1、 itif.org Assessing Indias Readiness to Assume a Greater Role in Global Semiconductor Value Chains STEPHEN EZELL|FEBRUARY 2024 India has the potential to play a much more significant role in global semiconductor value chains,provided the government upholds its investment policies,maintains a conduci

2、ve regulatory and business environment,and avoids measures that create unpredictability.KEY TAKEAWAYS Considering Indias large and growing consumer and business marketplace,its strengths in electronics production,and global supply chain rebalancing,India should seize this moment to expand its presen

3、ce in global semiconductor value chains.In the next five years,India has the potential to expand its presence in the semiconductor assembly,test,and packaging(ATP)segment to as many as five facilities and to attract fabs producing legacy semiconductors at 28 nm or above.Expanding its presence in sem

4、iconductor manufacturing would build on Indias decades-long experience in semiconductor design,where it accounts for 20 percent of the worlds integrated circuit(IC)design workforce,over 125,000 workers.The semiconductor industry faces a global shortage of talent;the over 800,000 engineers India grad

5、uates annually could help,but better courses,training,and preparedness are needed,as only a small fraction are industry ready upon graduation.Multinational investors seek stability,certainty,and predictability.So,India must continue to deepen recent improvements it has made to its business and polic

6、y environments,while avoiding policies that create business uncertainty.INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 2 CONTENTS Key Takeaways.1 Introduction.3 Why India Should Seek to Deepen Its Presence in Global Semiconductor Value Chains.3 Indias Semiconductor Moment.7 Rapidly

7、Expanding Market Size.7 Reorganization of Global High-Tech Value Chains.9 The Semiconductor Value Chain.13 Indias Semiconductor State of Play and Market Opportunities.15 Semiconductor R&D and Design.15 Semiconductor Assembly,Test,and Packaging.18 Semiconductor Fabrication.19 Semiconductor Equipment.

8、20 Semiconductor and Electronics Manufacturing Policy Environment.20 Regulatory Environment.22 Lessons From Attracting Microns Semiconductor ATP Investment.22 Evolution of Indias Regulatory Environment.23 Taxation.25 Labor Policy.25 Tariffs and Import Policies.26 Customs and Trade Facilitation.27 Bu

9、siness Environment.27 Labor/Workforce.28 Logistics/Infrastructure.30 Indias Semiconductor Supply Chain.31 Semiconductor Manufacturing Materials.31 Semiconductor Research Support Institutions.32 Opportunities In Indias States.32 Gujarat.32 Karnataka.33 Odisha.33 Tamil Nadu.34 Lessons Learned From Lea

10、ding U.S.Semiconductor States.35 Arizona.35 New York.36 Texas.36 Summary Conclusions and Policy Recommendations From Leading U.S.States.37 India-U.S.Partnership in Semiconductors.38 Conclusion.39 Endnotes.41 INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 3 INTRODUCTION On May 24,202

11、2,India and the United States announced the joint initiative on Critical and Emerging Technology(iCET),which committed the two countries to expand strategic technology partnerships and defense industrial cooperation between their nations businesses,academic institutions,and government agencies.As pa

12、rt of the inaugural meeting of the iCET in January 2023,the Semiconductor Industry Association(SIA)in the United States and the India Electronics and Semiconductor Association(IESA),agreed to develop a“readiness assessment”to identify near-term industry opportunities,facilitate the longer-term strat

13、egic development of their complementary semiconductor ecosystems,and make recommendations to the U.S.Department of Commerce and the Government of India Semiconductor Mission(ISM).This assessment also informs the U.S.-India Semiconductor Supply Chain and Innovation Partnership,established through a M

14、emorandum of Understanding(MOU)in March 2023.1 The Information Technology and Innovation Foundation(ITIF),a Washington DC-based science and technology policy think tank,was commissioned by SIA and IESA to undertake the assessment.In May 2023 and again in October 2023,an ITIF representative undertook

15、 fact-finding trips to India for this purpose,including conducting interviews with dozens of stakeholders from government,enterprises,industry associations,and think tanks.(At certain points,this report draws conclusions based on those interviews.)A summary of initial findings was delivered to the I

16、ndian and U.S.governments in June 2023;this is the final deliverable for the readiness assessment.2 The report proceeds by considering why India wants to compete in the global semiconductor industry and examining the opportune moment that stands before the country,before turning to consider the curr

17、ent state of play in Indias semiconductor sector and assessing its semiconductor policy environment.The report then pivots to examine the state of Indias regulatory and business environment,considering topics from talent and infrastructure to taxes and tariffs,before exploring the key supporting act

18、ors in Indias semiconductor ecosystem.It then examines the strategies several Indian states have fielded in an attempt to attract semiconductor activity and provides lessons from several U.S.states in that regard.The report closes with policy recommendations.WHY INDIA SHOULD SEEK TO DEEPEN ITS PRESE

19、NCE IN GLOBAL SEMICONDUCTOR VALUE CHAINS India faces a unique moment and opportunity in time.The aftershocks from the COVID-19 pandemic;increasing efforts globally to rebalance supply chains;rising labor and broader production costs in China;transformative,emerging technologies such as artificial in

20、telligence(AI)and electric vehicles(EVs);demographic shifts;and a host of other factors have led multinational enterprises to reassess the structure of their global value chains in a quest for enhanced diversification,resilience,sustainability,and cost competitiveness.Likewise,governments are paying

21、 dramatically increased attention to the supply chains that underpin their businesses and citizens ability to access critical and advanced emerging technologiesfrom biopharmaceuticals and information and communications technology(ICT)products to advanced batteries and critical minerals.As multinatio

22、nal businesses react to these trends and look to make their supply chains more diverse and resilient,governments have an opportunity to present their countries value proposition for how they can compete in high-tech industries to a global economy thats reorganizing in real time.3 INFORMATION TECHNOL

23、OGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 4 Amidst this rapid reordering of the global economy,Indias value proposition as an investment and production destination for high-tech industriesfrom clean energy and medical devices to electronics and ICT hardwareis particularly strong.The country has a

24、lready recorded notable early successes,particularly attracting Apples eye to the extent it may produce up to one-quarter of its phones in India by 2025.4 Moreover,for several decades,India has been the home of significant semiconductor design activity,accounting for 20 percent of the worlds chip de

25、sign talent.More recently,India has turned its attention to semiconductor manufacturing,notably semiconductor fabrication(“fabs”)and post-production assembly,test,and packaging(ATP),where semiconductors are tested and assembled into sophisticated packages.5 Here too India has notched a considerable

26、success,with the announcement from semiconductor memory chip manufacturer Micron in June 2023 that it will launch a major ATP facility for dynamic random-access memory(DRAM)and NAND products in Sanand,Gujarat.6 Semiconductor manufacturers may consider as many as 500 discrete factorsranging from coun

27、tries and states talent,tax,trade,and technology policies to labor rates and laws and customs policiesas they evaluate where to situate multi-billion-dollar fab investments.But global competition for semiconductor investment is fierce,as nationsand the states,regions,and cities thereinhave become pr

28、ice takers,not price makers,in the intense quest to attract globally mobile investment in high-value-added,high-tech industries,such as semiconductors.7 In fact,leading semiconductor manufacturers may consider as many as 500 discrete factorsranging from countries and states talent,tax,trade,and tech

29、nology policies to labor rates and laws and customs policiesas they evaluate where to situate multi-billion-dollar fab investments.Fabricating semiconductors is perhaps the most complex manufacturing activity humanity undertakes;the design and operation of fabs is so nuanced and sophisticated that i

30、t takes into account details as minute and granular as the gravitational effects of the moon on assembly lines.And so,in a like manner,if countriesand states or regions thereinwish to compete successfully for semiconductor-sector investment,then the policy and business environments they foster must

31、be equally finely tuned,well-crafted,and deeply sophisticated,a fact that applies equally to the United States as to China,Korea,and Japanor India.To win semiconductor investment,locales not only need to get some 500 factors right,but the strength of their“checkmarks”on those 500 factors needs to be

32、 stronger than other countries that are courting the same investment.That is the challenge confronting India:to create a business and policy environment that doesnt just attract one-off investments,but that fosters the emergence of a deep and vibrant semiconductor ecosystem active in all the key pha

33、ses of semiconductor productionresearch and development(R&D),design,fabrication,and ATPwith a network of suppliers and supporting institutions that power a globally cost-and innovation-competitive semiconductor ecosystem.Semiconductors represent the heartbeat of the modern global digital economy,an

34、industry thats expected to grow to become a$588 billion industry in 2024 and which stimulates another$7 trillion in global economic activity annually and underpins a range of downstream applications such as AI and big data.8 And because semiconductors power(both literally,through power management,an

35、d figuratively,through computational capacity)virtually every modern deviceINFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 5 from smartphones and EVs to toaster ovensit means that the countries,and the industries and enterprises therein,that have access to the most-sophisticated semi

36、conductors enjoy a first-mover advantage in the ability to develop and manufacture the most-innovative products.Put simply,semiconductors are foundational to the ability of enterprises and nations alike to compete in the global economy;they truly represent the“commanding heights”of the modern global

37、 digital economy.It should also be observed that semiconductorsand the capacity to continue to innovate and deploy themwill be indispensable to helping society achieve global climate and sustainability goals.For instance,studies estimate that ICT solutions will help reduce global greenhouse gas emis

38、sions by up to 15 percent by 2030 while being responsible for only 1.4 percent of the global carbon footprint.9 As this report details,Indias government is prepared to offer some of the worlds most generous investment incentives to attract greater levels of semiconductor investment.However,given the

39、 myriad challenges India faces and limited budget it possesses(much like the United States or any other country,frankly),why should India prioritize semiconductor investmentespecially capital-intensive manufacturing facilitiesover many other competing priorities?The question merits a considered resp

40、onse;the following evaluates five key justifications.Semiconductors are foundational to the ability of enterprises and nations alike to compete in the global economy;they truly represent the commanding heights of the modern global digital economy.First,theres certainly a prestige factor at play.Indi

41、a is to be celebrated and commended for its recent lunar vehicle landing,making it one of only four nations to achieve that incredibly impressive feat.10 That India should now wish to join a select group of nationsless than two dozenthat manufacture semiconductors at commercial scale is certainly un

42、derstandable.Moreover,Indian Prime Minister Narendra Modi has made attracting semiconductor manufacturing activity a key commitment of his administration and a key objective of his“Make In India”(part of the“Atmanirbhar Bharat”or“self-reliant India”)program,which seeks“to promote India as the most p

43、referred global manufacturing destination.”11 Second,India runs a large trade deficit in semiconductor products,which it seeks to balance through greater levels of domestic production.Indias imports of electrical and electronics equipment reached$67.6 billion in 2022.12 This included an estimated$15

44、.6 billion in semiconductors,a near doubling from Indias$8.1 billion in semiconductor imports the prior year.13 Over the past three years,Indias chip imports have increased by 92 percent.14 An estimated 70 percent of Indias electronics imports come from China and Hong Kong,with an additional 13 perc

45、ent coming from Singapore.15 Third,bolstering manufacturing activity in high-tech sectors such as semiconductors not only provides a significant source of high-value-added,high-paying employment opportunities,but can produce significant employment,and economic,multiplier effects.This is certainly tr

46、ue in the United States,where the semiconductor industrys jobs multiplier is 6.7,meaning that for each U.S.worker directly employed by the semiconductor industry,an additional 5.7 jobs are supported across the wider U.S.economy.16(In total,the U.S.semiconductor industry supports 277,000 jobs directl

47、y and 1.6 million more jobs indirectly.)Those jobs are highly productive,INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 6 and thus remunerative,with the average U.S.semiconductor job paying$177,000,compared with the average U.S.wage of$61,900.17 Semiconductors also produce significa

48、nt economic multipliers.As one report finds,“Every dollar added to U.S.GDP by the electronics manufacturing sector creates$1.32 elsewhere in the economy.Additionally,every dollar in electronics manufacturing output generates$1.05 of output elsewhere in the economy.”18 Just as U.S.semiconductor jobs

49、produce and pay more,and deliver significant economic and employment multipliers,so too would and do Indian semiconductor-sector jobs.Indeed,one study finds that the employment multiplier for jobs in Indias computer,electronic,and optical equipment industry is 16.19 Fourth,semiconductor manufacturin

50、g can produce tremendous spillover and“learning by doing”effects across the rest of Indias high-tech economy.As Carnegie Indias Konark Bhandari noted,“A robust manufacturing base ensures that the knowledge gained from learning by doing is transferred to domestic firms as well.”20 Or,as Rajat Kathuri

51、a,former director and CEO of the Indian Institute for International Economic Relations(ICRIER),explained,“Economic growth is influenced by levels of sophistication in a countrys production.The nature of production matters for economic growth.Countries that specialize in the production of goods with

52、higher productivity are better placed to achieve higher growth.”21 Kathuria noted how the economists Ricardo Hausmann and Bailey Klinger developed the notion of“product space”to illustrate how a countrys initial pattern of specialization impacts their ability to expand competitiveness in adjacent in

53、dustries.As Hausmann and Klinger wrote,“The location in the product space is a crucial determinant of a countrys potential to develop comparative advantage in certain products.Countries progress by exploiting the relatedness of products requiring similar inputs including skills and technology.”22 Th

54、us,countries economic development,“is not merely advancement in general attributes such as education,health,rule of law and infrastructure but also the development of ancillary support systems and activities that are specific to an industry.”23 For India,its extant capabilities in semiconductor desi

55、gn and electronics manufacturing can serve as a platform to enter the manufacturing-oriented elements of semiconductor production.If India can enter the semiconductor manufacturing“product space,”this in turn could power its future ability to compete in other high-tech manufacturing sectors,such as

56、robotics.Finally,there are significant“learning by doing”effects in the policymaking strategies needed to attract investment in high-tech industries such as semiconductors.Indeed,the knowledge spillovers for Indian policymakers of what it takes to attract semiconductor manufacturingto the extent it

57、informs how India competes for other high-tech sectors such as biopharmaceuticals or renewable energy and how it manages its broader policy and business environmentare likely to be far more powerful than even the technical“learning by doing”that occurs on the factory floor.INFORMATION TECHNOLOGY&INN

58、OVATION FOUNDATION|FEBRUARY 2024 PAGE 7 INDIAS SEMICONDUCTOR MOMENT This section explores the market opportunity that exists for India in semiconductors and electronics and how well it complements the currently ongoing reorganization of global high-tech value chains.Rapidly Expanding Market Size Ind

59、ias semiconductor marketplace is rapidly growing.According to a report from IESA and Counterpoint Research,Indias semiconductor consumption is expected to reach$64 billion by 2026,tripling in size from$22 billion in 2019,with a projected 16 percent compound annual growth rate(CAGR)over that period.2

60、4 That amount is expected to nearly double again to reach$110 billion by 2030,at which point analysts anticipate India will account for an approximately 10 percent share of direct global semiconductor consumption.25 By 2030,analysts predict wireless communications($26.5 billion),consumer goods($26 b

61、illion),and automotives($22 billion)will be the largest components of Indias semiconductor market.(See figure 1.)Figure 1:Indias semiconductor market,2022(actual)and 2030 forecast($billions)26 Source:Invest India In 2021,only 9 percent of Indias semiconductor components were locally sourced.27 India

62、 intends to increase its local sourcing of semiconductors to 17 percent by 2026,which would translate into a sixfold increase in locally sourced semiconductor revenue between 2019 and 2026.28 However,India already represents a far larger market for semiconductors than is generally recognized.Thats b

63、ecause,although statistics show that only about 4 percent of direct global semiconductor sales occurred in India in 2022,India actually already accounts for closer to 10$8.5$26.5$8.5$26.0$6.6$22.0$4.4$16.1$8.2$11.0$-$20$40$60$80$100$12020222030OtherWireline CommunicationsComputerAutomotive Electroni

64、csConsumerWireless CommunicationsINFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 8 percent of real global semiconductor consumption.29 Thats because,in many cases,the bill of lading for a semiconductor may indicate a point of sale in Hong Kong or Singapore,but that semiconductor is p

65、ut into an electronic design kit and immediately shipped to India for integration into an electronic device or consumer good.Even though those goods may be re-exported to third-party markets,the transformation or installation of the semiconductor into a final good is often happening in India.Moreove

66、r,analysts expect Indias demand for semiconductors to grow rapidly as Indian electronics production continues to flourish.Indias electronics production,valued at$101 billion in 2022,is expected to triple to$300 billion by 2026,including an anticipated doubling of mobile phone production from$44 bill

67、ion in 2023 to an estimated$110 billion in output by 2026.30 India has already doubled its share of global smartphone production(to 19 percent)over the past five years,and is now the worlds second-largest mobile phone manufacturer.Indias exports of electronics(which tripled from March 2018 to April

68、2023),are expected to grow another nearly fivefold over the next three years,from$25 billion in FY 2023 to$120 billion in FY 2026.31(For reference,Indias total quarterly merchandise exports have remained above$100 billion for nine consecutive quarters since Q2 FY 2022.)32 Many interviewees emphasize

69、d that,going forward,theres not an emerging economy anywhere in the world that offers the scale India does as a rapidly growing marketplace for consumer and business demand alike,presenting a ready-made market to consume the semiconductors India aims to produce.India is now the worlds most-populous

70、country,with over 1.4 billion citizens.India overtook the United Kingdom to become the fifth-largest economy in September 2022,and if current growth rates persist,India could become the worlds third-largest economy by 2027,and possibly second-largest by 2075.33 The International Monetary Fund(IMF)pr

71、edicts that India will be the fastest-growing of the worlds 20 largest economies in 2023.34 No emerging market in the world offers the scale India does as a rapidly growing marketplace for consumer and business demand alike,presenting a ready-made market to consume the semiconductors India hopes to

72、produce.Indicative of Indias growing market power,its consumer market is set to become the worlds third largest by 2027,growing at 7.8 percent annually,with analysts predicting a 29 percent increase in real Indian household spending by then.35 By that year,Indias household spending should exceed$3 t

73、rillion,as disposable income rises by a compounded 14.6 percent annually until 2027,when a projected 25.8 percent of Indian households will reach$10,000 in annual disposable income.36 According to BMI Research,one-third of Indias population in 2027 will be 20 to 33 years of age,with this demographic

74、 spending heavily on electronics,with spending on telecommunications growing to$76.2 billion due to a“technology-literate,urban middle class with increasing amounts of disposable income that would encourage expenditures on aspirational products such as consumer electronics.”37 The number of Indian c

75、itizens owning a smartphone is expected to double from 601 million today to 1.2 billion by 2027.Other sectors will drive semiconductor consumption as well.For instance,Indias$222 billion automotive sector,which produces 32.5 million vehicles(including two-and three-wheel vehicles and quadricycles),i

76、s expected to grow to$300 billion by 2030.38 Only 8 percent of INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 9 Indian households own a car today.39 India is also one of the worlds fastest-growing electric vehicle(EV)markets(although more than 90 percent of its 2.3 million EVs are t

77、wo-or three-wheel vehicles).40 EVs will devour semiconductors;while the average modern car has 1,400-1,500 chips,the average EV will have about 3,000.41 Similarly,Indias medical device market,currently Asias fifth-largest,is expected to nearly quintuple,from$11 billion today to$50 billion by 2030.42

78、 In summary,Indias rapidly growing economy will likely dramatically expand its demand for semiconductors in the coming years,making the country potentially more attractive to semiconductor producers.A final point on growing demand is that,aside from Indias market specifically,analysts expect the glo

79、bal semiconductor industry to also continue to boom in coming years.As the McKinsey Global Institute(MGI)explained,“The global semiconductor industry is poised for a decade of growth and is projected to become a trillion-dollar industry by 2030.”43 Over 70 new semiconductor fabs are expected to be c

80、onstructed worldwide by 2030 to satisfy this growing demand.44 India will certainly be one of the many counties competing for this growth.Reorganization of Global High-Tech Value Chains Multinational companies are reassessing their global value chains in real time in response to multiple factors,inc

81、luding the COVID-19 pandemic;natural disasters or challenges including earthquakes,floods,freezes,droughts,and climate change;geopolitical risk and instability;and emerging threats such as cybertheft and terrorism.As a recent MGI study concludes,enterprises have learned over the past several years t

82、hat the risk,severity,and expense from supply chain disruptions have all increased.45 MGIs report estimates that companies should expect supply chain disruptions of one to two weeks occurring at least once every 2 years;2 to 4 weeks occurring once every 2.8 years;1 to 2 months every 3.7 years;and 2

83、months or more every 4.9 years.46 Nations now confront an opportunity to present their value proposition for how they can compete in high-tech industries to a global economy thats reorganizing in real time.In recent years,growing geopolitical tensions have resulted in multinational companies turning

84、 to a“China-plus-one”(or“China-plus-two”)strategy in order to bolster their supply chain resilience.For instance,consulting firm Kearneys“2022 Reshoring Index”report finds that“80 percent of companies across almost all industries are now on a path to reshore.”47 In fact,in a survey released by the A

85、merican Chamber of Commerce in Shanghai in September 2023,some 40 percent of companies responded that they“are moving investments elsewhere from China.”48 A study conducted by the UBS Evidence Lab finds that 71 percent of U.S.companies with manufacturing in China were either in the process of or pla

86、nning to shift operations to other countries.49 And another survey finds 87 percent of U.S.firms expressing pessimism regarding the outlook for the relationship between the worlds two largest economies.50 Overall,according to MGI surveys,93 percent of global business executives are seeking to bolste

87、r their firms supply chain resilience,and 44 percent are willing to do so at the expense of short-term profitability.51 As a result of these forces,MGI estimated that 16 to 26 percent of world exports,worth between$2.9 billion and$4.6 billion in 2018,are likely to have moved their manufacturing base

88、 between 2018 and year-end 2023.52 Similarly,a Digital Supply Chain INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 10 Institute and Bain&Company study finds that 60 percent of companies identify flexibility as a priority,up from 35 percent.53 Moreover,41 percent value resilience(up

89、from 14 percent)and 36 percent value reducing cost(down from 63 percent).54 Thats one reason Kearney found that India(along with Cambodia,Thailand,and Vietnam)is emerging as“one of the early beneficiaries of the move away from semiconductor manufacturing in China,and to a lesser extent,Taiwan.”55 Si

90、milarly,as the Economist Intelligence Unit wrote,“India is well-placed to benefit from geopolitical and economic trends that are driving the diversification of Asias manufacturing supply chains.”56 As an alternative production location,India offers companies a large domestic market with a population

91、 of over 1.4 billion people,competitive labor costs,and a skilled labor force.57 In fact,one study finds that,for the year 2022,average Indian labor rates in“consumer electronics technology”manufacturing jobs averaged$2.19,a lower rate than in peer countries such as Mexico and Vietnam.58 Moreover,th

92、e Indian government is providing incentives and concessions to encourage foreign direct investment(FDI),benefitting companies that establish production hubs in the country.59 Early evidence suggests India may be beginning to benefit from these trends.Indias share of total Asian inbound FDI flows inc

93、reased from 14 percent in 2018 to 22 percent in 2019.(See figure 2.)In comparison,other major Asian economies share of FDI has stayed relatively stable,with the exception of Singapore.Figure 2:FDI(inward flow),share of Asian total,2013202260 Source:United Nations Conference on Trade and Development

94、Apple has been one of the first movers,and may rely on India for as much as one-quarter of its iPhone production by 2025,in part driven by disruptions to its operations in China.61 Morgan-5%0%5%10%15%20%25%2013201420152016201720182019202020212022SingaporeIndiaJapanIndonesiaKoreaVietnamMalaysiaThaila

95、ndPhilippinesINFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 11 Stanley estimated that Chinas COVID policies will result in an“iPhone Pro model shortfall at about 6 million units this year 2022.”62 Others have estimated that Chinas COVID regulations have resulted in iPhone shortages

96、that“reached as low as 35 percent of typical holiday inventory”in stores.63 Google is similarly“scouting for suppliers in India to assemble its Pixel smartphones to diversify beyond China.”64 Indeed,a not-insignificant portion of the increased inbound FDI is flowing into Indian manufacturing activit

97、y,complementing increased domestic investments in the sector.In fact,whereas manufacturing investments accounted for nearly 45 percent of all investment in India in 2005,this share fell to barely 20 percent from 2011 to 2019,but now the share has rebounded back to over 35 percent since 2019.65(See f

98、igure 3.)Figure 3:Manufacturing investment in India as share of total investment,2005202166 Source:Economist Intelligence Unit;Centre for Monitoring Indian Economy The increasing FDI into India signals that some companies have already diversified their supply chains and established production hubs i

99、n the country,as evidenced also by Indias increased export levels.From 2013 to 2021,Indias provision of intermediate goods to the global economy increased from$105.2 billion to$135.8 billion,signaling that more companies are relying on the countrys manufacturing capabilities.(See figure 4.)Moreover,

100、from 2017 to 2022,Indias total exports of goods increased from$294 billion to$452 billion,meaning that countries are increasingly turning to India for its products.(See figure 5.)In particular,Indias exports to the United States almost doubled from$46 billion to$80 billion in the same period.In summ

101、ary,the current geopolitical moment offers a tremendous opportunity for India to attract increased investment in globally mobile high-tech industries.0%5%10%15%20%25%30%35%40%45%50%200520072009201120132015201720192021INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 12 Figure 4:Indias

102、exports of intermediate goods to the world(billions)67 Source:World Bank,World Integrated Trade Solution(WITS)Figure 5:Indias total exports to the world(billions)68 Source:World Bank,World Integrated Trade Solution(WITS)$0$20$40$60$80$100$120$140$16020132021$0$50$100$150$200$250$300$350$400$450$5002

103、0172022INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 13 THE SEMICONDUCTOR VALUE CHAIN Semiconductorsthe worlds fourth-most-traded producthave perhaps the most complex and geographically dispersed value chain of any industry in the world.69 When all production phases are considered,

104、the entire semiconductor production process extends from material procurement to end-product manufacturing.70(See figure 6.)However,this report focuses mainly on the following facets of the semiconductor production process:semiconductor R&D and chip design,semiconductor fabrication,and semiconductor

105、 ATP.The semiconductor design process includes important additions of core intellectual property(IP)which consists of reusable modular portions of designs,allowing firms to license and incorporate them in their designsas well as electronic design automation(EDA)software tools.Figure 6:Facets of the

106、semiconductor value chain71 Source:Graphic Courtesy McKinsey Global Institute Distinctive business models characterize the industry.Integrated device manufacturers(IDMs)represent firms that conduct all key facets of semiconductor manufacturing,especially design and fabrication,internally.Infineon,In

107、tel,Micron,Renesas,Samsung,SK Hynix,and Texas Instruments are leading IDMs.Meanwhile,many semiconductor design firms(such as AMD,NVIDIA,and Qualcomm)are“fabless,”meaning they have no production capability,but outsource production to“foundries”such as TSMC or Global Foundries.72 The three most-preval

108、ent types of semiconductors are logic chips,memory(usually DRAM)chips,and analog INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 14 chips(those that generate a signal or transform signal characteristics,and are especially prevalent in automotive and audio applications).The most-sophi

109、sticated semiconductors operate at the smallest process node sizes(measured in nanometers).The most-sophisticated leading-edge logic chips operate at 23 nm,while older-process-generation legacy chips may be designed above 28 nm.In considering the value added by the various facets of semiconductor ma

110、nufacturing globally$445 billion in total output as of 2019analysts estimate that fabrication adds 38.4 percent of global value to the industry($171 billion),followed by design activities at 29.8 percent($132 billion),production of fab tooling at 14.9 percent($66 billion),and ATP at 9.6 percent($43

111、billion).Thats rounded out by wafers(2.5 percent),ATP tools(2.4 percent),EDA(1.5 percent),and core IP(0.9 percent).(See figure 7.)(As noted,the global semiconductor industry is expected to grow to$588 billion in 2024,but these percentages still reflect the relative value addition contributed by vari

112、ous core activities in the semiconductor supply chain.)73 Figure 7:Value added by segments of the semiconductor production process,2019($445 billion,total)74 Source:Center for Security and Emerging Technology INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 15 INDIAS SEMICONDUCTOR STA

113、TE OF PLAY AND MARKET OPPORTUNITIES India is currently strongest in the R&D and design facets of the semiconductor value chain but desires to build expanded manufacturing capability,starting with the ATP market and seeking to move into the semiconductor fabrication side of the business.A subsequent

114、section of this report examines the broader semiconductor ecosystem support actors in India(such as research institutes and materials and components suppliers),while this section focuses on the key phases of R&D/design,manufacturing(fabs and ATP),and semiconductor manufacturing equipment.As figure 8

115、 shows,India already has a number of important players operating in each of these phases of the semiconductor value chain.Figure 8:Key actors in Indias semiconductor ecosystem Semiconductor R&D and Design Integrated circuit(IC)design is undoubtedly Indias greatest semiconductor industry strength.The

116、 country employs approximately 20 percent of the worlds semiconductor design engineers,or about 125,000 individuals.75 About 3,000 individual ICs are designed in India each year.76 In terms of very large-scale integration(VLSI)which refers to the process of creating an IC by combining millions or bi

117、llions of MOS(metal-oxide)transistors onto a single chipIndia accounts for 15 percent of their global production.77 Almost every one of the worlds top-25 semiconductor design companiesincluding Intel,Texas Instruments,NVIDIA,and Qualcommhave design and R&D centers in India.78 Much of this presence i

118、s centered in the south Indian city of Bangalore(Bengalaru)in the state of Karnataka.INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 16 Texas Instruments(TI)was the first global technology company to set up an R&D center in India,in Bangalore in 1985.79 TI retains one of the largest

119、semiconductor presences in the country,employing over 2,500(mainly engineers)and working closely with over 1,000 engineering colleges across the country.Synopsys works in India to provide solutions across markets including high-performance computing,automotive,security,and manufacturing solutions by

120、 employing over 5,500 across the country.The companys recent announcements include MOUs with IIT Bombay and IISc Bangalore on research partnerships,educational software and curriculums,and faculty development programs to support workforce development.80 Additionally,through collaborations with the I

121、ndian governments Chips to Startup(C2S)and Synopsys SARA programs,Synopsys is working with more than over 400 universities for talent creation in various domains.81 In July 2023,semiconductor developer Advanced Micro Devices(AMD)announced a five-year,$400 million investment in India that includes a

122、new campus in Bangalore that will serve as the companys largest design center,as well as the addition of approximately 3,000 new engineering roles,bringing AMDs total workforce in India to nearly 10,000 by 2028.82 Beyond IC design,India is also a hub of semiconductor manufacturing equipment design.I

123、n 2000,Lam Research Corporationa U.S.manufacturer of equipment for thin film deposition,plasma etch,photoresist strip,and wafer cleaning processeslaunched Lam Research India.The unit,which now employs over 2,000 Indian workers,focuses on software development and support,hardware engineering,global o

124、perations management,and analytics.In particular,Lam Indias hardware team designs subassemblies and subsystems for all Lams product lines.83 In June 2023,Lam announced plans to train up to 60,000 Indian engineers through its Semiverse Solutions virtual fabrication platform to accelerate Indias semic

125、onductor education and workforce development goals.In support of the skilling initiative,Lam signed an MoU with the Centre for Nano Science and Engineering(CeNSE)at the Indian Institute of Science(IISc)in Bengaluru to support skilling of 60,000 Indian engineers.84 Lam also proposed a$25 million inve

126、stment to set up a new lab in the state of Karnataka.85 In June 2023,Applied Materials,another semiconductor toolmaker,announced plans to invest$400 million over four years to launch a new engineering center in India,which will support more than$2 billion of planned investments and create over 500 n

127、ew advanced engineering jobs.86 Most of the design work performed in India services foreign multinationals,and hasnt thus far given rise to a significant local design ecosystem,although thats slowly evolving.As of February 2023,India had fielded an estimated 21 start-ups between the semiconductor de

128、sign and manufacturing space,with that number expected to grow to 50 by the end of 2023.87 One such start-up of note is Mindgrove Technologies,a Chennai-based systems-on-a-chip(SoC)developer specializing in designing 28 nm chips for connected devices such as automobiles,medical devices,wearables,sma

129、rt electricity and water meters,and home appliances.88 As Sharan Srinivas J,Mindgrove Technologies co-founder and chief technology officer(CTO),explained,“We felt the competitive market featured a set of players that prioritized low-cost,power-optimized,reliable chips,but with slower processing spee

130、ds,while other competitors emphasized more-powerful processing speeds,but which increased cost and power consumption.”89 Mindgrove seeks to target the middle of those markets,developing SoC products“for a market which is emerging from entry level and moving to a higher level of optimization,INFORMAT

131、ION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 17 premiumization,and performance”and“which are tailored initially to India-specific use cases,markets,and operating environments(i.e.,temperate,moisture,etc.).”90 Mindgrove estimates that chip-based biometrics solutions alone will represent a$

132、500 million market in India.Other notable Indian design start-ups include Saankhya Labs and Signalchip.Established in 2006,Saankhya Labs was Indias first fabless semiconductor solutions company and developer of the worlds first production software-defined radios chipsets.91 A premier wireless commun

133、ication and semiconductor solutions company,Saankhya develops products for broadband,satellite,and broadcast applications including 5G,Direct To Mobile(D2M)broadcast,rural broadband connectivity,and satellite communication modems for Internet of Things(IoT)applications.Similarly,Signalchip is a fabl

134、ess design company developing innovative chips to enable high-speed wireless communication standards such as 4G-LTE/3G-WCDMA and 5G-NR.92 Most of the semiconductor design work performed in India services foreign multinationals,and hasnt thus far given rise to a significant local design ecosystem.Ind

135、ias domestic fabless design ecosystem has considerable room to grow,if it can overcome certain barriers.One such barrier is Indias lack of semiconductor manufacturing capabilities(i.e.,foundries),such that Indias chip designers must send their designs abroad for prototype development and testing.Cul

136、turally,as Mindgrove CEO Shaswath TR explained,“Our semiconductor designers are great at receiving a specification and designing it,but historically they havent been great at conceptualizing that spec themselves.So whats really required for domestic Indian players to get competitive in building thei

137、r own semiconductor design businesses is a mindset change.”93 Indias fledgling start-up culture,while growing,has faced challenges attracting venture capital(VC)investment.One article notes that“venture capitalists typically refrain from investing in a semiconductor startup because it demands consis

138、tent funding with a long time before the returns start materializing,”as long as 8 to 10 years.In 2022,VC investment in India declined by 38 percent to$20.9 billion,down from$33.8 billion.While certainly some of that drop was COVID-19 induced,Indias level of VC investment was considerably lower than

139、 the$69.5 billion invested in China in 2022,with India accounting for only 5.1 percent of all global VC investment in 2022.94 Certainly,more liquid risk capital markets will be needed if India is to meet its fabless semiconductor design aspirations.Compound semiconductors,which are semiconductors ma

140、de from two or more elements from the groups of the periodic table,represent an emerging area of semiconductor design innovation.95 Compound semiconductors such as silicon carbide(SiC)or gallium nitride(GaN)are particularly well suited for applications requiring both high power and frequency,as they

141、 limit energy loss.As MGI explained,“Increased sustainability and electrification is spurring the adoption of SiC and GaN power devices,and the CAGR for both categories is expected to far exceed the 5 percent growth forecasted for the power semiconductor market as a whole.”96 The market for GaN semi

142、conductors reached$2.17 billion in 2022 and is expected to grow at a 25.4 percent CAGR from 2023 to 2030.97 INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 18 This emerging field could be one in which Indian competitors can compete.For instance,the Indian start-up Agnit Technologies

143、is working on developing GaN semiconductors,particularly relevant for 5G amplifiers.But as Agnit Technologies CEO Hareesh Chandraeskar noted,“Funding and lack of infrastructure are the prime challenges.”98 Semiconductor Assembly,Test,and Packaging ATP generally occurs through one of two business mod

144、els:1)as in-house ATP services performed by integrated device managers and foundries after fabrication,or 2)by outsourced assembly and test(OSAT)firms,which perform ATP activities for third-party customers.99 ATP is typically labor intensive and lower value added than design and fabrication,explaini

145、ng why,historically,firms have set up ATP facilities to a larger extent in developing countries.100 By firm headquarters,Taiwan and the United States lead in terms of the companies instigating the most global ATP activity,accounting for 29 and 28 percent of the market,respectively,in 2019,followed b

146、y China(14 percent),South Korea(13 percent),Japan(7 percent),and Malaysia(5 percent).(See figure 9.)In terms of OSAT,Taiwan dominated,with their enterprises accounting for over half the market,followed by China(21 percent)and the United States(15 percent).In turn,the United States led in IDM ATP act

147、ivity(43 percent),followed by South Korea(23 percent)and Japan(13 percent).Figure 9:IDM ATP,OSAT,and all ATP country market share,by firm headquarters,2019101 Source:Center for Security and Emerging Technology However,the above data considers only countries share of ATP instigation by where firms ar

148、e headquartered.In terms of where ATP is actually conducted,Asia accounts for 81 percent of total global ATP activity,with China alone accounting for 38 percent of global ATP activity,and Taiwan about 37 percent.102 In fact,of the 373 OSAT facilities worldwide(as of November 29%52%4%28%15%43%14%21%6

149、%13%23%7%13%5%10%0%20%40%60%80%100%All ATPOSATIDM ATPTaiwanUSAChinaS.KoreaJapanEuropeMalaysiaSingaporeOtherINFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 19 2022),111 were located in China and 107 in Taiwan.(Forty-six are located in the Americas,primarily the United States,but the U

150、nited States accounts for only 3 percent of the market.)103 However,as Chris Miller,renowned author of Chip Wars,observed,“If you look at the way that Korea,Taiwan,and Singapore entered the chip industry,they entered with assembly,testing and packaging before moving to fabrication.”104 He continued,

151、“Theres a lot of scope for India to win investments in that sphere,particularly because its right adjacent to the device assembly,smartphone assembly,and PC assembly,where India is also in the early stages of winning a lot of market share.”105 However,while ATP is certainly more labor intensive than

152、 semiconductor manufacturing,executives interviewed observed that labor only accounts for approximately 5 percent of total ATP production costs.They also noted that India is cost competitive with China in this regard,with one executive noting that his firms assessment concluded that Indian hourly la

153、bor costs(in ATP)are within$0.01 of Chinas.In June 2023,Indias efforts to move into the more manufacturing-oriented elements of the semiconductor ecosystem paid dividends,with memory chip maker Micron announcing it would undertake a major investment to build a semiconductor assembly and test facilit

154、y in India,with the company contributing approximately 30 percent of the cost(up to$825 million),the Indian government contributing 50 percent($1.375 billion),and the state of Gujarat kicking in 20 percent($550 million).106 Micron began construction on the facility in September 2023,with the project

155、s first phase to be operational by late 2024 and a second phase coming online in the latter half of the decade.The facility,which will focus on transforming wafers into ball grid array(BGA)integrated circuit packages,memory modules,and solid-state drives,is expected to create up to 5,000 new direct

156、Micron jobs and 15,000 community jobs over the next several years.107 Analysts view Microns investment as a significant catalyst toward Indias semiconductor ambitions.108 Indeed,after Micron announced its investment,the Indian government received at least three to five additional ATP project proposa

157、ls(as well as proposals from compound semiconductor and memory players).109 As Indian communications and IT minister Ashwini Vaishnaw explained,Indias ability to attract Micron“is giving a lot of confidence to people that,yes,this is a government very clearly focused on execution,and we should see,i

158、n the coming months,a lot more interest in the Indian semiconductor story.”110 Semiconductor Fabrication Based on conclusions drawn from ITIF interviews with industry stakeholders,most were confident that India is likely to commission two to three fabs with varied technologies looking at semiconduct

159、ors at a commercial production scale at the 28 nm or above range within the next five years.Interviewees agreed that it would be some years before India is likely to field fabs producing chips at the sub-28(nm)range.By 2023,catalyzed by the official Semicon India Programme(i.e.,Indias semiconductor

160、policy)launched in December 2021,a number of conglomerates were showing interest for collaborations and considering bids to launch semiconductor fabrication facilities.Proposals have been submitted to the ISM from Singapore-based IGSS Ventures,the International Semiconductors Consortium(ISMC),and a

161、joint venture between Vedanta Group and Taiwans Foxconn.However,for various reasons,those proposals have yet to reach the desired fruition.The policy underwent a small revision in October 2022,which both made it more attuned to ease of doing business aspects and enhanced the incentive packages for s

162、emiconductors.Indeed,INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 20 coming on the heels of the Micron announcement,Indian officials revealed that they expect to receive multiple“high-quality”proposals for semiconductor fabrication facilities.111 In particular,Vedanta,a diversifie

163、d multinational mining company,recently confirmed that its in talks with three potential technology partners in a plan to set up a foundry fab and an outsourced assembly and testing electronics hub.As Vedanta CEO Anil Agarwal told reporters at the July 2023 Semicon India summit,In 2.5 years,we will

164、give you Vedanta made-in-India chips.”112 While India might wish to be manufacturing semiconductors at the sub-7 nm leading edge,it need not necessarily be,for theres a large and compelling global and domestic market for legacy chips,and theres likely a sweet spot for India to produce chips particul

165、arly suited for automotive,white goods,and industrial applications such as power base stations,solar panels,and wind turbines.In fact,the majority of chips sold worldwide are legacy chips(with two-thirds of them using technologies commercialized before 2005)and industries such as automotive,medical

166、devices,consumer electronics,infrastructure,industrial automation,and defense relying heavily on them.113 In fact,95 percent of the chips used in the automotive industry are legacy chips,and the global automotive semiconductor market is expected to grow from$38.7 billion in 2020 to$116.6 billion by

167、2030.114 Interviewees noted that as India expands its renewable energy production and revamps its electric grid,deploys EVs,and electrifies its railroads,there will be significant demand for legacy chips in this space.Indeed,as one report notes,“Areas like cloud computing,machine learning,connected

168、cars/automotive,IoT and AI will continue to drive the need for a new breed of chips that gives an opportunity to shift focus from improving silicon performance to increasing learning ability&decreasing power usage.”115 India would be in a prime position to manufacture these types of chips.In summary

169、,there is a strong possibility that India will break its commercial fab drought in this decade.Semiconductor Equipment India is also seeing increased interest for semiconductor equipment manufacturing.After Foxconn withdrew from the proposed deal with Vedanta to launch a fab,it signed a letter of in

170、tent with the government of Karnataka to invest Rs 5,000 crore for two projects:semiconductor equipment manufacturing(in partnership with Applied Materials)and phone enclosure manufacturing.116 SEMICONDUCTOR AND ELECTRONICS MANUFACTURING POLICY ENVIRONMENT The Indian government has extended some of

171、the worlds most generous incentives to attract semiconductor ATP and fabrication activity.In December 2022,India established the ISM,a government organization to guide the promulgation of central government policy and incentive packages to attract semiconductor-sector investment across each key phas

172、e of semiconductor production:design,fabrication,and ATP(with additional incentives to attract display fabs).117 The heart of the effort is the Rs 76,000-crore(approximately$10 billion)“Semicon India Programme,”which includes a variety of mechanisms designed to accelerate development of various face

173、ts of Indias semiconductor ecosystem.The programs flagship fiscal incentive devotes$10 billion to a match package,wherein the Indian central government offers to cover 50 percent of the project costwith the relevant INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 21 Indian state kick

174、ing another 20 to 25 percentto companies establishing semiconductor foundries(at any node level),ATP/OSAT facilities,or display fabs(e.g.,LCDs or AMOLED).Additional target sectors include MEMS(micro-electrical mechanical systems),sensors,compound semiconductors,and discrete devices.118 The Indian go

175、vernment makes the matching funds available on a“pari passu”basis,meaning the money is made available immediately upfront to the company.Indias federal government semiconductor investment package,offering this 50 percent match,is currently the worlds most generous.The Indian government has announced

176、 that it is accepting proposals under this scheme through December 2024.To accelerate the development of Indias semiconductor design ecosystem,India has created its Design-linked incentive(DLI)scheme,which offers a matching 50 percent“product-design linked”investment from the Indian government to su

177、pport enterprise launch,as well as“deployment-linked”incentives of 46 percent,based on factors such as use of Indian-made content(e.g.,printed circuit boards or indigenously produced IP)and year-over-year additionality in firm sales.The target segments for the DLI are ICs,chipsets,SoCs,systems and I

178、P cores,and semiconductor-linked designs.The DLI is designed for indigenous companies engaged in semiconductor design and IP development.The Indian government also offers Indian start-ups in this space infrastructure support tools,such as acquiring licenses for EDA tools(i.e.,helping acquire license

179、s for the software used to design integrated circuits).To support development of supply chain actors that would underpin development of Indias semiconductor ecosystem,the country has created the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors(SPECS).SPECS offers a 2

180、5 percent incentive for eligible capital equipment(CapEx),including into plant,machinery,equipment,R&D,and utilities,targeting segments such as semiconductor-grade chemicals and gases,capital goods needed in semiconductor manufacturing(e.g.,lithography tools),and engineering and R&D activities suppo

181、rting the development of semiconductor capital goods.119 Indias semiconductor investment package,offering a 50 percent match by the central government and 20 to 25 percent by the relevant state government,is currently the worlds most generous.Separately from its specifically semiconductor-focused in

182、centive packages,a key component of Indias strategy to accelerate its path to becoming a global hub for electronics manufacturing is its$20 billion Production Linked Incentive(PLI)scheme.To support electronics manufacturing,this includes$7 billion in incentive funding for:1)PLI for mobile phones,com

183、ponents,and hardware;2)CapEx-linked incentives for components and sub-assemblies;and 3)development of electronics manufacturing clusters.To support“Allied sectors,”$13 billion in PLI funds are earmarked for related sectors,including:1)advanced chemistry cells;2)automobiles and auto components;3)tele

184、communications and networking;4)solar photovoltaic(PV)cell modules;and 5)white goods.120 India launched the PLI scheme in April 2020,seeking to boost domestic manufacturing by offsetting costs in India compared with other locales.Indian manufacturers sat down with the government in 2019 and conducte

185、d a deep-dive analysis into the costs of manufacturing in India compared with comparable Southeast Asian manufacturing locations(e.g.,China,Indonesia,Malaysia,etc.),calculating an overall 89 percent handicap(based on factors such as labor,INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PA

186、GE 22 infrastructure,regulatory,etc.costs).121 The PLI offers an incentive of 46 percent(calculated based on extent of use of domestic content and increases in firms year-over-year net sales),with the opportunity to gain additional percentage points if the electronics company is sourcing inputs(e.g.

187、,parts,components,assemblies,etc.)domestically.(In theory,a firms PLI could reach as high as 11 percent.)Thus,the intent of the PLI is to accelerate the development of Indias domestic electronics manufacturing ecosystem(while replacing foreign-sourced content in the process).In total,PLI schemes are

188、 operational in 14 sectors of the Indian economy,including other flagship Indian industrial sectors such as vehicles&auto components,pharmaceuticals,steel,and textiles.122 To stimulate semiconductor-sector R&D,2.5 percent of Semicon India Programme funding has been allocated for R&D activity,especia

189、lly targeting advanced logic,packaging R&D,compound/power semiconductors,and chip design and EDA activities.123 To advance this,India has proposed establishment of a India Semiconductor Research Center(ISRC),characterizing it as an independent,nonprofit,world-class semiconductor research center.124

190、These investments are welcomed and needed,but they do point to Indias need to bolster its national R&D intensity(national R&D investment as a share of GDP).As a National Institution for Transforming India(NITI)Aayog(the Indian governments leading internal,economics-focused think tank)study itself st

191、ates,Indias R&D spend“is amongst the lowest in the world”and in fact fell from 0.8 percent of GDP in 20082009 to 0.7 percent in 2022.125 Indias BRIC peers each invest more in R&D than does India,with Brazil,Russia,and China investing around 1.2 percent,1.1 percent,and 2.4 percent,respectively.126 To

192、 meet its long-term aspirations of accelerating its innovation-based,high-tech economy,India will need to bolster its R&D investments,at both government and enterprise levels.In alignment with the National Policy on Electronics 2019(NPE-2019),the Ministry of Electronics and Information Technology(Me

193、itY)also launched the C2S initiative,which aims to train 85,000 industry-ready engineers over five years to act as catalysts for growth of domestic start-ups involved in fabless chip design.127 REGULATORY ENVIRONMENT As India seeks to expand its semiconductor industry,it will need to foster a regula

194、tory environment that provides stability,certainty,predictability,and transparency to investors(domestic and foreign alike).This section first examines lessons from Indias effort to attract semiconductor manufacturers such as Micron and then considers specific regulatory policy issues,such as taxati

195、on,labor market policy,tariffs and import policies,and customs and trade facilitation.Lessons From Attracting Microns Semiconductor ATP Investment As noted,Microns commitment to launch a world-class ATP facility represented a major victory for India.The ISM and the broader Indian government learned

196、several lessons through the process.Observers noted that Indian policymakers demonstrated flexibility in their approach,notably revising the initial Semicon India Programme by increasing the central government match from 35 to 50 percent and by making that deal available for proposals to manufacture

197、 semiconductors at any process node(whereas before the most-generous incentives were only available for proposals to manufacture leading-edge chips).Also,the ISM initially imposed a 45-day window for applications,which has now been removed(it will accept applications through INFORMATION TECHNOLOGY&I

198、NNOVATION FOUNDATION|FEBRUARY 2024 PAGE 23 December 2024).Observers also noted that the work on the Micron deal serves as an important reference,contributing to the development of contractual clauses that could be reused in future engagements.Particularly notable was how rapidly the Indian governmen

199、t,ISM,and Micron were able to affect a closure on the Advanced Pricing Agreement(APA),which specifies the tax treatment of relevant transactions(including intercompany transactions)for both the tax administrator and the taxpayers for the period covered.128 Typically,it can take multinational compani

200、es and governments three to four years to finalize these agreements,but it was possible to finalize the APA in less than six months on the strength of clear substantives that were submitted by Micron,and the diligence of the teams working on the agreement.ISM,officials from the Ministry of Finance,D

201、epartment of Revenue,Central Board of Direct Taxes(CBDT),and MeitY collectively enabled the Micron investment in India.129 In June 2023,Indias annual finance bill made an amendment to Section 65A of Indias Customs Tariff Act that raised concerns for beneficiaries of PLI schemes.Under the amendment,t

202、he Indian government removed the integrated goods and services tax(IGST)exemption on inputs imported by a duty-free bonded warehouse meant for export production,and instead planned to impose an 18 percent IGST on such goods.130 Under Indias manufacturing and other operations in a customs-bonded ware

203、house(MOOWR)scheme,in these“Customs Bonded Warehouses,”manufacturers can import(and store)components to be used in domestic production for goods intended for export purposes.MOOWR-bound imports historically did not attract any import duties or other customs taxes.131 Indias intent in creating the MO

204、OWR scheme was to reduce the cost of capital and maintain the availability of working capital to promote domestic manufacturing.132 The planned 18 percent IGST would have significantly disrupted these economics and,as a result of industry feedback,the Indian government announced in September 2023 an

205、 official exemption for the semiconductor and electronics manufacturing sector from the IGST duties under Section 65A.If India is to attract multi-billion-dollar semiconductor industry(let alone other advanced-technology industry)investments,the country will have to prioritize a regulatory environme

206、nt marked by stability,certainty,consistency,and predictabilityone that doesnt introduce business uncertainty or change the terms of investment deals over time.Evolution of Indias Regulatory Environment Indian government and state officials have underscored that Indias approach to industry has evolv

207、ed from“red tape”to“red carpet”in the fiercely contested global competition to attract high-value-added,globally mobile semiconductor industry(and broader high-tech)investment.133 While India has some ways to go here,several palpable and important improvements to Indias regulatory environment are vi

208、sible.In January 2021,India launched a“Regulatory Compliance Burden Reduction”initiative,whereby Indias central and state governments were instructed to identify,in consultation with industry,compliance procedures that were either cumbersome and could be simplified or were rudimentary or unnecessary

209、.One outcome was that an online application form to bring FDI into the country was reduced from 15 to 6.5 pages.134 INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 24 The effort culminated in July 2023,when Indias Parliament passed the Jan Vishwas(Amendment of Provisions)bill,which r

210、emoved(or decriminalized)183 provisions in 42 pieces of legislation to make doing business easier in the country.135 Prior to these changes,even inadvertent offenses,such as failing to file a business registration form,were punishable by fines and imprisonment as long as one year.Indias Commerce and

211、 Industry Minister Piyush Goyal noted that the outdated laws“have contributed to a trust deficit”(between Indian citizens and businesses and their government)and that repealing them was part of the governments efforts to improve“ease of living as well as ease of doing business”in India.136 Separatel

212、y,Indias Ministry of Commerce is currently undertaking a“Cost of Regulations”exercise that seeks to implement regulatory impact assessment(RIA)-based policies.137 The effort seeks to ease Indian processes for tasks such as starting(or closing)a business,obtaining consent to operate a factory,obtaini

213、ng electricity or water connections,getting a land registration,etc.Indias Ministry of Commerce expects to implement changes suggested from its“Cost of Regulations”initiative in the 20262027 timeframe.138 Indian government and state officials were keen to express the view that Indias approach to ind

214、ustry has evolved from“red tape”to“red carpet.”One area where Indias central government and states have already made considerable progress is in introducing single-window systems.Indias Department for Promotion of Industry and Internal Trade(DPIIT)has created a National Single Window System(NSWS)who

215、se goal is to provide a single platform to enable the identification and obtaining of approvals and clearances needed by investors,entrepreneurs,and businesses in India.The NSWS,which enables the identification,application,and subsequent tracking of approvals for all integrated states and central de

216、partments,is envisioned to reduce duplicity of information submission to different ministries,reduce compliance burdens,promote sector-specific reforms and schemes,reduce gestation period of projects,and promote ease of starting and doing business.139 Launched in September 2021,by January 2023 the N

217、SWS had made over 75,000 approvals out of 1,230,000 applications received.140(While that does represent progress,it only represents an aggregate 6 percent approval rate,suggesting a potential area for improvement.)The online NSWS portal hosts applications for approvals from 31 central departments an

218、d 22(of Indias 28)state governments.141 Mirroring the central government,many Indian states have established their own single-window clearance initiatives.For instance,Tamil Nadus Single Window Portal represents a one-stop portal for investors to electronically secure all business-related approvals,

219、licenses,and clearances,covering over 200 services and encompassing over 40 government departments/agencies.142 It provides a single point of acceptance and electronic distribution of applications to the respective authorities.As of July 31,2023,Tamil Nadu had approved 21,380 of the 23,548 applicati

220、ons received through the portal,enabling investments supporting over 360,000 jobs.143 Tamil Nadu officials have promised to make all investment project proposal decisions within 30 days.144 Likewise,Karnataka offers a single-window clearance system.145 INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FE

221、BRUARY 2024 PAGE 25 Taxation Likewise,India has made strides in reforming its tax environment.In July 2017,India significantly simplified and streamlined its tax system with the introduction of the goods and services tax(GST).146 The nationwide GST,essentially a destination-/consumption-based tax,re

222、placed what was one of the worlds most complicated origin-based indirect tax systema patchwork of value-added,sales,and excise taxes levied by Indias 28 states and the central government.147 This reform has brought myriad benefits to the Indian economy,including increased revenues,uniformity in taxa

223、tion,elimination of cascading taxes,reduced compliance burdens,and on online system of taxation.148 Indias National Council of Applied Economic Research(NCAER)has estimated that the GST has led to an increase in the size of Indias economy of 1.0 to 3.0 percent.149 India has also made strides in lowe

224、ring its corporate tax rates.As the EIU noted,“In 2019,the government reduced the standard corporate tax rate from 30%to 25%,while also offering a lower 22%opt-in tax,down from the standard rate of 30%,to eligible firms that choose not to avail themselves of certain deductions.”150 The Indian govern

225、ment also reduced the tax rate to 15 percent for any new domestic company incorporated after 2019 that will make new manufacturing investments and intends to commence production before March 2024.151(However,companies that elect to partake in this lower corporate tax are not eligible to participate

226、in other investment promotion schemes,such as SPECS or the PLI.)Indias top corporate tax rate of 25 percent in 2021 was lower than in the Philippines(30 percent),and was just slightly above Malaysias 24 percent,Indonesias 22 percent,and Thailand and Vietnams 20 percent.152 As in other facets of thei

227、r operations,investors seek a predictable tax environment.To increase predictability,India scrapped retrospective taxes,which charged for transactions in the long past.As one analyst observed,this reform“could encourage the flow of foreign investment in India and create a transparent and reliable ta

228、x regime for global investors.”153 As the EIU noted,in a positive step,“The government has moved to settle disputes over retrospective taxation with foreign companies,which had acted to unnerve investors.”154 India has also moved to offer R&D tax credits,another important instrument to encourage bus

229、iness investment.In a study of 34 countries,ITIF found that India ranked 26th in terms of R&D tax subsidies,with an R&D subsidy rate of 8.2 percent,which is slightly lower than the U.S.rate of 9.5 percent rate and considerably below the 16.6 percent in the comparison group(excluding the United State

230、s).155 Further improvements in this area could boost Indias attractiveness as a semiconductor investment destination.Considering tax issues,it should also be noted that in the special economic zones(SEZs)spread across Indias states,state taxes on goods and servicesalong with some national taxesare e

231、xempted or discounted for a certain period(usually 510 years).Some states have also eased labor laws within the SEZs.156 For instance,Gujarat has offered an amendment to industrial dispute legislation to allow flexible employment in SEZs.Labor Policy India has made considerable strides in reforming

232、its labor market policies to encourage investment.As ITIF wrote in a 2013 report on the Indian economy,“Indias 51 central and 170 state labor statutessome of which pre-date independencemake it hard for firms to fire INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 26 underperforming w

233、orkers.”157 It cited Indian businessman Jaithirth“Jerry”Rao as observing,“There are no clear rules for lay-offs.In order to lay off workers,an employer needs the approval of the government in power.”158 Approval of the government needs to be sought to shut down any factory,as well.Fortunately,times

234、have changed considerably over the past decade with regard to Indian labor market policies.In particular,major reforms undertaken from 20192020 amalgamated 29 pieces of labor legislation into four comprehensive labor codes.159 As the EIU noted,“The codes simplify compliance by ensuring a single lice

235、nsing mechanism for industries and provide operational flexibility for small and medium-sized enterprises”and“provide faster dispute-settlement mechanisms.”160 Analysts view the benefits of the labor market reforms as enabling companies to adjust their labor requirements in line with changes in mark

236、et demand,facilitating the ability of gig and platform workers to attain benefits,ensuring better compliance of labor laws through online tools,and shifting labor inspection regimes from a negative regulatory regime based on“dos”and“donts”to a more positive inspector and facilitator approach.161 Str

237、eamlining labor laws(including with regard to minimum wages)across Indian states remains a challenge,but overall,Indias labor market reforms have succeeded in making the country a more competitive location for manufacturing activity.162 Tariffs and Import Policies The nature of a countrys tariff and

238、 import policy regime plays an important role in informing multinational enterprises investment decisions in high-tech industries,which includes semiconductors.The World Trade Organizations(WTOs)Information Technology Agreement(ITA1)implemented in 1996 and to which India is an original signatoryhas

239、played a catalytic role in this regard,eliminating tariffs on trade in hundreds of ICT products.163 As noted by the WTO,the“zero-in/zero-out”tariff environment for the parts,inputs,and components that flow through semiconductor value chains created by the ITA1“influence investment and entry decision

240、s taken by multinational firms,including through firm location,in favor of ITA1 participants,thereby increasing their competitiveness and capacity to innovate.”164 It is observed that from 2005 to 2015,ITA1-member nations enjoyed nearly one-third greater participation in ICT global value chains than

241、 did non-ITA1-member nations.165 India is a member of the ITA1,but refrained from participating in the 2015 expansion of the agreement(ITA2).Participants in the ITA2 eliminated import tariffs on myriad additional semiconductor-related products,materials,and equipment.By contrast,in April 2023,a WTO

242、dispute settlement panel found that India was charging import tariffs on a range of technology products in violation of its commitments under the ITA1.166 More recently,in August 2023,the Indian government announced a licensing requirement for imports of laptops,tablets,and personal computers,with t

243、he requirement taking immediate effect.167 The promulgation of new regulations without consultation or the ability to submit comment and feedback raised concerns for foreign investors about the extent to which they can operate in a predictable and transparent regulatory environment in the country.Th

244、e Indian government ultimately modified the measure,shifting to an“import management system”that requires companies to register the quantity and value of imports but does not require an import license.168 This new system took effect on November 1,2023.INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEB

245、RUARY 2024 PAGE 27 Customs and Trade Facilitation India has worked diligently to improve its trade facilitation environment,which has resulted in substantive improvements in its performance in the Trading Across Borders indicator,from ranking 146th in 2017 to 68th in 2019.169 In 2017,the WTOs Trade

246、Facilitation Agreement(TFA)entered force(India had ratified it in 2016).The TFA contains provisions for expediting the movement,release,and clearance of goods,including goods in transit.It also sets out measures for effective cooperation between customs and other appropriate authorities on trade fac

247、ilitation and customs compliance issues and contains provisions for technical assistance and capacity building.170 To facilitate domestic coordination and implementation of its TFA commitments,India established a National Committee on Trade Facilitation(NCTF)under the chairmanship of the cabinet sec

248、retary.171 Indias efforts to implement its TFA commitments have led to improvements and is a work in progress.For instance,average dwell time for containers between May and October 2022 was just 3 days for India,compared with 7 for the United States and 10 for Germany.172 According to Indias Ministr

249、y of Commerce,Indias customs clearance time for goods entering ports improved 1517 percent over the past year,helped by many reforms to the custom clearance system.173 India also introduced a risk-based management system,reduced the number of pieces of documentation(e.g.,bills of entry and lading),m

250、ade it possible to support out-of-port documentation online,and introduced a grievance-redress system to improve and expedite customs clearance.However,there is room for continued improvement,for example by reducing Indias“Import Release Time”at seaports,which is still significantly higher than the

251、timeframe in many other countries competing for semiconductor investment.174 Indias position to allow the WTO moratorium on customs duties on electronic transmissions to expire could pose challenges for prospective investors,as well as semiconductor design firms with activities in India.175 Under th

252、e moratorium,WTO members have agreed to refrain from charging import tariffs on cross-border transfers of data.A non-renewal of this agreement could open the door to India and other countries requiring companies to file customs declarations and comply with other customs administration requirements f

253、or the“import”of semiconductor design and manufacturing data,and ultimately pay import duties on such data transfers into India.This would increase both compliance burdens and capital costs for semiconductor company operations,which would be a significant consideration for prospective investors rega

254、rding location of future semiconductor design and manufacturing investments.BUSINESS ENVIRONMENT As with Indias regulatory environment,India has attempted to make strides toward improving its business environment.The World Banks Ease of Doing Business series has unfortunately been discontinued,but i

255、n the final 2020 report,India ranked 63rd,more than doubling in improvement from its 142nd rank in 2014.176 More recently,the Economist Intelligence Unit has created a Business Environment Readiness(BER)Index that ranks countries on 11 factors:1)political environment;2)macroeconomic environment;3)ma

256、rket opportunities;4)policy toward private enterprise&competition;5)policy toward foreign investment;6)foreign trade&exchange controls;7)taxes;8)financing;9)labor market;10)infrastructure;and 11)technological readiness.For its 20232027 forecast INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2

257、024 PAGE 28 assessment,the EIU ranked India 10th among 17 assessed Asian nations(up from 14th place in their 20182022 period assessment),with Indias improvement mostly attributable to gains in its scores for infrastructure,technological readiness,and foreign trade and exchange controls.177 Indias st

258、rongest score on the BER Index came for market opportunity,given the large and growing domestic market the country offers,while its lowest score came for infrastructure quality.(See figure 10.)Figure 10:Indias scores on the Economist Intelligence Units BER Index(10 is highest)178 The following secti

259、ons delve deeper into some of the business environment-oriented factors the EIU assesses,especially labor/workforce and infrastructure considerations.Labor/Workforce As noted,India currently has about 125,000 engineerswith a bachelors,masters,or Ph.D.degreeworking in various aspects of chip design a

260、nd development.179 And employment in the category is growing,as semiconductor job openings in India increased 7 percent between March 2019 and 2023.180 As Pranay Kotasthane,chair of the high-tech geopolitics program at the Takshashila Institution,explained,“India has semiconductor human power.Semico

261、nductor design or production requires large numbers of skilled engineers and this is where Indias strength lies.”181 Deloitte estimates that the global semiconductor workforce will need to grow by more than a million additional skilled workers(from a base of 2 million in 2021)by 2030,and India is we

262、ll poised to help address this need,roughly adding more than 100,000 workers annually.182 Close to 2.5 million students enroll for undergraduate engineering degrees in India each year,with almost 600,000 students opting for the electronics stream.183 The Indian Ministry of Educations report“All Indi

263、a Survey on Higher Education 20212022”finds that India currently has 36.62 lakh(3.6 million)students enrolled in B.Tech and B.E courses,with about 8.25 lakh students(825,000)awarded such degrees in FY 2021.184 However,that graduate pool could be deepened,as several interviewees observed that while o

264、nly 1 percent(roughly 6,000 graduates)are“industry ready”upon graduation(i.e.,capable of working on the factory floor within three months of graduation),it may take one to two years of on-the-job training before others are prepared.INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 29 I

265、nterviewees noted that one challenge for Indias semiconductor manufacturing ambitions is that most engineering students are focused on data science or AI and machine learning,and its been more difficult to interest students in electrical engineering,which is a key need for semiconductor talent.As th

266、e head of one foreign fabless chip design firm operating in India explained,for Indian engineering students,“the exposure to semiconductors is lesser than other technologies.Engineering students are choosing the easier path to employability compared to semiconductor-hardware engineering,which requir

267、es a masters degree and years of experience.”185 Indeed,while India boasts a strong base of skilled talent supporting semiconductor design work,it will need to expand its base of skilled talent capable of supporting semiconductor chip manufacturing plants.As one MeitY representative explained,“For s

268、emiconductor manufacturing we do not have skilled manpower readily available in India.”186 A MeitY report supports this,finding,“There will be a requirement of 10,00013,000 human resources to meet industry chip manufacturing requirements,by 2027.”187 India simply doesnt produce enough M.Tech or Ph.D

269、.s in semiconductor-related fields(a mere 8 percent of graduates);indeed,remediating this is a key objective of the aforementioned C2S initiative.188 To boost employment,its essential that engineering institutes focus on facilitating programs that concentrate primarily on semiconductor equipment ope

270、ration and manufacturing.These programs can offer practical experience and hands-on training that will help students to explore jobs in various fields such as process engineers,foundry engineers,etc.189 To that end,many of Indias premier engineering institutes are expanding their electrical and comp

271、uter engineering course offerings.For instance,Indian Institute of Technology(IIT)Kanpur offers a course on IC fabrication,and various courses related to electronics device physics and modelling as well as integrated circuits,while its Material Science and Engineering(MSE)and Chemical Engineering de

272、partments offer courses related to semiconductor fabrication and packaging.Similarly,IIT Madras has launched a four-year online Bachelor of Science in Electronic Systems programme.190 Elsewhere,the All India Council for Technical Education(AICTE)has also designed a curriculum for BTech in Electronic

273、s(VLSI Design and Technology)and a diploma in IC manufacturing.191 India has committed to the development of a skilled semiconductor workforce in part through the C2S program,which seeks to train 85,000 high-quality and qualified engineers in VLSI and Embedded System Design specialties.192 Through C

274、2S,engineers will be trained at 120 Indian academic institutions across the Masters and Ph.D.levels over the next five years,developing a talent pool supporting Indias aspirations in semiconductor design and fabrication,with the goal of making India a“Semiconductor Talent Nation.”Beyond this,the C2S

275、 program will also provide financial incentives to companies,start-ups,MSMEs,and academic institutions working on projects that could lead to the development of 175 application-specific integrated circuits,working prototypes of 20 SoCs,and an IP core repository by 2027.193 Further,in February 2022,t

276、he country revised its VLSI curriculum;625 colleges have adopted the curriculum,with 16,300 enrolled in VLSI-diploma granting programs in 20222023.194 In addition to engineers,India also needs a skilled base of technicians to support semiconductor manufacturing plants.A lack of skilled workers has b

277、een a challenge to U.S.efforts to accomplishing the objectives of the CHIPS Act.195 Technicians will be needed in India as well,INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 30 and there will be opportunities for the two countries to collaborate to build skilled technical workforce

278、s supporting their respective semiconductor industries.Logistics/Infrastructure The quality of Indias overall logistics and infrastructure environment has certainly improved considerably in recent years.For instance,in April 2023,India jumped up six places,to 39th,in the 7th Edition of the 139-natio

279、n Logistics Performance Index(LPI),which measures the quality of countries logistics infrastructure and efficiency.196 India has promulgated a National Logistics Policy which in aggregate seeks to reduce the logistics costs-to-GDP ratio from 14 percent to a more globally competitive 78 percent and c

280、atapult the country into the top 25 on the LPI.197 In total,India is investing$1.4 trillion in its national infrastructure pipeline.However,despite the countrys progress,Singapore,Hong Kong,Taiwan,China(PRC),Japan,Republic of Korea,Malaysia,and Thailand still scored better than India in the latest e

281、dition of the LPI,underscoring the need for India to sustain its efforts to improve the quality of its logistics and infrastructure environment.Transportation Infrastructure The quality of Indias logistical transportation is critical in supporting its global competitiveness.From FY 2014 to FY 2022,I

282、ndia increased its highway construction threefold,to 37 km/day,and built over 200,000 kilometers of road over that period.But India still lags behind competitors;one study finds that a 2,000-kilometer delivery can be completed within 24 hours within China but could take as long as five to seven days

283、 in India.198 India has likewise significantly expanded its rail infrastructure,increasing its amount of track laid daily threefold since 2014.India has doubled its number of airports over that period(from 74 to 141),with 100 more greenfield airports under construction.The country has also made prog

284、ress in its ports infrastructure.As the World Bank noted,“Since 2015,India has invested in soft and hard infrastructure to connect ports on both coasts to economic poles in the hinterland,including introducing a supply chain visibility platform delivered through a publicprivate partnership.”199 The

285、country has completed over 180 port projects,with over 230 new ones in the pipeline.Electrical Infrastructure Ensuring a stable,reliable,and consistent supply of electricity is crucial to supporting both semiconductor ATP and fabrication operations;semiconductor fabs use up to 100 megawatt-hours of

286、power each hour.Power outages not only disrupt operations,but can significantly damage equipment and wafers in production,with such outages typically costing around a few million dollars but up to tens of millions in some instances.200 As Rajat Kathuria noted,“Power fluctuations are an anathema for

287、chips.With the minutest interruptions leading to a total batch loss worth millions of dollars.Hence,the process has to be immaculate,the packaging will need to be of Japanese quality,and the transportation impeccable.”201 Concerns about unstable power supply in India have been a factor in Indias pre

288、vious unsuccessful attempts to attract semiconductor manufacturing.202 However,the situation is improving.For example,the Indian central governmentalongside Indian stateshas made considerable investments in increasing electricity production,developing reliable and redundant electricity grids,and pri

289、vatizing distribution companies.Indias installed capacity of 410 gigawatts(GW)is now the INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 31 worlds third largest,with an ever-greater supply,at least 172 GW of which,is renewable power.203 Indias solar and wind production capacity has m

290、ore than quadrupled over the past four years,with full integration of renewable energy into Indias electrical grid expected to be complete by 2030.It is noteworthy,and indicative of the increasing quality of Indias electric grid,that Indias Semiconductor Laboratory has not sustained a power outage s

291、ince 1983.INDIAS SEMICONDUCTOR SUPPLY CHAIN Semiconductor supply chains are anchored around several key pillars,including:1)materials(chemicals,minerals,and gases)used in the manufacturing process and 2)ecosystem support tools such as research institutions and accelerators.204 The following elaborat

292、es on Indias ecosystem in each of these areas.Semiconductor Manufacturing Materials Semiconductor production entails more than 150 chemicals,over 30 gases,and over 30 minerals,including many unique chemicals such as sulfuric acid,nitric acid,hydrochloric acid,ethanol,acetone,and phosphoric acid;mine

293、rals including aluminum,antimony,arsenic,beryllium,bismuth,boron,carbon,chlorine,cobalt,copper,fluorine,gallium,and germanium among others;and gases such as hydrogen,argon,nitrogen,oxygen,and helium.205 Key substrates used in the industry include gallium antimonide,indium antimonide,gallium nitride,

294、gallium oxide,aluminum nitride,and diamonds.206 Thanks to Indias strength in other industrial sectors such as automotives,paints,pharmaceuticals,and steel,it has many globally competitive players in the industrial chemicals and gases sector,including Tata Chemicals,Pidilite Industries,and Gujarat Al

295、kalies and Chemicals Limited.In fact,Indias$178 billion chemicals industry(expected to grow to$350 billion by 2025),contributes 7 percent to Indias GDP and is the third-largest such sector in Asia(and sixth-largest in the world).207 Indias chemical and gas producers already produce many of the chemi

296、cals that are required for semiconductor manufacturing,but India will need to build refinement capabilities in order to improve the purity of India-produced chemicals to support semiconductor-grade needs.208 A currently inadequate base of domestically available,semiconductor-grade chemicals and gase

297、s are viewed by interviewees as a barrier to Indias ambitions to attract a semiconductor fab,because the requirement for foreign sourcing substantially raises costs.Investment will be required here,and,as one observer noted,an investment of some$300 million to$500 million will be needed to upgrade I

298、ndian chemicals and gas manufacturers quality and purity to meet semiconductor-grade needs.209 Of course,this raises the chicken-or-egg issue:If the chemical and gas companies dont invest now,Indian semiconductor manufacturing efforts wont have an adequate supply of domestically available inputs;but

299、 if the semiconductor manufacturing opportunities dont materialize,the investments may be in vain(given lack of anticipated demand and the difficulty of breaking into competitive global markets).Therefore,as Anurag Awasthi explained,“The time is ripe for established chemical conglomerates in the cou

300、ntry to study,align,and thereafter aim to produce select chemicals used in semiconductor manufacturing and photolithography,including polymers,solvents,and additives.”210 Awasthi has noted that Indias chemical companies should seek to diversify their existing product range,focusing their impetus on

301、R&D(with realistic budgetary support)and trying to improve quality and purity as per global standards.211 Interviewees view setting up INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 32 qualification labs in partnership with major global companies as important to provide confidence i

302、n the quality of Indian chemicals/gases.Certain Indian chemical companies have shown considerable progress in this space.For instance,one report notes that“SCL,Chandigarh has been working on indigenization of Chemicals,Gases and Spares over the last 5 to 6 years specially targeting the 180 nm requir

303、ement,”noting the organization has been successful in indigenization of 35 materials.212 Semiconductor Research Support Institutions Indias semiconductor ecosystem,especially chip research and design,is supported by a rich variety of supporting assets that position the nation well for an expanded gl

304、obal role in semiconductor innovation.For instance,the Semiconductor Fabless Accelerator Lab(SFAL)represents a globally competitive Center of Excellence supporting Indias fabless ecosystem.Indias Semiconductor Laboratory(SCL)is a research institute under MeitY coordinating R&D in the field of semico

305、nductor technology,MEMS,and producing chips for mission-oriented purposes such as Indias space program.At the Indian Institute of Science in Bangalore,the Centre for Nano Science and Engineering(CeNSE)operates the National Nanofabrication Centre,a state-of-the-art CMOS/MEMS-capable research facility

306、.MeitYs Centre for Development of Advanced Computing(C-DAC)supports additional R&D efforts.C-DAC Bengaluru has launched the“ChipIN Centre,”which will act as a one-stop-shop center to provide semiconductor design tools,fabrication access,a virtual prototyping hardware lab,and access to fabless chip d

307、esigners in the country.213 As noted,India has also proposed establishment of an ISRC,characterizing it as an independent,nonprofit,world-class semiconductor research center,and also recently launched the“India AI datasets program,”the worlds largest datasets program,which seeks to catalyze the inte

308、lligent computing,AI computing,and device and system design ecosystem in India.214 OPPORTUNITIES IN INDIAS STATES As India scholar Rick Rossow noted,“Prime Minister Narendra Modi regularly touches on the twin theories of competitive federalism and cooperative federalismgetting states to push each ot

309、her to have the most inviting business climate,while simultaneously getting states to work together to speed up national development.”215 And theres no doubt that Indian states are competing fiercely to attract semiconductor and electronics production,with at least three Indian states have announced

310、 individual policies aiming to secure investments in this sphere.216 The following provides a brief overview of several leading Indian states strategies(with states listed alphabetically).Gujarat In July 2022,the western Indian state of Gujarat became the first Indian state to launch a policy specif

311、ically for the semiconductor sector:the Gujarat Semiconductor Policy(20222027).217 That policy was a factor in Microns June 2023 announcement of its plans to build a$2.75 billion ATP facility in Sanand,Gujarat.Gujarat seeks to develop a“Semicon City”in the Dholera Special Investment Region(SIR),whic

312、h it intends to become a dedicated manufacturing hub of semiconductor and display fabs.Gujarats semiconductor policy seeks to facilitate eligible semiconductor and display fab projects with land allotments;expedited process approvals;ready access to power,water,and gas INFORMATION TECHNOLOGY&INNOVAT

313、ION FOUNDATION|FEBRUARY 2024 PAGE 33 utilities;and generous fiscal incentives.218 For the Dholera Special Investment Region,eligible projects will receive a 75 percent subsidy on the procurement of the first 200 acres of land,while additional land for upstream or downstream projects will receive a 5

314、0 percent subsidy on land cost.Other incentives include a one-time reimbursement of 100 percent stamp-duty and registration fees paid to the government,a fixed water tariff at 12 rupees per cubic meter for five years,and a capital subsidy of 50 percent for desalination plant.The policy also offers a

315、 power tariff subsidy of 2 rupees per unit for 10 years.219 Gujarat has further committed to implement a single-window clearance mechanism to expedite clearances and avoid bottlenecks.220 Karnataka Karnataka is already a leader in Indias electronic systems design and manufacturing(ESDM)/semiconducto

316、r sector,contributing 10 percent of Indias national electronics output,maintaining over 100 fabless chip design houses and the largest chip design hub in India,and contributing 40 percent of the national share of electronic design output and 50 percent of the share for electronic product companies.2

317、21 Karnatakas broader IT industry is worth approximately$64 billion,with a workforce of over 500,000 employees.222 One of the driving policies supporting the ESDM sector is the“Special Incentives Scheme for the ESDM Sector 20202025,”which includes a 20 percent capital investment subsidy for capital

318、expenditure on plants and machines;a 25 percent and subsidy for expenditure on land up to 50 acres;reimbursements for stamp duties,registration fees,and land conversion fees;incentives on power and electricity duties;and a production linked incentive scheme.223 The government of Karnataka has also c

319、ontinued to develop the infrastructure and labor environment needed for a larger semiconductor industry with two Electronics Manufacturing Clusters(EMCs)being built in Mysuru and Hubballi in the state.The government has received 7 letters of intent from electronics manufacturers to set up operations

320、 in the Mysuru EMC and 11 letters of intent for the Hubballi EMC.The Karnataka government is also working with global investors and major technology firms such as MKS Instrument and Aptiv Plc.The IT minister has also called for investment outside Bengaluru in the state to further develop its tech ec

321、osystem.224 In terms of industry partnerships,the states government has extended an invitation for Aptiv Plc to establish an R&D center in the state and is in talks with other major global technology firms to develop a local supply base for semiconductors.With MKS Instruments,the government is explo

322、ring new developments in vacuum and photonics,as well as expanding the software engineering capabilities in the state and better utilizing its skilled workforce.225 Karnataka has also signed an MOU with Kaynes Technology for the Rs 3,750 crore for a printed circuit board manufacturing plant.226 Odis

323、ha Odisha,a state in eastern India,has been making significant progress in industrialization over the past few years.Odishas strategic location,abundant natural resources,and investor-friendly policies have made it an attractive destination for businesses to set up operations.Odisha is rich in miner

324、als such as iron ore,bauxite,manganese,and coal,which are essential raw materials for various industries.The state government has made efforts to develop infrastructure,such as ports,airports,and industrial parks,to facilitate the movement of goods and services.Odisha unveiled its Semiconductor and

325、Fabless policy in July 2023 post ratification by the state cabinet.The focus of the state on innovation and technology has led to the establishment of a INFORMATION TECHNOLOGY&INNOVATION FOUNDATION|FEBRUARY 2024 PAGE 34 number of R&D centers,such as the International Institute of Information Technol

326、ogy,Bhubaneswar,and the National Institute of Science Education and Research.These centers have been instrumental in fostering innovation and building a skilled workforce.Furthermore,the state government has also launched several initiatives to promote entrepreneurship,such as the Startup Odisha ini

327、tiative,which aims to create a conducive ecosystem for start-ups to flourish.The state has also implemented Development Policy 2020 to support the growth of micro,small,and medium-sized enterprises.Overall,Odishas efforts to promote industrialization have yielded positive results,with the state attr

328、acting significant investment and generating employment opportunities.With a focus on innovation,technology,entrepreneurship,and now semiconductors,the state is poised to become a leading semiconductor and display technology hub in India.Tamil Nadu The southeastern Indian state of Tamil Nadu is one

329、of Indias leading manufacturing states,housing 38,000 factories and operating over 50 SEZs,the most of any Indian state.227 Manufacturers operating in Tamil Nadu produce 62 percent of the computers and peripherals India produces and 17 percent of the electronic components India manufacturers,while t

330、hree out of Apples four iPhone contract manufacturers are located there.Tamil Nadu expects to produce$5.37 billion in electronics exports in 2023,a 233 percent increase over the$1.66 billion it produced in 2022.Semiconductor companies active in Tamil Nadu,mostly in design activities,include KLA Tenc

331、or,Qualcomm,Applied Materials,Tessolve Semiconductor,Sanmina,Coherent,and the aforementioned Mindgrove Technologies.International contract manufacturers include Foxconn,Pegatron,and Flex while domestic contract electronics manufacturers include Avalon,Syrma,VVDN Technologies,and Rikun Manufacturing.

332、To attract semiconductor value chain activity,Tamil Nadu has developed a“Flagship Investment Promotion Subsidy”program whereby investors can choose one of three options:1)up to 40 percent flexible capital subsidy;2)1025 percent fixed capital subsidy;or 3)1.52 percent turnover subsidy for 10 years.22

333、8 To support pre-operations setup,Tamil Nadu offers a 50100 percent concession on stamp duties,a 25 percent subsidy on environmental measures,and a 2050 percent land subsidy.With regard to post-operations support,it offers a 100 percent exemption from electricity duties for five years,industrial training of$450 per worker,R&D training of$1,500 per worker,and a(capped)50 percent subsidy for IP crea