Learning from the CHIPS Act of the US

Why in News?

• The United States’ Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (CHIPS Act) has completed one year as a law.
• While the long-term effectiveness of the Act is yet to be assessed, it is important from an Indian perspective to observe and learn from its implementation.

 

The US’ CHIPS and Science Act, 2022

• The Act authorises $52.7 billion over five years and aims to catalyse investments in domestic semiconductor manufacturing capacity to boost US competitiveness, innovation, and national security.
• It also seeks to jump-start R&D and commerciali­sation of leading-edge technologies, such as quantum computing, AI, clean energy, and nanotechnology.
• The law aims to create new regional high-tech hubs and a bigger, more inclusive science, technology, engineering, and math (STEM) workforce.

 

Important Features of the US’s CHIPS Act

• Cooperation and Coordination Among Government Departments
  • The CHIPS Act involves cooperation and coordination between several arms of the government.
  • Four separate funds have been created for the execution of the Act. The Department of Commerce is the lead agency administering the $50 billion CHIPS for America Fund for accelerating semiconductor manufacturing and research.
  • There are also allocations for the Department of Defence ($2 billion) for defence-unique technologies, the Department of State ($0.5 billion) to coordinate with foreign partners on semiconductor supply chain security, and the National Science Foundation ($0.2 billion) to promote the growth of the semiconductor workforce.
• Workforce Development Plans
  • Companies seeking funding under the CHIPS Act are required to submit workforce development plans.
  • A nodal agency, the National Semiconductor Technology Centre (NSTC), has been created to collaborate with industry and educational institutions.
• Catalysing Private Sector Investments
  • The CHIPS Act has also created a CHIPS Program Office (CPO) to lay down the guidelines for assessing the financial viability of a project.
  • The CPO is hiring Investment Principals and Financial Structuring Directors to catalyse private sector investments.
• Futuristic Approach of Research and Innovation
  • The CHIPS Act is not just about bringing semiconductor manufacturing back to the U.S.
  • The Department of Commerce also invests $11 billion focused on future research.
  • For example, the strategy acknowledges that advanced packaging is a leverage point to excel in semiconductors over the next decade.
  • Therefore, it envisages a National Advanced Packaging Manufacturing Program (NAPMP) to help the U.S. gain a disproportionate competitive advantage in the future.

 

India’s Progress So Far in Semiconductors: India Semiconductor Mission and Objectives

• India Semiconductor Mission
  • Launched in 2021 by the Ministry of Electronics and IT (MeitY), the ISM is a significant step with an allocation of Rs. 76,000 crores.
  • This comprehensive initiative is dedicated to fostering a sustainable semiconductor and display ecosystem within the country.
• Objectives of ISM
  • Formulate a comprehensive long-term strategy for developing sustainable semiconductors and display manufacturing facilities and semiconductor design eco-system in the country.
  • Facilitate the adoption of secure microelectronics and develop a trusted semiconductor supply chain, including raw materials, specialty chemicals, gases, and manufacturing equipment.
  • Enable a multi-fold growth of the Indian semiconductor design industry by providing required support in the form of Electronic Design Automation (EDA) tools, foundry services, and other suitable mechanisms for early-stage startups.
  • Promote and facilitate indigenous Intellectual Property (IP) generation, encourage, enable, and incentivize the Transfer of Technologies (ToT).
  • Enable cutting-edge research in the semiconductors and display industry including evolutionary and revolutionary technologies through grants, global collaborations.

 

Lessons for India from the CHIPS Act

• Need for a Whole-of-Government Approach
  • India’s semiconductor industrial policy is being managed mainly by the Ministry of Electronics and Information Technology (MeitY).
  • The schemes for manufacturing, assembly, displays and compound semiconductors have been assigned to an independent division called India Semiconductor Mission (ISM) within a non-profit company set up by MeitY.
  • The policy for chip design is being administered by C-DAC, an R&D organisation again under the MeitY.
  • The ISM Committee comprises largely MeitY bureaucrats. While the committee is a good beginning, ensuring that the semiconductor strategy survives beyond government terms requires a whole-of-government approach along the lines of the CHIPS Act.
• Needs to Prioritise Development of Skilled Workforce
  • This must become a focus area for India as is in the US.A competent semiconductor engineering workforce is India’s quickest route to gaining leverage in the semiconductor industry.
  • Keeping this in mind, MeitY has begun a Chips2Startup (C2S) programme, collaborating with over 100 universities and colleges.
  • Like the NSTC, C2S aims to scale up workforce expansion by supporting existing quality training programmes.
  • However, in the Indian case many private training centres prepare chip designers outside the conventional university system.
  • Hence, it is important for C2S to focus on certifying good programmes of universities or private training institutes rather than running them.
• Robust Transparency and Accountability Mechanism
  • Like the US, India also has guidelines for assessing the viability of proposals, however, a lot remains to be done concerning transparency.
  • The government needs to put out regular monthly progress reports on its semiconductor programme.
  • This will help manage expectations and instil reassurance in India’s plans.
• Focused Futuristic Approach Towards Research and Innovation
  • In India’s semiconductor strategy, advanced manufacturing and packaging research are not priority areas of focus.
  • This makes sense to the extent that India is currently nowhere in the picture in high-volume chip manufacturing.
  • However, the lesson from the CHIPS Act is that India’s strategy needs to identify and invest in research on future technologies.

 

Conclusion

• The CHIPS and Science Act is a useful template for industrial policy in semiconductors.
• The administrative capacity that the U.S. has put together institutionalises the Act in a manner that will ensure its continuity beyond governments.
• Therefore, it is expected of India’s semiconductor strategists that they study the positives and drawbacks of this Act deeply to implement India’s industrial policies in semiconductor effectively.

 

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Q1) Who is driving the Indian Semiconductor Mission?

The India Semiconductor Mission is driven by the Indian government in collaboration with various industry associations, research organisations, and educational institutions. It operates under the guidance of the Ministry of Electronics and Information Technology (MeitY) and other relevant government bodies.

 

Q2) How will the India Semiconductor Mission contribute to India’s overall economic growth?

The India Semiconductor Mission aims to strengthen the semiconductor industry in India, which in turn contributes to the country's overall economic growth. It creates employment opportunities, attracts investments, reduces imports, promotes technological self-reliance, and fosters innovation. The growth of the semiconductor industry has a multiplier effect on various sectors, including electronics, telecommunications, healthcare, automotive, and defence, leading to sustainable economic development.

 

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Source: The Hindu