New Semiconductor Policy

Despite of being home to a vibrant chip design industry, India has lagged way behind in semiconductor ship manufacturing (aka: fab).  The first attempt to set up a semiconductor industry was done in 1999-2000, but was unsuccessful. A similar semi-hearted attempt was made in 2007, result was also similar.

This time government plans to come up with a customized subsidy package in way of New Semiconductor Policy.  The opportunities and stakes are huge and so is the requirement.  Most of the chips in India (be in any electronic device – mobile, TV, computers, manufacturing equipment and so on and so forth numerous appliances) are supplied from China – and unfortunately even with the best available memory and analytical skill we do not find any reason to trust that the chips supplied from other side of the Himalayas will not be utilized for some other purpose (let’s say spying activities) – specially the locally made unbranded electronics.  The latter form a large chunk today in Indian market and also in many other developing countries.

Apart from security stuff if we look at economic aspect – semiconductor today is the fastest growing manufacturing industry – and the decades old Moore’s law (1965) still holds true. Local electronics industry is expected to reach $400 billion by 2020, and chip market is expected to contribute $40 billion - $60 billion of this market.   Establishing a semiconductor wafer fabrication unit is a critical requirement to promote Electronics System Design and Manufacturing (ESDM) in the country. This will also be helpful in generating employment for engineers in the country – and possibly in a good direction (most engineers today in our country have an un-fascinated tilt towards only IT).

This is definitely a welcome step from government of India.  However, there have to be some concrete steps required to make the movement on ground visible.  Bureaucrats need to learn from their seniors’ mistake before drafting the policy, it has to be more investor friendly and sops need to be more realistic.  Possibly we are in a phase of a political stability and as such the geo-political risk is comparatively low, at least for the short term of 5-10 years (this is short in terms of fab industry profitability timeline).

India needs to increase the electronic industry contribution to GDP from 1.7% as of now – at least to the level of China which falls close to 12.0%.