Urgent need to boost semiconductor manufacturing in India: NITI Aayog
What's the story
NITI Aayog has called for a major push toward self-reliant semiconductor manufacturing in India. The think tank's latest report highlights the strategic importance of semiconductors for economic resilience, national security, and inclusive growth. It notes that while government initiatives like the India Semiconductor Mission are laying the groundwork for a domestic industry, India's semiconductor manufacturing base is still in its infancy.
Supply chain challenges
Shrinking window for India to establish itself in semiconductor sector
The report warns that with global supply chains undergoing a major realignment, India has a shrinking window to establish itself as a key player in the semiconductor sector. It highlights the urgency of this effort due to India's heavy reliance on imports, rising national security concerns, and an increasing foreign exchange burden. The report also emphasizes how semiconductors can improve access to technology-driven services in India.
Demand-supply dynamics
Global chip production concentrated in few countries
India currently meets only 5-10% of its semiconductor demand domestically, with the rest coming from imports. The report highlights that global chip production is concentrated in a few countries, making supply chains vulnerable to geopolitical tensions and disruptions. Any disruption in Taiwan or China could lead to shortages across sectors such as automobiles, consumer electronics, healthcare, and defense.
National security
Strategic importance of semiconductors for defense and aerospace programs
The report also stresses the strategic importance of semiconductors for defense and aerospace programs. It warns that as many semiconductor parts used in defense systems are produced outside India, their deployment in Indian aerospace and defense programs is increasing threats to national security. Unmanned aerial vehicles, naval systems, and airborne platforms continue to rely heavily on imported chips.
Import costs
Economic implications of India's semiconductor imports
The economic implications of India's semiconductor imports are also significant. The country spent nearly $150 billion on these imports between FY17 and FY25, with the import bill rising from $5.7 billion in FY17 to $30.3 billion in FY25. If this trend continues, the annual import cost could reach a whopping $240 billion by 2035, warns the report.
Cost reduction
Report emphasizes benefits of domestic chip production for next-gen technologies
The report also highlights that domestic chip production could help lower costs for next-generation technologies. The rollout of 5G and future 6G networks could improve rural connectivity, enable remote healthcare, and support precision agriculture. However, widespread adoption will depend on affordable devices. India-made semiconductors "will be decisive" in lowering handset costs and expanding access to such technologies, the report says.