The Prime Minister’ vision of reviving growth with self-reliance focuses on five major pillars of development: economy, infrastructure, technology driven systems, vibrant demography and sustained demand.
While each of these five pillars are crucial for growth, technology driven systems is one aspect which is critical for the other four factors. India cannot achieve aatmanirbharta by lagging in the technology ladder; rather, it must become a leader.
Investments and interventions for accelerated technological progress should focus on technologies with maximum horizontal intersectionality, to ensure optimal resource allocation. This will allow for the opportunity to scale-up and maximize incremental returns. Given the capital-intensive nature, some of the factors that should be considered for intervention are:
Scalability: Technology which are relevant in the short term and scalable over the medium term
Applicability: Technological platforms with wide ranging applicability, across manufacturing to services to delivery of public goods
Access: ensuring easy access to these technologies even for the smaller players, through incentives and subsidies
Cost: it is important that the overall cost-benefit should not look at the industry in isolation but consider positive externalities for the wider economy.
Few of these game changing technologies and innovations are Artificial Intelligence, Machine Learning, 5G networks, Big Data Analytics, Block Chain, Internet of Things and EDGE, Battery Technologies and Quantum Computing, among others. These are emerging technologies and this is an opportune time for India to leverage and promote such technology for larger benefits of development and equity besides growth. A long-term strategy for each of these segments is needed.
It is here that the role of semi-conductors becomes critical. For the technologies mentioned above, semiconductors form the base of such platforms. All these technologies use very high-end semiconductor ‘chips’ which are critical for manufacturing of all technology devices and systems.
Recognizing the criticality of the industry, the Government has already issued Expression of Interest (EoI) for setting up /expanding existing semiconductor wafer / Device Fabrication (FAB) facilities in India or acquisition of semiconductor FABs outside India.
Semiconductors are today at the core of all modern electronics, from consumer products to sophisticated equipment used in aerospace and national defense. With growing electronics demand and manufacturing in India, semiconductors are projected to be a significant consumption and import item.
Globally, Taiwan and South Korea dominate the market while China is rapidly expanding capacity. As the pandemic disrupted production and supply, the criticality of these semiconductor chips became so apparent that it led to the governments of Germany, Japan and United States to appeal to Taiwanese authorities to help in resolving the issue.
Capacity creation in India will give it economic benefits such as link the country closely with global value chain; reduce the country’s dependence on semiconductor imports; give it more control over chips being used in critical infrastructure with local design and manufacturing; provide access to advanced technologies in domestic market and help in efficient delivery of public goods, among others. The semi-conductor industry will benefit from rising electronics production, future demand prospects, and aatmanirbharta in semi-conductor ecosystem as ‘design’ is already India’s strength.
While benefits of scalability, applicability and access has already been highlighted above, the overall benefit from a strategic and economic perspective should be considered for cost implications. Setting up of a semiconductor FAB manufacturing is a capital-intensive process and will requires significant Government support. If India has to be successful in semiconductor manufacturing, it will have to provide support to the industry in a manner similar to countries like China and Israel.
Given the cutting-edge technology required for semiconductor FAB manufacturing, setting up an analog and mixed-signal FAB could be more relevant for India viz-a-viz an even costlier digital-FAB facility. Along with financial viability, it has wider applications, especially for technological penetration and delivery of public goods. However, setting up an analog/mixed-signal FAB will require substantial Government support to become viable. Capex and interest subsidy for setting up manufacturing over long term will also be needed. Requirements like land, taxes, market access and high quality provision of utilities at competitive rates will also have to be addressed while development of world class dedicated SEZs or technology parks with plug and play facilities are a necessary imperative.
The article first appeared in the April 2021 issue of CII Communique. Click here to read the issue.