Semiconductors are the foundational building blocks used in electronic gadgets. Semiconductor chips have gained huge popularity in the last few decades owing to the increased usage of electronic gadgets like smartphones, laptops, digital cameras, automobiles, televisions, washing machines, refrigerators, LED bulbs, etc. worldwide. Several Asian countries including Taiwan, Hong Kong, Singapore, Thailand, and Vietnam have become popular hot spots for semiconductor manufacturing in the world. These countries are the biggest semiconductor exporters today.
India too imports most of the country’s semiconductor requirements. With a growing population, rising affluence, and growing digital awareness, the country is poised to become a huge digital economy in the near future achieving $1 trillion in value and $5 trillion in GDP by 2025. Taking a cue, India’s Prime Minister Sri Narendra Modi has called on domestic manufacturers to set up a semiconductor manufacturing base in the country making “Bharat Atma-Nirbhar”. India is poised to have a huge demand explosion in the near future. With the COVID-19 disruption in the last two years and the Russo-Ukrainian war currently, the country has been grappling with supply issues that have disrupted the production capabilities of the automobiles sector in particular.
The Vedanta-Foxconn Deal
It is in this regard that India’s Vedanta Group (one of the leading mining companies in India) and Taiwan’s electronic giant, Foxconn have signed an MoU to form a joint venture company that will manufacture semiconductors in India. While Vedanta will hold the majority of the equity in the JV (~60%), Foxconn will be the minority shareholder (~40%). Foxconn’s technical proficiency and Vedanta’s local relations should support the deal. Several large foreign companies like Intel, Taiwan Semiconductor Manufacturing Company (TSMC), and United Microelectronics Corporation should also consider establishing a semiconductor manufacturing base in India.
India is recognized as a manufacturing hub globally given its reasonable resources and has the ability to design & manufacture its own semiconductors. To encourage domestic manufacturing, the Indian government announced a Rs 76,000 crore PLI scheme for domestic semiconductor and display board production in December last year including Rs 2.3 lakh crore in incentives. The Indian government will further provide financial aid of up to 50% of the project cost to eligible applicants. This support should enable the country to not only set up mere assembly units but to develop technology-advanced production centers in this regard.
