Powering India’s Future:
The Semiconductor PLI Scheme and its Strategic Significance
Semiconductors, or “chips,” are tiny but very powerful pieces that make almost all electronic devices work. From mobile phones and laptops to cars and satellites, these chips are everywhere. India has launched a special programme called the Production-Linked Incentive (PLI) scheme to become a major player in making semiconductors. This programme started in December 2021, with ₹76,000 crore (about $10 billion) set aside to help companies make these chips in India.
The PLI scheme aims to make India less dependent on other countries for chips, boost the economy, and strengthen India’s position in the world. However, to achieve this, India needs to tackle some challenges and make smart decisions. This essay explains how the PLI scheme works, its benefits, its challenges, and why it’s important for India’s future.
What is the PLI Scheme for Semiconductors?
The PLI scheme encourages companies to set up chip-making factories in India by offering money to cover part of their costs. It focuses on three main areas:
- Chip-Making Plants (Silicon Semiconductor Fabrication): These factories produce the actual chips that power electronic devices like phones, computers, and more.
- ATMP (Assembly, Testing, Marking, and Packaging): This is the final stage of chip production. Chips are put together, tested to ensure they work, labelled, and packed for use. This process is easier than making chips but still very important.
- Display Fabrication: This means making advanced screens like AMOLED or LCD, used in phones, TVs, and other devices.
The government promises to cover up to 50% of the costs for companies that join the PLI scheme. This has attracted attention from big companies around the world. However, progress has been slow, with only five projects approved so far.
Why is This Scheme Important for India?
The PLI scheme provides strong financial support, attracting big global companies. This fits India’s “Make in India” plan to grow its factories aimed at boosting India’s manufacturing strength and helping it become important in global technology.
- Reducing Dependence on Imports: India currently buys most of its semiconductors from other countries, especially China. This can be risky if global supply chains are disrupted. Making chips in India ensures a steady supply and makes the country self-reliant.
- Creating Jobs: The PLI scheme can create many jobs for people. Factories need skilled workers (with special training) and semi-skilled workers (basic training). This will help India’s economy and give people more opportunities.
- Attracting Big Companies: Global companies like Intel and TSMC are showing interest in investing in India because of the financial help offered by the PLI scheme. If these companies set up factories here, India can become a key player in the global tech industry.
- Advancing Technology: The scheme focuses on new and advanced technology, like making 300mm silicon wafers (large sheets used to make chips). This could help India compete with other countries in the technology race.
What Challenges Does the PLI Scheme Face?
While the plan sounds great, there are some problems that need fixing:
- Not Enough Focus on Research: Innovation, or coming up with new ideas, is very important for making semiconductors. However, India spends only 2.5% of the PLI budget on research and development (R&D). This is too little for such a technology-heavy industry. India needs to invest more in R&D and set up a national research centre to stay competitive.
- High Costs of Chip-Making Plants: Building chip factories is very expensive and risky, especially for a country like India that is new to this industry. Instead of focusing only on these factories, India should prioritise ATMP, which costs less and can show faster results.
- Small Team for a Big Job: The India Semiconductor Mission (ISM), which manages the PLI scheme, has too few people to handle such a big project. This slows down approvals and progress. Expanding the team and simplifying the approval process can speed things up.
- No Clear Goals or Timelines: The scheme doesn’t have specific milestones (goals to be achieved at different stages). Without these, it’s hard to measure success or know where improvements are needed. Setting clear, time-bound goals would improve accountability and help track progress.
How Does This Plan Help India’s Global Role?
Semiconductors are not just important for technology; they also play a key role in global politics. Right now, China dominates the semiconductor industry, and India relies heavily on imports from them. This is risky because it can affect India’s economy and security. By making its own chips, India can reduce its dependence on China and strengthen its position in the world.
India’s PLI scheme also aligns with its vision of becoming a global manufacturing hub. By offering an alternative to China, India can attract international companies to set up their factories here. This will boost India’s economy and improve its relationships with other countries.
India can also partner with countries like the United States, Japan, South Korea, and Taiwan, which are leaders in semiconductors. Working with them can help India learn new technologies, improve its manufacturing capabilities, and become an important part of the global supply chain.
What Should India Do to Improve the Scheme?
To make the PLI scheme more successful, India should focus on these areas:
- Increase Spending on Research: The government should spend more money on research and set up specialised training programs with universities to build skilled workers for the industry.
- Focus on ATMP First: Since ATMP is less expensive and quicker to start, India should make it a priority. Once the country gains experience and profits, it can move on to making complex chips.
- Hire More People for the ISM Team: A bigger team with more experts can handle projects better and ensure that things move faster.
- Set Clear Milestones: The government should create clear goals for each stage of the scheme and review progress regularly. This will ensure accountability and help make improvements where needed.
- Strengthen International Partnerships: Collaborating with global leaders in semiconductors can help India share risks, learn advanced technologies, and achieve its goals faster.
Conclusion
India’s PLI scheme for semiconductors is a bold plan to become a global leader in chip manufacturing and reduce dependence on other countries. By attracting big companies, creating jobs, and building partnerships with other nations, the scheme can help India grow its economy and strengthen its global position. However, its success depends on addressing challenges like low R&D spending, slow progress, and unclear goals.
With the right planning, investment, and teamwork, India can use this scheme to drive innovation, boost its economy, and secure a stronger role in the global semiconductor industry. Semiconductors are not just tiny chips—they are the building blocks of modern technology and power in the world.
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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH
