Why in the News?

A 2 nm chip is being designed in India for the first time after  inauguration of ARM's new semiconductor design office in Bengaluru.

Why is 2nm chip significant?

• Semiconductors are the fundamental components of modern electronics devices.
• The semiconductor materials are used to create microchips that store, process, and transfer information.
• Each chip contains millions of micro-scale switches called transistors, which control electrical signals much like brain cells pass messages.
• Thinner chips mean more processing capacity in less space hence lighter products. 
• Smaller transistors enable greater efficiency and reduced power consumption. 
• They hold strategic importance for national security, space exploration and defence applications.

The global semiconductor industry is projected to reach USD 1 trillion by 2030. This is dominated by Taiwan, South Korea, Japan, China and the United. Taiwan produces over 60 per cent of the world's semiconductors and nearly 90 per cent of the most advanced chips. 

With supply chains concentrated in a few geographies, India is positioning itself as a trusted and reliable partner in diversifying global manufacturing.

Major ongoing Initiatives for Semiconductor Industry in India 

• India Semiconductor Mission (ISM): Launched in 2021 with following schemes-
  • Semiconductor Fabs Scheme: Targets advanced nodes such as 28nm or below, as well as mature technologies and provides up to 50% fiscal support for setting up semiconductor wafer fabrication (fab) units in India.
  • Display Fabs Scheme: Offers financial assistance of up to 50% of project cost to set up display fabrication units in India and covers technologies such as AMOLED and LCD displays.
  • Compound Semiconductors & ATMP/OSAT Scheme: Supports compound semiconductors, silicon photonics, MEMS/sensors, discrete semiconductors.
  • Design Linked Incentive (DLI) Scheme: Promotes design startups & MSMEs through incentives up to ₹15 crore per company. 
• Semicon India: It is one of eight annual SEMICON expositions worldwide that bring together executives and leading experts in the global semiconductor design and manufacturing ecosystem.
  • Semicon India, 2025 (4^th edition) was co-hosted by India Semiconductor Mission (ISM) in partnership with SEMI (Semiconductor Equipment and Materials International), with the theme 'Building the Next Semiconductor Powerhouse'. 
• Skilling & Talent Development Programs:
  • AICTE VLSI curriculum: Courses updated to match industry requirements. 
  • Skilled Manpower Advanced Research and Training (SMART) Lab (NIELIT Calicut): To train 1 lakh engineers.
  • Chips to Startup(C2S) program: For developing Specialized Manpower in Very Large-Scale Integration (VLSI)/Embedded System Design domain
  • Future Skills Program: 20,000 engineers in Madhya Pradesh.
• Global Collaboration: India- U.S. Initiative on Critical and Emerging Technology (iCET) in deepening strategic cooperation across key technology sectors, including, semiconductors.
• Promotion of Design & R&D:
  • 3 nm chip design centres in Noida & Bengaluru inaugurated in 2025.
  • Move towards Silicon Carbide (SiC) & 3D Glass packaging for EVs, defence & aerospace.
  • Vikram 32-bit processor, India's first fully indigenous 32-bit microprocessor, qualified for use in harsh launch vehicle conditions. 

Challenges in Semiconductor ecosystem

• Limited Core IP and Indigenous Product Development: Indigenous research and innovation remain weak, with few original patents in advanced chip technologies, AI chips, or quantum computing.
• Geopolitical Risks: E.g., Export controls by major powers (especially the US) may limit India's access to critical technologies and chipmaking equipment.
• Low focus on advanced fab facilities: Most Indian fabs/facilities target mature technology nodes (>28nm), while global market is shifting towards 3nm, 5nm, and specialized chips for AI and quantum computing.
• Underdeveloped supply chain: India lacks domestic sources for key materials like silicon wafers, specialty chemicals, and ultrapure gases needed for advanced chip manufacturing.
• High Capital and R&D Costs: Semiconductor fabs require billion-dollar investments; design costs are prohibitively expensive for many startups etc.
• Other issues:
  • Fragmented Collaboration and Ecosystem Creation between manufacturers, design houses, fabs, research unit
  • Shortage of specialized manufacturing talent.
  • Slow project execution and delays in regulatory approvals.
  • Inadequate logistics and transport infrastructure.
  • Environmental concerns as Semiconductor fabs consume huge water and energy.

Way Ahead

• Enhance Indigenous R&D and Intellectual Property Creation: Increase public and private funding for semiconductor R&D; strengthen IP registration and enforcement for an indigenous IP base etc.
• Leverage Geopolitical Shifts: Position India as a secure, transparent investment destination amidst supply chain realignments.
  • E.g., India can pursue alliances like joining U.S. led "Chip 4" alliance.
• Expand incentives and R&D for advanced nodes: Through joint ventures and technology transfer with global leaders. E.g., 12 MoUs were announced during Semicon India 2025. 
• Improve Manufacturing Infrastructure: Establish an initial refurbished fab for training and fabrication access; incentivize private investments with tax breaks and infrastructure support etc.
• Enhance production of raw material: Establish local manufacturing plants for specialty chemicals etc.; Fast-track regulatory approvals for raw material industries etc.
• Promote collaboration: Across Original Equipment Manufacturer (OEMs), design houses, fabs, and testing units to build a complete semiconductor value chain.
• Build Skilled Workforce: Update academic curricula with practical semiconductor training; set up dedicated training centers including refurbished fabs for hands-on experience.