What goals does Semicon 2.0 aim to achieve? | Explained
What are the key focus areas of Semicon 2.0? How is it different from the first phase? Why is India focusing on semiconductor manufacturing? What incentives does the Mobile Phone Manufacturing Scheme offer?
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Context
The Union Cabinet has approved the second phase of the (ISM 2.0) and the (MPMS) with a combined outlay of nearly ₹1.9 lakh crore. These schemes aim to build a robust domestic electronics and semiconductor manufacturing ecosystem, focusing on chip fabrication, packaging, design, and localized mobile component assembly, moving beyond the first phase's focus to encompass the broader value chain.
UPSC Perspectives
Economic
The transition to ISM 2.0 reflects a strategic shift in India's industrial policy, moving from basic assembly to higher value-chain activities. The reduction in capital subsidy from 50% under ISM 1.0 to 30-40% under ISM 2.0 indicates the government's assessment that the Indian semiconductor market has gained sufficient momentum and attractiveness, requiring less aggressive fiscal intervention. This aligns with the concept of infant industry protection, where initial high support is gradually tapered as the industry matures. The (MPMS) complements this by incentivizing domestic design (2.25% to 5% incentives) and component manufacturing, addressing the critical vulnerability of relying heavily on imported components despite increasing domestic assembly (like iPhones). This integrated approach is crucial for improving India's current account deficit by reducing reliance on imported electronics, a major contributor to the import bill after oil and gold. The target of generating ₹1 lakh crore in exports underscores the ambition to integrate India into global value chains (GVCs).
Geopolitical and Strategic
India's push for domestic semiconductor manufacturing is deeply intertwined with techno-nationalism and the need for strategic autonomy. The COVID-19 pandemic and subsequent supply chain shocks exposed the vulnerabilities of a highly concentrated global semiconductor manufacturing landscape, dominated by countries like Taiwan and South Korea. The U.S.-China trade war and ensuing export controls have further highlighted the risks of relying on geopolitical rivals or unstable regions for critical technologies. Developing a robust domestic ecosystem, even focusing on 'legacy' 28nm nodes, provides a buffer against external shocks and ensures a stable supply for critical sectors like defense, telecommunications, and automotive industries. The ambition to eventually move towards 'frontier' nodes (sub-7nm) is essential for future competitiveness in emerging technologies like Artificial Intelligence and 5G/6G, which are increasingly viewed through a national security lens.
Science and Technology
ISM 2.0 expands its scope beyond pure manufacturing to encompass the foundational elements of the semiconductor ecosystem. By supporting chip design talent, capital machinery, and research & development, the government is attempting to address the critical gaps in India's technological capabilities. The focus on domestically owned intellectual property (IP) is crucial; currently, while India has a vast pool of design engineers, the resultant IP is often owned by foreign multinational corporations. The revamping of the in Mohali to aid students and researchers in 'taping out' chips (the final step of the design process before manufacturing) is a vital step in democratizing access to expensive design infrastructure and fostering indigenous innovation. The strategic choice to initially target legacy 28nm nodes is pragmatic, as these chips remain ubiquitous in everyday electronics, automotive applications, and IoT devices, providing a significant domestic market to sustain early manufacturing efforts before tackling the immense complexities of frontier nodes.