The Importance of Semiconductor Manufacturing for India’s Technological Growth
The Need to Shift Focus from Software to Hardware Technologies
India’s technological advancements have predominantly been driven by its prowess in software development. However, with the global landscape evolving, there is a growing realization that hardware, especially semiconductor manufacturing, holds great promise for India’s future growth. While recent collaborations with the United States in the semiconductor sector show positive signs, it is evident that more efforts are needed to establish a strong domestic semiconductor industry.
The Rise of Software Dominance and Hardware Challenges
Over the years, India has made remarkable strides in software technologies, leading to the development of digital innovations in various sectors, including digital payments, e-commerce, and digital identities. These achievements have been lauded globally and have positioned India as a leader in software-based solutions. However, unlike software, the development of hardware technologies, particularly semiconductors, presents a more complex challenge with significant entry barriers.
Unlike software companies, hardware manufacturers require substantial investments in infrastructure, research, and development. The ability to pivot and adapt to new opportunities, as seen in software, is not as seamless in the hardware domain. Consequently, India has struggled to crack the hardware puzzle and has become heavily dependent on importing hardware technology from other countries.
The Case for Semiconductor Manufacturing in India
While India’s digital prowess has brought immense societal benefits, concerns arise regarding its impact on job creation and the manufacturing sector. The software industry’s growth has undoubtedly created employment opportunities, but it has not translated into significant job openings in the manufacturing domain. To address this issue, there is a strong argument for fostering semiconductor manufacturing in India.
Apart from creating jobs and strengthening the electronics supply chain, semiconductor manufacturing has a unique advantage in terms of knowledge transfer. The “learning by doing” approach in manufacturing ensures that domestic firms gain valuable know-how, leading to continuous improvement and innovation. A thriving semiconductor manufacturing base can fuel further growth in the hardware sector, driving India’s technological advancement.
The Potential of Production Linked Incentives (PLI) Scheme
To jumpstart semiconductor manufacturing and boost domestic production, the Indian government introduced the Production Linked Incentive (PLI) scheme in February 2021. With an initial outlay of 1.97 lakh crores Indian rupees (approximately $24 billion), the PLI scheme aims to incentivize and support domestic manufacturing while nurturing global champions in the sector.
The PLI scheme holds the potential to attract investments, encourage research and development, and build a robust semiconductor ecosystem within the country. By providing financial incentives to manufacturers, the scheme aims to make India an attractive destination for semiconductor production, thereby reducing dependence on imports.
Addressing Challenges and Embracing Friendshoring
While the PLI scheme shows promise, India’s path to semiconductor manufacturing still faces several challenges. The lack of existing capabilities in large-scale semiconductor production needs to be acknowledged and addressed. Collaborative efforts, such as the partnership with the United States, are essential for gaining insights and knowledge to bridge this gap.
Additionally, embracing the concept of “friendshoring” can play a critical role in augmenting India’s hardware capabilities. Friendshoring refers to close collaboration and technology transfer between global partners, which can facilitate the development of semiconductor manufacturing skills and expertise in India.
India’s journey towards semiconductor manufacturing represents a crucial shift from its software-dominated past. While the country has excelled in software technologies, the hardware sector presents new challenges and opportunities. The collaboration with the United States and the PLI scheme indicate positive steps towards fostering a strong domestic semiconductor industry. By addressing existing challenges and leveraging collaborative efforts, India can position itself as a major player in the global semiconductor supply chain, driving its technological growth and economic development.