Why geopolitics revolves around semiconductors and where India fits into the power structure

The recent World Trade Organization protest by India against the American CHIPS Act has brought the economic, technological, and geopolitical importance of the semiconductor enterprise back into the spotlight. 

The Indian government attacked the US bill for limiting equitable access to technology even though it was purportedly intended to address the “threat” from China. 

It wasn’t the first incident of this kind to suggest the geopolitical importance of semiconductors either; the US had previously cut off chip shipments to Russia and later forbade the export of AMD and Nvidia goods to China.

Technological contender simmers as semiconductors increasingly serve as the foundation of the modern economy, playing a key role in both established technologies and emerging ones. But where does India fit into this power structure, having started its semiconductor expedition in the 1970s? How far along is domestic manufacturing? What are the government’s plans to advance technology in the nation?

Let’s take a quick look at chunks and their different applications before we investigate these issues.

What is the superior semiconductor?

A 2014 iPhone 6 that cost over Rs 60,000 was 120 million faster than the 1969 Apollo moon landing computer, which cost Rs 29 crore. The ability of semiconductors to reduce prices while also doubling the number of elements that can fit on a chip every two years is what makes them so magical.

Semiconductors are substances with an electrical conductivity that falls between that of an insulator (rubber glove) and a conductor (like a copper wire). They are perfect for help with electronic equipment because of their special quality. They are commonly composed of silicon, but they can also be built of germanium and gallium arsenide.

There is a board containing several additional components, which can be considerably divided into active and passive, within every piece of electronic equipment. Integrated circuits, commonly known as chips, are active components and are located inside the packaging. 

They are the brains of the gadget. They are constructed from a small, flat wafer or thin slice of semiconductor material, typically silicon. Additionally, the number of components that can be incorporated into a chip determines its capabilities.

The smallest physical size that is feasible for systems on a wafer, or the minimum feature size, in nanometers, is used to define semiconductor technology generations, also known as process nodes. Process nodes in the 40nm, 28, 16, 5nm, and 3nm ranges are common.

What makes them so important for India?

The current global scarcity of semiconductors, which has affected many industries, including the automobile, consumer electronics, and telecommunications, is what has brought attention to the semiconductor market. 

But besides this demand-supply dichotomy, there are various additional aspects that help to explain its significance. Let’s examine why it is crucial for India.

First, the expansion of the national economy. About 80% of the semiconductors India needs are now imported, and the country’s current account deficit might increase by $95 billion if a domestic semiconductor sector does not emerge.

Significant job opportunities would be created in India if a thriving semiconductor industry were to develop.  A fifth of the world’s semiconductor design engineers are from India, and the Indian IT industry currently donates 150$ billion to the 1$ trillion global markets of IT while also supporting 5.8 million high-quality jobs there.

A McKinsey analysis predicts that the worldwide semiconductor market will grow from $590 billion in 2021 to over 1$ trillion by 2030. In contrast, it is anticipated that India’s semiconductor market would increase from 15$ billion in 2020 to 110$ billion in 2030, making it one of the fastest-growing semiconductor markets in the world. The expected budget for the industry for the Indian government in 2023 is $550 billion, which helps put these figures into context.

Additionally, semiconductors play a crucial role in the developing safety state, particularly in satellites, military hardware, and communication systems. In modern combat, equipment availability and complexity frequently play a more significant impact than the quantity or expertise of military troops.

For instance, in an air war, targets hundreds of miles away are tracked by aircraft radar. A strategic advantage made available by semiconductors is that, in a fight between two planes, the one who’s radar can effectively track more targets will likely prevail.

Semiconductors are also widely used in cutting-edge technology such as quantum computing and artificial intelligence.

What role does Indian chip manufacturing hold?

The government’s emphasis on digitalization, the Make in India ambition, and the expanding demand for electronic equipment have all contributed to the industry’s impressive recent rise in India. Closely trailing China, the nation is now the world’s 2nd largest producer of mobile phones. It is also a top producer of other electronic items like LED televisions, computers, and tablets.

However, India lacks a strong manufacturing ecosystem when it moves toward semiconductor production, and its semiconductor sector mainly concentrates on product design and development rather than production.

The process of designing a semiconductor chip’s blueprint, which includes defining its features and functions, is known as semiconductor design. Design engineers create the design and evaluate its performance using sophisticated software devices and simulation methodologies. The creation of a chip that satisfies the required standards and effectively carries out its intended activities is the main objective of semiconductor design.

How are locally produced chips doing?

When Semiconductor Ltd (SCL) was founded in Mohali, Punjab, in the 1970s, India’s semiconductor industry adventure officially began. For tactical reasons, the state research facility developed silicon wafers, the fundamental component of microchips. Though it still meets the demands of the satellite and defense industries, SCL’s current 180nm manufacturing node is no longer competitive for use in commercial applications due to technical improvements.

India’s Shakti microprocessor program, which started as an academic project in 2014, reached a critical milestone in 2018 when it produced the first domestic microprocessor. The processor, which is well suited for internet of things applications and industrial and offers manufacturing options in 180nm and 22nm, is a critical step in developing a strong processing infrastructure in India.

Does the chip industry receive enough policy support?

One of the 25 important economic areas for job development and skill improvement under the Make in India ambition is electronics systems. 

In place of NPE 2012, 2019 the National Policy on Electronics seeks to support the domestic production of electronics goods. The NPE 2012 was restricted to electronics manufacturing, whereas the NPE 2019 spans the full electronics importance chain, from manufacturing through design and innovation.

The NPE 2019 focuses on the importance of (R&D) research and development in electronics and seeks to encourage innovation and the development of intellectual property in the industry.

The newest Semicon India Policy Framework, a document on policy that was first produced by the center in 2007, allocates $10 billion in financial support to the semiconductor industry.

Compound semiconductors, silicon photonics, sensor fabs (including MEMS), discrete semiconductor ATMP/OSAT units, and semiconductor fabs units are all qualified to receive 50% of the capital investment under this mission.

Then there is the design-linked incentive (DLI) plan, which offers incentives to 100 domestic semiconductor design firms for Integrated Circuits worth up to 50% of eligible spending. The program aims to promote home innovation and entrepreneurship while strengthening indigenous design capabilities for ICs, the fundamental components of all electronic devices.

Despite the Indian government’s encouragement of the domestic chip industry, there is still a sizable untapped resource pool in the sector. Although India has achieved great strides in chip design and development, the industry still requires the government to focus its efforts to strengthen the domestic production environment.

India’s prolonged reliance on imports for chips isn’t likely to hold well in light of the expanding applicability of semiconductors in technology and their foreseen compelling role in geopolitics, and its route towards bridging this gap will be widely followed.

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