Semiconductor Association and Counterpoint Research, mobile handsets and IT sectors are leading the market by contributing over 75 percent of revenues. 

Focus on Semiconductor Sector: Need for it

• Strategic Significance: Given their importance to the economy, semiconductors have become a key strategic industry sector for many countries, with governments and companies alike investing heavily in research and development to maintain competitiveness and innovate.
• Dependence on Global Supply Chain: A serious shortage of those chips in 2021, underlined how dependent the global industry is on a few key suppliers.
  • Taiwan is currently the world’s largest chipmaker, holding approximately 44% of global market share, followed by China (28%), South Korea (12%), the U.S. (6%) and Japan (2%)
  • In an effort to cut that dependency governments are spending huge sums to create stronger domestic chip industries.

Steps by Government 

• Semicon India: The initiative is for the development of semiconductor and display manufacturing ecosystem in the country.
  • The programme aims to provide financial support to companies investing in semiconductors, display manufacturing and design ecosystem.
• India Semiconductor Mission: It functions as a dedicated division within the Digital India Corporation.
  • Its main goal is to nurture a strong semiconductor and display ecosystem to position India as a prominent global player in electronics manufacturing and design.
• The government offers incentives for manufacturing setup in India:
  • Under the Semiconductor Fab Scheme, fiscal support of 50% of the project cost on an equal footing for all technology nodes.
  • Under the Display Fab Scheme, fiscal support of 50% of the project cost on an equal footing basis.
  • Under the Compound Semiconductor Scheme, fiscal support of 50% of the capital expenditure on an equal footing basis, including support for discrete semiconductor fabs.
• Under the Chips to Startup (C2S) Programme being implemented at 113 academic institutions/ R&D organizations/ Start-ups/ MSMEs, 85,000 number of high-quality and qualified engineers are being trained in several areas. 
• In February 2024, the government approved the establishment of three semiconductor plants, two in Gujarat and one in Assam.

Way Forward

• With the rise of digital technologies, AI, IoT, and 5G, the demand for semiconductors is skyrocketing. India, with its burgeoning tech industry, is well-positioned to capitalize on this trend.
• Foreign Investment: Major global players like Intel, TSMC, and others are exploring opportunities in India. This influx of foreign investment will help develop local expertise and infrastructure.
• Startup Ecosystem: India has a vibrant startup ecosystem focused on semiconductor design and related technologies, fostering innovation and contributing to the overall growth of the sector.
• Infrastructure Development: Improved infrastructure, including special economic zones (SEZs) for electronics manufacturing, is being established to facilitate the growth of the semiconductor industry.
• Talent Pool: India boasts a large pool of engineering graduates and skilled professionals, which can support the workforce needs of the semiconductor sector.