Promise of chips: On the India Semiconductor Mission phase II

📌 Summary:

• Context: The second phase of the India Semiconductor Mission (ISM) has been launched with a corpus of Rs 1.27 lakh crore, far outpacing phase I

• Core argument: In a geopolitically fraught environment the wisdom of spending public money on semiconductor capability is clearer, and the larger corpus is welcome — but returns remain unknowable and execution risk is high

• Design of the incentive: capital subsidy (with the government paying a smaller share than phase I's 50%) plus manufacturing-linked incentives disbursed per unit once sales occur; incremental boosters for products leveraging domestic capabilities and components

• Stated goals: make India a strategic destination for the electronics value chain, and build home-grown human capital and intellectual property in segments where a few countries dominate

• Causal chain of the risk: most phase-I facilities are yet to begin commercial production, so returns on the initial chipmaking bet are unproven; meanwhile advanced economies with deeper pockets will resist India acquiring talent and frontier capability

• Technology frontier: Dutch extreme ultraviolet (EUV) lithography machines remain out of reach even for most advanced economies; only Japan is close to cracking the code — India deploying investment at that frontier is hard to imagine but tantalising

• AI linkage: AI sits on a foundation of memory and processing infrastructure that India hopes to manufacture, tying chip policy directly to AI sovereignty

• India's specific vulnerability: the industry may never be a mass employer, and India risks repeating its decades-old mistake of training the West's premier technical human capital instead of retaining it

• Solutions proposed: leverage India's existing pool of semiconductor engineers and designers amid a looming global talent shortage; give them worthwhile work and academic pursuits in highly technical fields; treat ecosystem-building, not just fabs, as the objective

• Comparative angle: sustained competitiveness in key value chains is what made the Asian Tigers, and the capacity to inflict pain is the best deterrent against supply-chain shocks

🎯 UPSC Relevance: GS3 — Science & Technology: indigenisation, emerging technology, IPR; Indian Economy: industrial policy, manufacturing and investment models; GS2 — technology and geopolitics in international relations.

📝 Prelims Facts:

• India Semiconductor Mission phase II corpus: Rs 1.27 lakh crore
• Phase I capital subsidy was up to 50% of project cost; phase II government share is smaller
• ISM operates under the Ministry of Electronics and Information Technology (MeitY)
• EUV lithography machines are made by the Dutch firm ASML and are critical for advanced-node chipmaking

🔑 Key Term: Extreme Ultraviolet (EUV) Lithography — a chipmaking technique using 13.5 nm wavelength light to etch extremely fine circuit patterns onto silicon; a monopoly technology that acts as a strategic chokepoint in the global semiconductor supply chain.