Semiconductor fab: the unfinished agenda – on developing semiconductor fabrication industry in India | 21st June 2023 | UPSC Daily Editorial Analysis

Please Share with maximum friends to support the Initiative.

What's the article about?

  • It talks about the developing semiconductor fabrication industry in India.


  • GS3: Effects of Liberalization on the Economy, Changes in Industrial Policy and their Effects on Industrial Growth;
  • Essay;
  • Prelims


  • Semiconductors are the backbone of the present digital era. Thus, developing a versatile semiconductor manufacturing industry is the need of the hour.
  • India, too, realised this point and started to build semiconductor fabrication plants there. But India’s efforts could not bring the desired success.
  • In this article, the writer analyses these efforts and offers some suggestions.


Importance of semiconductor fabrication industry:

  • Semiconductor fabrication represents the ultimate frontier of human tech advancement.
  • The frontier has been advancing adhering to Moore’s law that the number of transistors in a unit area doubles every 18 months.
  • But the progress of miniaturisation is accompanied by higher complexity and costs. As a result, the industry has seen a decline in the number of participants.

Reasons for India’s failure in successfully setting up semiconductor fabrication industries:

  • The first serious attempt was made in 2007 in the form of a Special Incentive Package (SIP), but it yielded no response. The second attempt in the form of Modified SIP in 2012 fared better.
  • Greenfield vs Assembly, Testing, Packaging and Marking (ATMP):
    • India’s strategy has been to set up a new logic fab from scratch. But China started with ATMPs and became one of the leading global players.
    • Developing an ecosystem for chip manufacturing in a greenfield location is a major challenge.
    • Hundreds of chemicals and gases are required for chip fabrication, people need to be trained, and abundant clean water be made available.
  • Technological challenges:
    • There are other issues, such as whether to set up a logic/processor, memory or analog fab.
    • Electronic equipment and its functionalities are characterised by their logic chips, which are therefore strategically important and generate the highest profit.
    • The most advanced set of technologies is needed to manufacture them.
  • Other challenges:
    • Investment in a semiconductor fab is one of the riskiest. Billions of dollars need to be recovered before the technology becomes obsolete.
    • This necessitates substantial production volumes for economic viability, often reaching levels that are adequate to meet global demand.
    • It is therefore difficult to conceive of a fab which is based on the domestic market only.

Lessons from China:

  • India’s strategy has been to set up a new logic fab. China, which acquired loss-making fabs and then set up its own logic fab, provides lessons.
    • Acquiring existing fabs has many advantages: they are reasonably priced, have stabilised technology, a supply chain ecosystem, an established product line, and market.
  • Another strategy could be setting up ATMPs.
    • Tessolve, now acquired by Tatas, had set up an ATMP in 2013-14. This ATMP is successfully packaging chips upto 7 nm feature size.
    • China has over 100 ATMPs.

Way Forward:

  • Lessons from China needed to be incorporated in India’s strategy to develop the semiconductor fabrication industry in India.

Please Share with maximum friends to support the Initiative.

Download the Samajho App

Join 5 lakh+ students in downloading PDF Notes for 2000+ Topics relevant for UPSC Civil Services Exam. &nbsp Samajho Android App: Samajho iOS App: &nbsp Samajho IAS Youtube Channel (300K+ Subscribers):