With the Union Cabinet approving a Rs 76,000-crore incentive scheme for semiconductor manufacturing, Rajeev Chandrasekhar, Union Minister of State for Electronics and Information Technology, as well as for Skill Development and Entrepreneurship, explains the government’s vision behind the decision and its ecosystem-led approach in an interaction with Business Today’s Nidhi Singal.
After focussing on assembly in India, the government is now looking at growing the overall ecosystem within the country. What is the vision when it comes to semiconductors?
India’s ambition is an electronics ambition. The reason that ambition is very relevant is that when Narendra Modi became Prime Minister in 2014, the electronics industry, and more specifically the components industry that fed the electronics industry, had been devastated. If you look at the period up to 2014 and see what the situation of the electronics sector was compared with many years before that, you would notice that the successive FTAs and the reckless imports had really demolished it. So in 2014, the PM laid out his vision for electronics manufacturing. The total electronics production for the country in 2014 was around Rs 1.9 lakh crore. In 2020 [pre-Covid-19], we were at around Rs 5.3 lakh crore. Now, that growth came pre-Covid-19, before all the changes in the global value chains (GVCs). But post-Covid-19, it is very clear that the dominance of China in the global electronics market is being challenged, in the sense that most of these GVCs want to diversify and create alternate supply chains to China. So here is India, with a tailwind of growth momentum and $75 billion of electronics (industry size) in 2020.
The opportunity for electronics, which looked very different pre-Covid-19, looks very different and much more significant post it. The next two-three years, as the supply chain diversifies out of China, and looks at India, Vietnam, Thailand, India in particular has a huge opportunity to grow at a rate much faster than the 14-20 per cent rate 2021 onwards. The ambition statement is $250300 billion of electronics [manufacturing] by 2025, which comes from broadening electronics product categories and deepening the component categories.
Now, in the deepening argument lies squarely the semiconductor, PCB (printed circuit board), PCB material, active components, passive components, and the semiconductor is just one piece. So this would have been the narrative generally. Added to that is the semiconductor autonomy, semiconductor security aspect of it. A country that is now aspiring to be an electronics hub in the global value chain, which is India, is also now faced with a growing global concern about the concentration of semiconductors in certain geographies, which may or may not be resilient over the medium term or long term. Therefore, there is an added reason, logic and rationale for India to explore the semiconductor opportunity in the context of electronics opportunity growth, semiconductor sovereignty-security bit, as well as product categories like EV, where the world is more or less at the same starting point, except for Tesla.
The world, like India, is very semiconductor and compute-intensive. India has the opportunity to really be at the starting line of that. There again the electronics capabilities, electronic systems design capabilities, semiconductor design capabilities, and semiconductor and components capabilities play to that strength. This is the logic of India’s aspirations, that has been set on electronics and that leads naturally to semiconductors.
The Union Cabinet has just announced a scheme for semiconductor and display manufacturing. How big are the plans?
The response to India’s aggressive, ambitious electronics goals has been extremely positive. I think that is the absolute prerequisite for any conversation on the components or semiconductors. If we go down this road currently, I think the goal of $300 billion can be realised—it is not easy, but is doable.
PM Narendra Modi has recently announced a Rs 76,000-crore ($10-billion) incentive package to attract global semiconductor companies to India.
The country has tried many times in the past to get semiconductor [fabs], but almost always flopped because the semiconductor sector thought we were not serious enough. They did not think the market was big enough, they did not think the government was going to support them enough. And in some cases, it is true that the Indian industrial ecosystem could not absorb something so sophisticated as fabs—that is the general argument being used. But the PM’s vision, backed by this package, reaffirms the serious strategy to build a global standard semiconductor ecosystem. Our goal is to build high-volume silicon fabs, fabs for compound semiconductors, fabs for display used for mobile devices (phones, tablets, etc.), investments in semiconductor testing and packaging, and expanding semiconductor design and innovation, which includes EDA (electronic design automation) companies and start-ups.
In the 1990s, it was believed that India is a good place for financial software, but not a great place for semiconductors. But come 2021, India is one of the hottest destinations for semiconductor design. Over 2,000 ICs (integrated circuits) and chips have been designed in India in the last few years. Given the success of our electronics vision and [the fact] that more and more companies are coming here, I think the perception amongst these semiconductor [majors]—that India is not ready, India is not capable, India can’t do it, India will not do it, India will back out, India does not have the money—is gone.
I am willing to concede that it’s an unprecedented opportunity for India. I do believe that if we can’t do it this time, we will never be able to do it again. Instead, I think that this time around, we will do it. The PM’s vision and support for this have been steadfast and the Rs 76,000-crore package will transform and leapfrog India’s electronics and semiconductor industry, and will catalyse investments, entrepreneurship and jobs. This is the kind of confidence that the industry has. That is the confidence with which even the foreign partners, who today are being wooed by every country, look at India with great amount of respect. Everyone is looking at India seriously now and no one can ignore it any more.
Nobody is saying no to India, but they are taking their own time to think. So we are also just starting, we are also just getting ready, and we are going to them. We have to go to these companies with a clear blueprint. It’s not enough to say we want a fab, we want semiconductors. These are all big companies, which have been doing this for 30, 40, 50 years. They know exactly what they want, what kind of environment a fab will be successful in. We are positioning ourselves as a country potentially where this will be very successful.
What is the government doing when it comes to the technical know-how and skills required for fabs?
If India can produce engineers and scientists who can put a rocket on Mars, I am sure even if we don’t have the skills, we can build those skills.
I think directionally we know where we want to go. The government knows how complex the issues are, how complex and sophisticated the ecosystem is, and the inputs that are required. If you connect the dots, you will see the pattern. The government is investing Rs 436 crore in ‘FutureSkills Prime’, a digital-led skilling programme for high-end skills and technology, with NASSCOM. The platform is exactly for these kind of skills—AI, blockchain, semiconductor design. So, you see, there is a pattern—we are not waiting for the equipment to land here suddenly and then say, let’s start training people.
Once the semiconductor fabs come to India, will they cater to domestic production or exports? Will India become part of the global supply chain?
By exporting electronics, we will be part of the new, changing global value chain of electronics. Semiconductors are going to be either exported directly as semiconductors or through the electronics route. Our components are going to be directly exported as components or through the electronics finished products. No semiconductor fab or company has ever been produced anywhere in the world that only caters to domestic needs. Why would you start doing that in India? No semiconductor plant has been created where it is only for exports. Components in general and semiconductors always have to have a business model that will be partly exportled and partly domestic consumption-led.
What kind of geographical benefit do we have when it comes to exports?
Earlier, the reason China managed to get such a huge market share in electronics was the availability and price—the only defining attributes in GVC. But today, global value chains have brought one more attribute—which is a defining attribute along with price, efficiency and competitiveness—and that is ‘trust’. The global value chain should be reliable, immune to disruption and predictable. India is square and centre in that. So technology, at a time when the world is digitising at a rapid pace, technology services, software as a service—that is the platforms sitting in it—and electronics and digital products all are characterised by the need to come from a trusted value chain. And that is our advantage. Of course, there are other geopolitical advantages. We are the centre of Asia, which is the biggest consumer of electronics and electronics components today. Thailand, Vietnam are all big importers of components. We are reasonably close to the Middle-East markets. Today, with transportation and logistics becoming more and more efficient, we can serve Western Europe and US markets just like any other competing country.
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