Hi, Do you know what your mobiles, laptops, smartwatches, video games, cars, and even defense missiles - all have in common?
All devices, from digital watches to a missile, have semiconductor chips in them. Today we cannot even imagine our life without digital devices.
So, if we say that today's world runs because of semiconductors, then it will not be wrong.
That's why today all the countries around the world are investing in the semiconductor industry.
But where does India stand in terms of manufacturing such an important element? To know this watch this video till the end.
The basic application of semiconductors is memory storage and processing.
From 1+1 = 2 to the complex functions of computers and smartphones, semiconductor chips play a primary role.
These semiconductors are mounted on a board in the form of integrated circuits or in simple language chips.
Without these, you will not be able to play games on the laptop, nor will you be able to talk to your friends on calls.
Remember, the big TVs of the olden days and compare them with today's sleek LCD and LED.
Thanks to semiconductors, your smartphone is many times more powerful than the IBM 704 mainframe computer of 1955.
Today, there would be hardly any such machine, in which semiconductors are not used. So, many industries also depend on semiconductors.
Just look around you, fridges, microwaves, vacuum cleaners, washing machine displays, interactive panels,
with their various modes and functionalities, they all use semiconductors.
Intelligent and digital security such as automatic theft alarms, CCTV surveillance, infrared sensors, and even advanced smart ATMs,
all function with integrated circuits and chips made of semiconductors. But digital devices are also widely used in the healthcare sector.
Complex devices ranging from a digital pulsometer to a blood pressure monitor to a ventilator cannot function without semiconductors.
And you must be aware of automobiles, nowadays cars and 2-wheelers also come with all the new interactive and smart features.
Digital electronics are used in battery management systems of electric 2-wheelers, interactive panels of cars, and control systems of airplanes & metro trains.
Not only this but semiconductor chips are also used in satellite communication and technology like 5G.
Friends, no electronic equipment, machine, technology, or industry can exist today without semiconductors.
Consider these headlines, given the shortage of semiconductors. And most importantly. Defense!
Gone are the days when the outcome of wars could be decided only by the might of the army.
Now is the era of state-of-the-art, modern, and advanced defense systems.
In the defense sector, semiconductors are used for efficient communication, fast and advanced computation, high-precision and
automatic targeting, and almost all defense equipment and weapons such as missiles, unarmored aerial vehicles, jamming stations, etc.
Therefore semiconductor chips are an important part of the defense, space, nuclear power, and cyber security.
The importance of semiconductors today is for economic development and for maintaining national security and a strong geopolitical position.
As seen, the research and manufacturing of semiconductors have been happening only in a few selected countries till now.
However, due to global trade, this technology has been a problem in all the countries of the world.
Semiconductor consumption in India is going to grow at the rate of 19% annually in the next 4 years i.e. till 2026!
The story of consumption is strong.
But what about manufacturing? Can India afford to depend forever on the rest of the country for supplies of advanced semiconductor chips?
Probably not, and this critical importance of semiconductors is accepted by all countries!
So, just as it did with nuclear technology a few decades ago, semiconductors are now center-stage in global geopolitics.
As I told you just now, the manufacturing of semiconductor chips has been happening only in a few selected countries.
Why? Because making semiconductors requires precise technology and expertise.
It takes lakhs of crores of capital investment to build a semiconductor plant.
Sourcing the lithography tools used to print highly complex circuit patterns on chips from global manufacturers is an important aspect of semiconductor manufacturing.
Moreover, the chip-making industry is also a very ultra-pure water-intensive industry.
As per estimates, a manufacturing unit uses at least 2 million gallons of water per day.
Now it can be understood how much vast land would be required to support the manufacturing operations.
The wastewater, which is also highly toxic, adds to the environmental concerns on top of that.
It is necessary to have a water recycling system, but how to preserve it is also an important issue for both governments and companies.
Hence, running such precise and critical operations requires high investment as well as highly advanced technology.
And that's why so far only a few countries have got a grip on semiconductor chip manufacturing.
In global semiconductor players, America has been a leader in chip designing and research through Intel Corporation and Nvidia.
That is, America's leading company in R&D and design of advanced chips, has been outsourcing to countries like Taiwan, slow in manufacturing.
The second country is Taiwan, where the world's largest semiconductor manufacturing company is TSMC i.e.
Taiwan Semiconductor Manufacturing Company Limited manufactures 90% of the world's 5nm thickness chips.
The Netherlands also plays a very critical role in the semiconductor manufacturing industry.
Dutch company ASML supplies these semiconductor manufacturers with photolithography tools, a critical tool in chip manufacturing.
China is the world's largest chip buyer, and South Korea the world's second-largest chip maker, is also an important part of this ecosystem.
When Taiwan and South Korea only manufacture 80% of the world's chips, then it is difficult for any other country to enter the chipmaking industry
because only a few players have maintained strong control over the years.
But it also has another implication that in the changing geopolitical arena, countries have now started weaponizing their interdependencies.
After Covid-19, differences have started between countries regarding the supply chain of semiconductor chips at the global level.
Especially, between today's 2 biggest economies - China and the US. A trade war is going on between USA and China for the last few years.
It started in 2018 when the USA increased custom duty on goods imported from China such as cars, hard disks, aircraft parts, etc.
In response, China also raised customs duties on goods imported from the USA. And this cycle continued.
In the meantime, there was batching in both Nations many times, but trade relations did not improve.
In August 2022, the Biden administration passed the “CHIPS AND SCIENCE ACT” legislation
that would take tough measures to prevent China from military benefits from US research and innovation investments.
In October 2022, Biden's government imposed an export ban on semiconductors manufactured by American companies in China.
Moreover, license restrictions were also imposed on some important and strategic chips.
Even American citizens were persuaded to work in Chinese chip-making companies.
The USA has also blacklisted 28 Chinese companies that were contributing to building China's defense capabilities.
The USA believes that China can stand as a security challenge and defense enemy for their country, and they are taking such steps.
The USA is also pressuring its allies such as South Korea and the Netherlands to bar Chinese customers from negotiating.
Overall, the USA has taken political calls on the semiconductor issue.
Its maximum revenue comes from technology, custody of intellectual capital, and patents making its issue focus clear, regardless of any party in power.
And recently the effect of this US-China conflict regarding semiconductors was also been seen in Taiwan-China.
Remember, when Nancy Pelosi, a high-level official from America, visited Taiwan, there was an atmosphere of tension between China and Taiwan.
We also made a detailed video on this issue. If you haven't seen that, you can also check out the usage.
Friends, one thing is clear, the chip-making industry is highly concentrated and tensions are high in this ecosystem right now.
Keeping in mind global geopolitics, we come to India.
Where do we stand in semiconductor manufacturing and what can India do to establish its presence in this exclusive group? Come let's know.
Have you ever wondered why California is called Silicon Valley? As it was the place where companies like Intel used to do chip manufacturing.
But due to increasing need and demand, chip manufacturing work was outsourced to Taiwan where cheap labor was available.
Today US realized that despite making its supply from Taiwan hostage to China's whims and fancies, it is better to promote chip manufacturing in the US itself.
And on these lines, the country, India, which imports more than 90% of its chip requirement, is also thinking.
Due to the declining demand and cost nature of electronic components, Indian industrialists are far from the semiconductor industry.
And they were happy to import chips. But now the phenomenal growth of our electronics sector has increased semiconductor chip demands.
China began to squeeze the supply of chips after the pandemic, causing demand and supply to stand at an unequal level.
And this, like America, has forced India to think. Semiconductors are as important today as oil and petroleum were a few decades ago.
The geopolitical chip war is therefore a golden opportunity for India.
India must capitalize on the semiconductor investment coming its way and act decisively on two things.
1 is to grab the opportunity to start manufacturing in India with America and 2nd when India will chair the Wassenaar Arrangement next year,
India will have to play an important role in setting the rules of this tech game.
The Wassenaar Arrangement is an export control regime that sets rules for trade in defense weapons and dual-use technologies.
India has a great opportunity in this forum to get its 'foot in the door'.
As per a State Readiness Report by the Indian Electronics and Semiconductors Association, the Indian semiconductor market was valued at $27 billion in 2021.
And by 2026, its valuation could reach $64 billion. Only 9% of India's total semiconductor needs in 2021 are met locally.
And it is expected that by 2026 this percentage can go up to 17%. And the interesting thing is that India has the best chip designers in the world.
Indians constitute 20% of the global workforce in chip designing. The chip design sector in India is employing 90,000 professionals.
To borrow the Intel company, around 13,500 Indians are employed in the design and engineering of chips.
And if you have noticed, for the last few months, India has been making moves regarding semiconductors on the global stage and domestically.
Let's take a look at the developments happening in India that can help us push our ambition to be a global semiconductor player.
India does not have any semiconductor fabrication or manufacturing facility of its own,
but the Government of India is in constant discussion with several foreign companies to bring them to India.
And to achieve this, the government has also started a lot of work at the policy level
so that we have a foundation ready to bring investment and technology from outside.
You all know that under the "Make in India" initiative of the Government of India, efforts are being made to make all sectors self-reliant.
And under this initiative, there is a plan to set up 12 local factories in the semiconductor sector in the coming 2 to 3 years.
And to achieve this, the government is also bringing various incentives.
Recently, the government has increased the financial support from 30% to 50% for setting up the semiconductor industry.
The Government of India has announced Rs. ₹76,000 crores ($10 billion) production-linked incentive scheme (PLI) comes within the initiative to make local chips.
Under it, the government has also launched the Design Linked Initiative (DLI) scheme supported by domestic semiconductor design companies.
The India Semiconductor Mission (ISM) announced in 2021 is being encouraged to set up semiconductor, display fabrication, and manufacturing facilities.
India is not focusing on just 1 aspect. It wants to create a semiconductor fab ecosystem that covers design manufacturing and supply chain.
Let us now see which projects in semiconductor manufacturing in India have started or are about to happen.
First of all, let's talk about the semiconductor manufacturing unit to be set up in Bhubaneswar, Odisha.
With the efforts of Odisha Chief Minister Naveen Patnaik, UK-based SRAM and MRAM Group have raised Rs. 30,000 crores to invest.
As this project progresses, the group can take its investment up to Rs 2 lakh crore. And this unit will be the first semiconductor FAB unit in Eastern India.
This project will be started as soon as some necessary permissions from the government are obtained.
Another semiconductor manufacturing facility is coming up in Karnataka.
In May 2022, ISMC (International Semiconductor Consortium), a joint venture between UAE-based investment firm
Next Orbit Ventures and Israel-based Tower Semiconductor, signed an MoU to invest $3 billion in Karnataka.
According to Karnataka minister Ashwath Narayanan, work on this plant will be started in just a few months.
However, this plant will manufacture older generation 45nm to 65nm chips called trailing edge components.
These components are often used in the defense and auto sectors. And nobody knows about the most recent and huge development?
Yes, the JV of Vedanta and iPhone assembling giant Foxconn, Joe Milke is setting a Rs 1,54,000 crore semiconductor facility at Dholera, Gujarat.
The plant will have a display manufacturing and a semiconductor manufacturing facility.
Many subsidies will be given to this project under the “Gujarat Semiconductor Policy”.
Vedanta and Foxconn's facility coming up at Dholera will be developed exactly on the model of Taiwan-based TSMC.
Is the road to India easy? But will this path be easy for India? Is it that easy to break away from China? No.
Restructuring this ecosystem will come with an economic cost.
China may not be a chip manufacturing giant, but 35-40% of the world's chips are assembled in China.
And has invested a lot in China for a few years to develop the semiconductor ecosystem.
China imports more than $300 billion of semiconductors, and 25% of the sales of major semiconductor companies come from the Chinese market.
So you think for yourself that at present India is just warming up for the race of semiconductors.
Even today, we depend on countries like China, Taiwan, and South Korea for our semiconductor needs.
We import chips, but we still do not have the malware detection technology for these chips.
As per Professor Emeritus Arogyaswami Paulraj, awarded with Padma Bhushan, India has no presence in semiconductor manufacturing these days!
So one thing is certain, India will have to pull up its socks if it wants to enter the elite circle of used semiconductor chips.
If India becomes self-reliant in semiconductors, it can become self-sufficient in defense, telecommunication, and digital technology.
Moreover, new avenues of export can also open up for India.
UAE and Arab countries which run rich oil reserves are an important part of global geopolitics, it maybe the same for India in the coming years.
So guys that's it for today's video. I hope you found this video informative and learned something new.
Will India be able to gain a significant place in the global semiconductor industry? What are your thoughts on this?
Do tell in the comments. Subscribe to the Groww channel for more such informative videos. Bye,