"To cash in on next tech boom, India needs the right chips"
ATMP/OSAT
Assembly, Testing, Marking, Packaging / Outsourced Semiconductor Assembly and Test, the packaging stage of chip manufacturing.
Supercycle
a multi-year structural surge in demand driven by a fundamental shift, here AI, not a short-term cyclical boom.
India's semiconductor mission sits inside a global 'supercycle', a multi-year structural shift in chip demand driven by artificial intelligence rather than a short-term cyclical upswing. Earlier supercycles followed personal computers and smartphones; this one is driven by AI data centres and the accelerators that power them. Countries that control key links in the chip value chain, design, fabrication, and packaging, convert that control into economic leverage: Taiwan dominates advanced fabrication, South Korea's Samsung and SK Hynix lead AI memory chips, and the US CHIPS Act committed a $53 billion direct subsidy that catalysed roughly $450 billion in private investment. China has reportedly deployed close to $150 billion toward semiconductor self-sufficiency.
India's institutional response rests on three pillars launched in recent years: the India Semiconductor Mission (ISM) under the Ministry of Electronics and Information Technology, the Design Linked Incentive (DLI) scheme for fabless design companies, and the IndiaAI Mission for sovereign compute. ISM has approved a dozen projects and a further outlay under what is being called ISM 2.0, but the composition of these projects, overwhelmingly in assembly and packaging rather than fabrication or design, is the central policy question going forward.
The semiconductor value chain has three broad layers: chip design (the intellectual property defining how a chip works), fabrication (etching that design onto silicon wafers), and ATMP/OSAT, assembly, testing, marking and packaging of finished chips. These layers differ sharply in margin and complexity. Conventional wire-bond packaging, the layer most of India's approved ISM projects occupy, yields gross margins of roughly 6 per cent, since it is labour-intensive and easily substitutable between countries. Advanced packaging techniques that integrate processors with high-bandwidth memory command 25-35 per cent margins, while chip design that owns its own intellectual property can command 50-70 per cent margins. This is close to the classic distinction between labour-augmenting technological change, which raises output per worker without altering the underlying capital good, and capital-augmenting change, which upgrades the capital good itself to produce more value; chip design and fabrication are capital- and knowledge-augmenting activities, while wire-bond assembly remains comparatively labour-intensive and low-value. …
The substitution of steel for wooden ploughs in agricultural production is an example of
'Investment in infrastructure is essential for more rapid and inclusive economic growth.' Discuss in the light of India's experience.
Consider the following statements regarding India's semiconductor policy ecosystem:
1.The India Semiconductor Mission operates under the Ministry of Electronics and Information Technology.
2.The Design Linked Incentive scheme is meant to support fabless chip design companies.
3.Under the India Semiconductor Mission, the majority of approved projects to date are advanced wafer fabrication units.
Which of the statements given above is/are correct?
Match List I (Country/Entity) with List II (Semiconductor strength or initiative) and select the correct answer using the code given below:
List I
1.Taiwan
2.South Korea
3.United States
4.China
List II
A.Direct manufacturing subsidy under a dedicated legislative act
B.Mastery of advanced semiconductor fabrication
C.Large state-led investment toward self-sufficiency since 2015
D.Leading AI memory chip producers
Which segment of the semiconductor value chain is generally associated with the lowest gross margins?
Consider the following statements about RISC-V:
1.It is an open-source instruction set architecture.
2.Its adoption eliminates licensing costs associated with proprietary architectures such as ARM.
Which of the statements given above is/are correct?
With reference to technological progress, which of the following best describes 'capital-augmenting technological progress'?
Want the full note, Prelims Facts & MCQ answers?
Create a free account — takes less than a minute.
Create free account