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Semiconductor Fab UPSC NOTE


Importance of Semiconductor technology

  • Semiconductors are materials which have a conductivity between conductors and nonconductors or insulators.

  • It serve as a foundation for computers and other electronic devices.

  • Semiconductors are the thumbnail-sized building blocks of almost every modern electronic device from smartphones to connected devices in the Internet of Things (IoT). 

A semiconductor fab, also called a fab lab, is a manufacturing plant in which raw silicon wafers are turned into integrated circuits.


  • The basic component of a semiconductor chip is a sliver of silicon, which is etched with billions of microscopic transistors, forming patterns to control the flow of current while following different computational instructions. 

Steps taken by India to se up fab

  • The first serious attempt was made in 2007 in the form of a Special Incentive Package (SIP), but it yielded no response.

  • The second attempt in the form of Modified SIP in 2012 fared better.


  • (1) Jaiprakash Associates in partnership with IBM and Israeli company TowerJazz and (2) Hindustan Semiconductor Manufacturing Corporation along with ST Microelectronics – both failed to mobilise resources.


Steps taken by India

  • As part of the new semiconductor policy announcement in December 2021. SCL back to the Ministry of Electronics and Information Technology (MeITy) after a 15-year stint as a laboratory within the Department of Space.

  • The Union Cabinet has allocated an amount of Rs 76,000 crore in 2021 for supporting the development of a ‘semiconductors and display manufacturing ecosystem’.

  • India launched the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS).


  • In 2021, India announced 10 billion dollar production-linked incentive (PLI) scheme to encourage semiconductor and display manufacturing in the country.

  • In 2021, the MeitY also launched the Design Linked Incentive (DLI) Scheme to nurture at least 20 domestic companies involved in semiconductor design and facilitate them to achieve a turnover of more than Rs.1500 Crore in the next 5 years.

  • Seek to harmonise government incentives for all technology nodes of semiconductors.


  • Uniform 50% fiscal support for all nodes of semiconductor.

  • Provide 50% of capital expenditure for other steps of the process as well (chip design and ATMP).

  • Production of the 45nm chip, which is fairly less time-consuming and economical in terms of production.


  • Chip production is a resource-intensive and expensive process.

  • Minimal Fiscal Support from Government.


  • Just the setting up of one semiconductor fab requires an investment of anywhere between $3 and $7 billion.

  • Lack of Fab Capacities.

  • Insufficient Grants under PLI Scheme.

  • Resource Inefficient Sector.

  • Chip-making also requires gallons of ultrapure water in a single day

  • Semiconductors and display manufacturing is a very complex and technology-intensive sector.


  • Investment in a semiconductor fab is one of the riskiest. 

  • Billions of dollars need to be recovered before the technology becomes obsolete. 

  • This necessitates substantial production volumes for economic viability, often reaching levels that are adequate to meet global demand. 

  • It is therefore difficult to conceive of a fab which is based on the domestic market only. 


  • The advantage of semiconductors having a small freight-to-price ratio and a zero-custom duty regime under the Information Technology Agreement, 1996, facilitates production in a single location and global sales. This is why no company is interested in setting a greenfield fab.

  • Developing an ecosystem for chip manufacturing in a greenfield location is a major challenge.

  • Hundreds of chemicals and gases are required for chip fabrication, people need to be trained, and abundant clean water be made available. 


  • But above all is the art of chip-making. Despite the best of equipment, poor quality and low yields can make fabs fail.

  • There are other issues, such as whether to set up a logic/processor, memory or analog fab. 

  • An electronic equipment and its functionalities are characterised by their logic chips, which are therefore strategically important and generate the highest profit. The most advanced set of technologies is needed to manufacture them.

  • Analog chips are essential, but have the least strategic value. 


  • Memory fabs use the most advanced feature nodes, while analog fabs can be even as large as 130 nm. 

  • Logic fabs are the most expensive and analog fabs the least. 

  • A relatively easier option is Assembly, Testing, Packaging and Marking (ATMP), to get the fab ecosystem developed before the full-fledged fab is set up. But ATMPs have little value in terms of actual chip-making.


Way forward

  • The “More than Moore” (the combination of digital and non-digital functions on the same chip) segment of >180 nm node involving mixed signal analog (BCD and SiGe), wide bandgap (GaN, GaAs, Silicon Carbide) for RF and power markets leveraging existing lithography capability already in place at the SCL.

  • An investment of $50-$100 million may result in the development of Indian solutions for automotive electronics (EV traction inverters/on board chargers), PV-Inverters, 5G infra-power amplifiers, railway electronics (traction inverters).


  • The upgrade has to be backed by subsidies aimed at fabless design houses with proven design (sales of >$100 million per year) willing to fabricate at the Semiconductor Lab (SCL) in the 180nm+ node (and possibly transfer process intellectual patents if they have any).

  • The subsidies have to be aimed at global design companies with products aimed at India-specific markets such as motor drives for BLDC fans or e-bike chargers.

    • Unfortunately, the existing DLI/PLI schemes provide no such incentives to proven global fabless design companies.


  • Course correction on incentive targets.

    • The stakes are high as a lack of clarity and inaction may lead to India completely missing out on the semiconductor fabrication bus, yet again, unless there is course correction on incentive targets.

Lessons from China:

  • India’s strategy has been to set up a new logic fab.

  • China, which acquired loss-making fabs and then set up its own logic fab, provides lessons.


  • Acquiring existing fabs has many advantages: 

    • They are reasonably priced, 

    • Have stabilised technology, 

    • Have a supply chain ecosystem, 

    • Have an established product line, and market.

    • They will enable India to build the fab ecosystem and train human resources. 

    • Much lower subsidies would be required, and the funds saved could be used for advanced R&D in fab technologies which will help build state-of-the-art fab in next few years. 


  • Another strategy could be setting up ATMPs. Tessolve, now acquired by Tatas, had set up an ATMP in 2013-14. This ATMP is successfully packaging chips upto 7 nm feature size. 

  • China has over 100 ATMPs.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Semiconductor Fab UPSC NOTE
Semiconductor Fab UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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