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Global Semiconductor Chip Supply Chain and US China Tech War – Can India become electronic chip hub?

Global Semiconductor Chip Supply Chain and US China Tech War – Can India become electronic chip hub?


  • GS 1 || Geography || Indian Economic Geography || Industries

Why in news?

Due to an unprecedented scarcity of inputs, particularly semiconductor chips, India-based vehicle manufacturers (cars and premium motorcycles) have had to reduce output across the board.


Semiconductors are a contemporary wonder, an engineering and human creativity achievement unsurpassed by any other sector. As a result, significant reforms are required to create India’s indigenous semiconductor manufacturing capability.

All about Semiconductors:


  • A semiconductor is a substance that permits electrical conductivity between a conductor and an insulator. Conductors are materials or substances that allow electricity to flow through them.
  • They conduct electricity because electrons can freely move from one atom to the next inside them. Gold, silver, mercury, saltwater, and other conductive materials are examples of insulators.
  • They have a lower resistivity than insulators but a higher resistivity than conductors. As the temperature rises, the semiconductor’s resistance lowers, and vice versa.
  • Semiconductors are formed of pure elements such as silicon or germanium, as well as compounds like gallium arsenide. Doping can alter their conductivity in several cases.
  • It’s a method of introducing minute quantities of impurities to these pure elements, resulting in significant alterations in the material’s conductivity.
  • About Semiconductors chip: Semiconductors are materials that have conductivity between conductors (usually metals) and nonconductors or insulators (such as most ceramics). Semiconductors are made up of pure elements like silicon and germanium, as well as compounds like gallium arsenide and cadmium selenide.

Country as a hub of semiconductor industry worldwide:

  • South Korea: South Korea’s semiconductor industry is large and include numerous enterprises. The biggest semiconductor enterprises are Samsung and SK Hynix. South Korea has more than 20000 semiconductor related companies, including 369 IC manufacturing enterprises, 2650 semiconductor equipment enterprises and 4078 semiconductor material enterprises.
  • Japan: Japan’s strengths in semiconductors are in raw materials, equipment and small active-passive components. In 2019, Sony semiconductor became a top 10 global semiconductor supplier just by producing camera image sensors.
  • Taiwan: Taiwan has well-developed semiconductor clusters. It is one of the few regions in the world with a depth and breadth of semiconductor clusters packed into a small geographical area. For example, many of Taiwan’s ODM/OEM production.
  • China: China’s largest semiconductor cluster. China is also quite strong in OSAT, and has a large share of the global market. In integrated circuit (IC) design, China’s capability has surged over the past 5 years. Recently, China depended on the U.S for chips and its annual imports were estimated to be worth more than US$ 300 billion.
  • US: S wants US$ 50 billion to boost the U.S chip industry.

Status of Indian semiconductor industry:

  • Expressions of interest (EOIs): India relies heavily on imports to satisfy its semiconductor requirements. Over 20 semiconductor manufacturing and design companies in the high-end, display, and specialty fabrication categories have recently made expressions of interest (EOIs) to set up operations in India.
  • More investment in 2020: The semiconductor sector received a lot of attention in 2020. The semiconductor sector has been in the news for a variety of reasons, including geopolitics, manufacturing advancements, and mergers and acquisitions.
  • Incentive-based programmes: The government is attempting to entice companies from all over the globe to establish semiconductor manufacturing, assembly, and testing facilities in India by offering incentive-based programmes. The fact is that much more than policies are necessary.
  • The government of India owns and operates all current semiconductor manufacturing facilities for essential infrastructure needs such as defense and space technologies:
    • Semi-Conductor Laboratory (SCL)on a 6-inch and 8-inch wafer, it can manufacture a 180nm CMOS process. It’s also capable of packing and testing.
    • Bharat Electronics Limited (BEL) is another public sector company that has electronic manufacturing units but not semiconductor fabrication.
    • Society For Integrated Circuit Technology And Applied Research (SITAR) has a 6-inch wafer processing capacity but the technology node is not advanced.
    • IIT Bombay Nanofabrication Facility (IITBNF) is another lab that has the equipment to enable 2-inch, 4-inch, and 8-inch silicon wafers, which are primarily used for research and development activities only.
  • Few private companies are in semiconductor assembly and testing but not into fabrication:
    • SPEL Semiconductor Limited is capable of providing turnkey post-fabrication testing and assembly solutions.
    • ChipTest Engineering Private Limited is another (owned by SPEL’s parent company) assembly and testing solution provider with an office in Asia-Pacific apart from India.
    • Tessolve Semiconductor also provides semiconductor testing and product engineering related services.
    • Apart from the above three, there are numerous private electronic assembly (different from semiconductor assembly and testing) service providers that do not fall either in the semiconductor fabrication, assembly, or testing domain.

Semiconductor companies in India:

  • Broadcom Inc: Broadcom Inc is an American semiconductor company with an office in Bangalore
  • NXP Semiconductors: The Dutch Semiconductor manufacturer, founded in 2006, has offices in Noida, Bangalore, and Pune. NXP Semiconductors helps in enabling secure connections for a smarter world and offer connectivity solutions for embedded applications.
  • Wipro: Wipro was founded in 1945 with headquarters in Bangalore.
  • Samsung Semiconductors: Samsung Semiconductors, founded in 1983, has an office in Bangalore. Samsung‘s Foundry Business supports global fabless and IDM semiconductor companies.
  • Applied Materials: Applied Materials was founded in 1967 and has an office in Bangalore. It is one of the largest providers of semiconductor and display manufacturing equipment.

What are the challenges in front of India?

  • High startup costs: According to official estimates, establishing a chip manufacturing plant in India would cost between $5 and $7 billion.
  • Inefficiencies in the bureaucratic process: building an indigenous semiconductor facility needs permissions and approvals from a number of government agencies. Furthermore, there are significant bureaucratic delays at each level, which deters the development of industrial units.
  • Unstable power supply: Semiconductor manufacturing requires a continuous power supply 24 hours a day, seven days a week. Many locations in the country, however, do not meet this criteria. This limits manufacturing to a small number of places.
  • Technological Barrier: Semiconductor manufacture in the United States necessitates the employment of high-end technology. Patent holders charge a hefty fee to license these technologies.
  • Structural flaws: Because of a scarcity of trained personnel, delays in land acquisition, and an unclear tax environment, FDI in electronics accounts for less than 1% of overall FDI inflow.

Initiatives taken to promote indigenous Semiconductor capacity:

  • National Electronics Policy for 2019: It aspires to make India a global center for Electronics System Design and Manufacturing (ESDM). Its goal is to promote the development of fundamental components (such as chipsets) and to establish a competitive environment for the industry internationally.
  • SPECS (Scheme for Promoting Electronic Components and Semiconductors Manufacturing): The government will offer a 25% financial incentive on capital expenditures for a list of items that make up the electronic product supply chain. Electronic components, semiconductors, and specialized sub-assemblies are examples of this. India will pay each semiconductor manufacturer that establishes a production facility in the nation more than $1 billion in cash.
  • Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme: The government would help establish Electronics Manufacturing Clusters (EMCs) and Common Facility Centres under this scheme (CFCs).
  • Production Linked Incentive Scheme (PLI): Under this program, the government would offer qualifying firms a 4% to 6% incentive on items made in India and covered by target categories for a five-year term.
  • Foreign Direct Investment (FDI): The Indian government has approved 100% FDI in the Electronics Systems Design and Manufacturing industry under the automated method.


The 21st century will be an era of Digital revolution signifying an increased use of mobile phones and computer devices. This enhanced usage can be met only with a robust availability of semiconductor chips that sustains their functioning. Therefore India needs to focus on the indigenous development of semiconductors in order to realize its digital potential and emerge as a strong power in the present era.

Mains oriented question:

The growing significance of semiconductors, often known as chips or integrated circuits (ICs), and China’s competence with their production and design make a compelling case for India to concentrate on chip design. Comment.