PM Modi: Supply chain victim of conflicts, own full-stack chip ecosystem must
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Context
Prime Minister Narendra Modi inaugurated Kaynes Technology's Outsourced Semiconductor Assembly and Test (OSAT) facility in Sanand, Gujarat. This event highlights India's accelerated push to establish a self-reliant semiconductor ecosystem. This move aims to mitigate risks from geopolitical conflicts that disrupt global supply chains for critical components like chips and rare earth minerals.
UPSC Perspectives
Economic
The establishment of semiconductor manufacturing units is central to India's economic strategy of becoming a global electronics hub under the 'Make in India, Make for the World' mantra. The government launched the (ISM) in 2021 with a financial outlay of ₹76,000 crore to attract investments in the capital-intensive chip industry. This mission provides fiscal support of up to 50% of the project cost for setting up semiconductor fabs, display fabs, and compound semiconductor facilities, including OSAT units. These initiatives, part of a broader Production Linked Incentive (PLI) scheme, aim to reduce India's heavy import dependency (currently importing most of its chips) and develop domestic capabilities across the value chain—from design to fabrication and packaging. The goal is to capture a larger share of the global market, projected to grow significantly, and build supply chain resilience, which has become a key aspect of economic and national security.
Geopolitical & Strategic
The push for a domestic semiconductor ecosystem is a direct response to geopolitical instability and the weaponization of supply chains. Events like the war in West Asia disrupting shipping routes underscore the vulnerability of relying on a few nations for critical technologies. To counter this, India is enhancing its strategic partnerships. It has joined the US-led , a coalition of allied nations aiming to build a secure and resilient silicon supply chain, reducing dependencies on adversarial nations. This initiative focuses on joint ventures and co-investment in critical minerals, chip design, fabrication, and AI infrastructure. Furthermore, India is securing its raw material pipeline through the , which aims to achieve self-sufficiency in processing key minerals and even acquire mining assets abroad. These actions represent a calculated shift towards technological sovereignty and position India as a reliable partner in the new global tech order.
Governance & Infrastructure
The government is creating a supportive policy framework and infrastructure to realize its 'Techade' vision. The (NCMM), launched for the period 2024-25 to 2030-31, is a cornerstone of this effort, with a significant budget to foster exploration, mining, and recycling. A key infrastructural project announced is the Rare Earth Corridor, which will connect coastal states like Odisha, Andhra Pradesh, Tamil Nadu, and Kerala. These states have significant reserves of beach sand minerals, including monazite, which is crucial for rare earth elements. The corridor aims to create an integrated value chain, linking mining, processing, and manufacturing hubs, thereby leveraging regional strengths and existing infrastructure like ports. By amending the to allow auctioning of critical minerals, the government is also facilitating private sector participation to accelerate development in these strategic areas.