Electronics and semiconductors

Almost every modern machine, from a phone to a car to a power grid controller, depends on semiconductor chips. India designs many chips and assembles many electronic goods, but for decades it imported most of the chips themselves and much of the high-value component base. Electronics and semiconductor policy is therefore an attempt to close a strategic gap, not simply to add another export sector.

The Semicon India programme was approved by the Union Cabinet in December 2021 with a total outlay of 76,000 crore rupees for developing a semiconductor and display manufacturing ecosystem. It offers fiscal support for semiconductor fabrication plants, display fabrication plants, compound semiconductor and assembly and testing units, and design-linked incentives for chip design. The India Semiconductor Mission, set up under the programme, administers these schemes. The scale of the challenge is visible in the economics: a modern fabrication plant costs billions of dollars, needs ultra-pure water, uninterrupted power and a deep supplier base, and takes years to build and qualify.

Electronics manufacturing has grown faster than chip fabrication, helped by production-linked incentives for mobile phones and components, and by large assembly plants. Assembly is a real step, creating jobs and exports, but critics note that the domestic value added in a finished phone remains modest when chips, displays and many components are imported. The policy response has been to push step by step from assembly into components, design and, eventually, fabrication.

Design is India's strongest card. Indian engineers have designed chips for global firms for years, and design-linked incentives aim to turn that service strength into Indian chip products and intellectual property. Success here depends on universities, tooling, testing facilities and patient capital, because chip design firms take years to reach revenue.

For civil studies, semiconductors are a lesson in industrial patience. Governments can announce outlays quickly, but fabs, supplier ecosystems and skilled workforces take a decade to mature, and success will be judged by how much of the value chain sits in India, not by how many units are approved.