GS 3: Science and Technology- Developments and their Applications and Effects in Everyday Life.
Context: The Government of India has approved the India Semiconductor Mission (ISM) Phase-II with a significantly enhanced financial outlay to strengthen the country’s semiconductor ecosystem.
The initiative seeks to reduce India’s dependence on imports, enhance technological self-reliance, and position India as a global semiconductor manufacturing hub amid growing geopolitical uncertainties.
What are Semiconductors?
- Semiconductors are materials that possess electrical conductivity between conductors and insulators, making them essential for manufacturing integrated circuits (ICs) or microchips.
- They serve as the “brain” of modern electronic devices, including smartphones, computers, automobiles, defence equipment, artificial intelligence systems, and communication networks.
UPSC Course Fees Online
Why is the Semiconductor Mission Important?
Growing Global Supply Chain Risks
- More than 60% of global semiconductor manufacturing and nearly 90% of advanced semiconductor chips are concentrated in Taiwan, creating a major supply chain vulnerability.
- Any geopolitical conflict, particularly in the Taiwan Strait, could severely disrupt global electronics production.
Strategic Importance
- Semiconductors are no longer merely commercial products but have become strategic assets essential for economic growth, national security, and technological sovereignty.
- Countries worldwide are investing heavily in domestic semiconductor manufacturing to reduce external dependence.
India Semiconductor Mission (ISM)
Objective
- To establish a comprehensive semiconductor manufacturing ecosystem in India.
- To promote fabrication (Fab) plants, chip packaging, semiconductor design, testing, and research.
- To strengthen India’s participation in global semiconductor value chains.
India Semiconductor Mission Phase-II
Enhanced Financial Commitment
- The Government has announced an outlay of approximately ₹1.27 lakh crore for Phase-II, significantly higher than the ₹76,000 crore allocated under Phase-I.
- The increased investment reflects the government’s long-term commitment towards building a globally competitive semiconductor industry.
Major Features
Reduced Capital Subsidy
- Unlike Phase-I, where the Government provided up to 50% capital support, Phase-II introduces a relatively lower capital subsidy.
- However, overall incentives have been broadened through multiple support mechanisms.
Production-Linked Incentive (PLI)
- Manufacturers will receive incentives based on their actual semiconductor production and sales.
- This encourages companies to establish commercially viable manufacturing facilities rather than merely constructing factories.
Domestic Component Bonus
- Additional incentives will be provided to firms that source components domestically.
- This aims to strengthen the domestic supply chain and promote the vision of Atmanirbhar Bharat.
Comprehensive Ecosystem Development
- The mission focuses not only on fabrication plants but also on:
- Semiconductor packaging
- Assembly and testing facilities
- Electronic component manufacturing
- Research and development
- Skilled workforce development
Progress under Phase-I
Approved Projects
- Several semiconductor projects have received government approval under Phase-I.
- The Tata Electronics–PSMC semiconductor fabrication project at Dholera, Gujarat, is among the flagship initiatives.
Current Status
- Although construction has begun, commercial semiconductor production has not yet started.
- Semiconductor fabrication is a highly complex industry requiring several years before operational output becomes commercially viable.
UPSC Coaching Classes
Why was Phase-II Announced Before Phase-I Results?
Long Gestation Period
- Semiconductor fabrication plants generally require 8–10 years before reaching full-scale production.
- Waiting for Phase-I outcomes could delay India’s strategic ambitions.
Strategic Necessity
- Developing domestic semiconductor manufacturing has become a national strategic necessity rather than merely an industrial policy choice.
- Reducing dependence on imports is essential for economic resilience and national security.
Challenges in Semiconductor Manufacturing
Capital Intensive Industry
- Semiconductor manufacturing requires massive financial investments, sophisticated infrastructure, and advanced manufacturing technologies.
- It generates relatively fewer direct jobs compared to labour-intensive industries such as textiles or construction.
Technology Dependence
- India continues to depend heavily on foreign technologies for advanced chip fabrication.
- Access to cutting-edge manufacturing equipment remains limited.
EUV Lithography Monopoly
Extreme Ultraviolet (EUV) Lithography
- EUV lithography machines are used to print nanometre-scale circuits onto silicon wafers, making them indispensable for manufacturing advanced semiconductor chips.
Global Monopoly
- Only ASML (Netherlands) currently manufactures commercial EUV lithography machines.
- Even technologically advanced countries such as Japan have not yet developed a comparable commercial alternative.
Talent Retention
- India produces a large number of highly skilled engineers every year.
- However, brain drain continues to divert talented professionals toward developed economies due to superior research opportunities and innovation ecosystems.
Importance for India
Economic Security
- Domestic semiconductor production reduces dependence on imports and improves supply chain resilience.
National Security
- Indigenous chips are critical for defence electronics, communication systems, satellites, and strategic technologies.
Technological Leadership
- Semiconductor manufacturing supports emerging sectors such as:
- Artificial Intelligence (AI)
- 5G and 6G technologies
- Internet of Things (IoT)
- Electric Vehicles (EVs)
- Quantum Computing
Industrial Growth
- A robust semiconductor ecosystem encourages investment across electronics manufacturing and advanced technology sectors
Challenges Ahead
- High capital requirements and long payback periods.
- Dependence on imported manufacturing equipment.
- Global technological monopolies, particularly in advanced lithography.
- Need for skilled manpower and advanced research infrastructure.
- Intense global competition from countries such as Taiwan, South Korea, the United States, Japan, and China.
Click to Know UPSC Offline Courses
Way Forward
- Increase long-term investment in semiconductor research and indigenous technology development.
- Strengthen public-private partnerships for fabrication, design, and advanced manufacturing.
- Develop frontier technologies, including indigenous lithography capabilities.
- Create world-class research ecosystems to retain highly skilled engineers and scientists.
- Promote domestic semiconductor supply chains through targeted incentives and local value addition.
- Support globally competitive Indian semiconductor companies, similar to how South Korea nurtured firms like Samsung.
- Enhance international cooperation while simultaneously building technological self-reliance under Atmanirbhar Bharat.
18 Jul 2026
