India has been leading in many technological sectors in recent times. Alike the growing semiconductor boom, the proliferation of the IT sector in the country has been extolling. Nonetheless, India today is the economic juggernaut across the world. According to a report by Nasscom, the Indian software industry grew at >10% CAGR from 2019-22 to reach $13.3 Bn. The growth has been propelled by the cloud shift and global market penetration. Software product industry has outperformed the overall industry growth in FY2022E and has grown by 18.7% compared to the tech industry which has grown by 16.3% in the same period.”
If you imagine an electronic device as a human then the software is its soul and semiconductors are its heart. In India, domestic production of electronic goods has increased to Rs 5,54,461 crore (USD 74.7 billion) in 2020-21 from Rs 2,43,263 crore (USD 37 billion) in 2015-16 growing at a Compound Annual Growth Rate (CAGR) of 17.9 percent mainly depending on imports.
The elephant in the room:
India currently imports the majority of its semiconductor requirement from China. China is one of India’s infamous neighbours. In recent years, the skirmish between India and China has increased. Any escalation of tension between India and China can put India in a dangerous spot which could impact both the hardware and software industries in India since both are dependent on each other.
India faced a similar scenario in the pharmaceutical sector during covid due to its dependence on China for Active pharmaceutical ingredients (API). When shipment from China stopped during the lockdown, the government was forced to take many knee-jerk actions.
India’s other Semiconductor chip manufacturing friends:
India maintains a healthy relationship with many other semiconductor chips manufacturing countries like Taiwan, the US, South Korea, Japan, etc. Only two countries- Taiwan and South Korea are producing chips with the latest 7nm technology. Intel’s 7nm chips have seen several delays.
Industries all over the world are already facing semiconductor chip shortages and tension with China will only aggravate the situation. Although China’s Semiconductor Manufacturing International Corporation (SMIC) hasn’t announced the production of 7nm chips. Some reports suggest that it is making 7nm at its foundry since last year.
Taiwan’s TSMC is the largest producer of semiconductor chips in the world tension between China-US-Taiwan can have global ramifications. The US through its Chips and Science Act is trying to manufacture semiconductor chips back in the US.
Russia could be looked at as an example:
Russia started semiconductor manufacturing in the 1960s but it didn’t keep pace with technological development. It is now using 20-year-old technology. US sanction has further complicated things for Russia and its only hope is China. Some reports say that Russia is in dire need of semiconductors for its missiles and fighter aircrafts and due to this they lack many advanced features.
India’s recent efforts:
India has been making efforts in manufacturing semiconductors in India but with no success. In 2019, the government cancelled the Letter of Interest granted to Hindustan Semiconductor Limited. Recently the government has announced its plan to upgrade the Semiconductor Laboratory in Mohali and a program of Rs76,000 crore for the development of sustainable semiconductor and display manufacturing in the country.
The government of India have to make concert efforts for semiconductor manufacturing in India for internal security and growth of electronic manufacturing in India.
