India’s Resolve For Self Reliance In Microelectronics

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The article highlights the reasons for limited growth of the microelectronics industry in India and gives a historical perspective of the Indian chip industry, why it did not flourish in the country and major causes that hindered its growth. The article emphasizes that it may not be easy to lure potential mega chip makers to establish their manufacturing facilities in India just by offering financial incentives unless a complete ecosystem is put in place and the causes that didn’t allow the industry to grow are resolved. A roadmap has been outlined to make India self-reliant in chip making.

In the past couple of months, the microelectronics industry has been receiving a lot of attention. Recent media reports suggest that India is trying to incentivize international chip and display manufacturers to set up mega manufacturing facilities in the country. It may not be easy to attract the world’s leading chip makers to the country unless India removes hurdles that hindered the growth of this industry in the past.

Before dwelling on the subject, it is important to go through the history of the Microelectronics Industry in India. We also explore the reasons why the Indian microelectronics industry did not flourish despite the policy makers’ best intentions. Thereafter we discuss what can be done now to establish this industry and take it on a growing trajectory.

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History of the Indian microelectronics industry

With the invention of Metal Oxide Semiconductor (MOS) transistors in the late 40’s and monolithic Integrated Circuits (ICs) in the 50’s, electronics was considered an important upcoming field. The Electronics Industry came into focus of the Indian Government with the establishment of Bharat Electronics Limited (BEL). The company started manufacturing discrete semiconductor devices with technology sourced from a Dutch company, Philips Semiconductor. Later in the 1970s, BEL procured 7 micron Bipolar technology from Radio Corporation of America (RCA)1 to manufacture Small Scale Integrated Circuits on 3” wafers.

To give further push to the electronics industry, the government set up the Electronics Commission and Department of Electronics (DoE) in early 1970s to formulate plans and policies for development of the Electronics & Computer industry in India.

Eight State Electronic and Production Corporations namely Hartron, Keltron, Meltron, Webel, Uptron and Electronic Townships were set up in different Indian states. Private companies (Continental Devices India Ltd – CDIL , Hindustan Conductors Ltd, Greaves Semiconductors, Spic Electronics Ltd, Hind Rectifiers) and hundreds of other manufacturing units were established to produce electronics components, subsystems and systems in the 70’s and 80’s with funding from the centre, states and banks. These units did well initially and started contributing in the development of the electronics industry in the country.

India’s first chip plant: Semiconductor Complex Limited (SCL)

India’s sole microchip manufacturing plant, Semiconductor Complex Limited (SCL) was first proposed in a technical report titled “Planning for the Semiconductor Industry in India” submitted to the Electronic Commission in 1972. The project was approved by the Government after four years in May 1976. However, the financial outlay of Rs 55 Crores to set up SCL was approved after another four years in October 1980. SCL acquired 5 micron CMOS technology from American Microsystems Inc, USA4, built a state-of-the-art chip making plant located at Mohali, Punjab and started commercial operations in April 1984.

SCL was set up with the objective of developing the electronics industry in India and move the country towards self-reliance in chip manufacturing. SCL designed, developed and manufactured very Large Scale integrated Circuits (VLSICs) for time keeping, telecom and strategic customers. The company supplied more than 20 millions standard LSI/VLSI devices and about 70 Application Specific Integrated circuits (ASICs) until 1988. SCL’s customers included Centre for Development of Telematics (CDOT) licensee’s Electronic Exchange Manufacturers, ISRO, HMT, Titan, Hyderabad Alwyn, ITI, Airtel, Telephone Instrument manufacturers, Indian Railways and the strategic sector.

The production of microelectronic devices in India during 1987-88 was around US $8 million3 whereas companies in Japan, Taiwan, South Korea, Hong-Kong and Singapore were clocking sales revenues around $3 billion each. The revenues of microelectronics companies in Europe and the USA were even bigger, to the tune of $100 billion2.

SCL was a small chip manufacturing facility by world standards with an annual capacity to process around 5000 wafers of 4” size in 5 micron technology (later developed 3, 2 and 1.2 micron CMOS technologies in-house) whereas microchip companies in other countries were processing 20,000 to 30,000 wafers of 8” size using sub-micron technologies, manufacturing chips of high complexity and transistor count. For India to rise to the level of International competitiveness and standards, it was imperative to operate at the same scale with long term commitment to invest in capital intensive technologies, human resources, indigenisation of materials and infrastructure to develop the ecosystem for this industry.

SCL proposed to set up a Mega microchip plant in the country to compete internationally. The National Microelectronics Council (NMC), an Inter-Ministerial Forum, was set up in January 1985 for getting a share of the pie of the ever-expanding microelectronics industry. Under NMC, an Indo-US Joint Scientific Committee on Microelectronics (JSC) prepared a report in 1988 titled “MICROELECTRONICS IN INDIA – A BLUEPRINT FOR 2001”. The JSC recommended that it is imperative for India to enter microchip manufacturing in a big way to compete in the world and implement the prospective plan2.

The 1988 JSC report anticipated domestic sales2 of Rs 1000 crores ($ 1 billion) by the year 1995 and Rs 2000 crores ($ 2 billion) by the year 2000. The JSC recommended that the government formulate, steer and promote the microelectronics industry in India through its incentivised industrial policy initiatives and play the role of a catalyst to attract investment from foreign companies along with participation of the Indian private sector.

While the action envisaged on such an initiative was being contemplated, a major fire accident in SCL burnt its microchip plant4 on 8th Feb 1989. This was a major setback to the Indian microelectronic industry particularly when India was exploring and considering different approaches suggested by the JSC to leapfrog in this sector. It took seven years (1989 to 1996) just to decide on re-establishing the chip plant. Rebuilding started in 1996 and SCL became operational again in April 1998, however, nine years went by in the process.

In 1991, the Indian government enacted economic reforms, liberalized imports and reduced import tariffs. Diffused wafers (unpackaged microchips) were allowed under Open General License(OGL) at 45% duty compared to 75% on finished VLSI devices1. This left little incentive for SCL or any other manufacturer to design, develop and manufacture devices with huge investments compared to device packaging houses. Due to liberalized imports, SCL also had to compete with international chip manufacturers who could price their chips cheaper due to scale of production. As a result, SCL started to lose its market share, sales declined and it soon became financially unviable.

While SCL continued to design, develop and manufacture microchips for the strategic sector, the government transferred the chip plant to the Indian Space Research Organization (ISRO) under the Department of Space (DOS) in 2006. ISRO upgraded the CMOS chip manufacturing technology to 180 nanometer sourced from an Israelly company. Since then SCL has designed and manufactured a variety of microchips and used these successfully in some of the ISRO’s flight missions.

During the last two decades, the National Policy on Electronics (NPE)6 was announced twice in a bid to attract world’s prominent microchip makers, offered incentives, however, no company came forward to set up a mega chip plant in India.

In view of the above narrative it is pertinent to discuss the probable causes for limited growth of the microelectronics industry in India during the last five decades (1972-2022).

1. India’s indecisiveness

After independence, India allocated funds mainly to Energy, Education, Health, Transportation, Agriculture, Textile, Steel, Cement, Chemicals, Space, Aviation, Infrastructure, Defense and other industrial sectors. The country formulated policies, implemented plans and invested heavily in the above areas to improve the economic outlook. To make a beginning in the field of microelectronics, the government established BEL in 1954 and 30 years later, SCL in 1984.

While the Ministry of International Trade and Industry (MITI) of Japan2 was strategizing along with Nippon Electric Company (NEC), Toshiba and Hitachi to compete with big American corporations (Intel, AMD, National semiconductors, Texas Instruments and IBM) and gain a competitive edge in market share, price, quality and innovation. The governments of South Korea, Singapore and Taiwan at the same time were supporting their own microelectronics industry.

China had also been working all these years to set up this vital industry. It set up an Electronics Industry Development Fund5 in 1986 (compared to India in 2016) to encourage technological innovation and adopted an Industrial Policy Framework for technology transfer in exchange for opening up their domestic markets. Upon gaining strength in mass manufacturing, the country joined the World Trade Organization in 2001 and tweaked its import, industrial, licensing and custom tariff policies to further accelerate manufacturing and made it a world manufacturing hub.

India took 8 years (1972-1980) to approve and allocate funds for its first microchip plant and another 7 years (1989-1996) just to decide on rebuilding its fire damaged chip plant. During the last three decades (1988-2021), India found it difficult to implement the recommendations made by the JSC in its 1988 report except announcing the National Electronic Policy twice during 2006 and 2017 without success. The idea never took off! Looking back, it appears that India lost 50 years, equivalent to many generations’ shift in chip making technology.

These precious years have been a game changing period where India lost its race to other countries to scale its microelectronics industry. Realizing that the position of a country depends on its strength in the electronics industry, in particular microelectronics, India should have supported this industry by acting quickly, intervening and restructuring its policies which were found wanting.

2. Role of the Electronic Commission, National Microelectronics Council and the Department of Electronics

The Electronic Commission and the Department of Electronics were set up during the 70’s to provide leadership roles, formulate policies, allocate resources, guide and monitor development of the electronics industry in India. The institutions were relatively young and their managerial and technical acumen/resources were limited.
Though they worked hard to usher the electronics industry by setting up SCL, State Electronics Corporations and encouraged private companies in the country, they could not play a lead role in garnering enough financial support and political clout for financing a mega microchip fabrication plant, create the required ecosystem to sustain the industry and manage changes quickly in its industrial and import policies to attract big industry players in India.

DoE for most of the time was headed by officials who kept changing every few years. This affected their understanding and appreciation of the vast potential of the new microelectronic technologies.

The government also set up a National Microelectronics Council (NMC) in 1985 in parallel to the Electronics Commission which added confusion in policy making, its monitoring and ultimate responsibility to execute1. The Electronics Commission was eventually dissolved and the Department of Electronics (DoE) was merged with Information technology in 2012 known as (DEITY).

3. State policies

During the 1970s, International Business Machines (IBM) and Texas Instruments of USA expressed their interest to manufacture microchips in India with 100% ownership. Since the Indian scientific community in Tata Institute of Fundamental Research (TIFR) had been working to set up its own chip making plant, the above companies were not encouraged to establish their manufacturing bases in the country.

In 1986, Intel of the US also contemplated setting up their second source manufacturing facility in India, however, they preferred Vietnam and South Korea due to inadequate infrastructure and unfriendly industrial policies. Similarly Phillips, having a strong presence in India preferred to set up their microelectronics manufacturing in Taiwan1.

State heads in America, Japan, European and South Asian countries in those years provided financial & market support to their electronic companies and brought changes to their industrial and import policies to make things conducive to their industry. This helped these countries dominate the world in innovation and electronics manufacturing.

Before the Indian electronics industry could scale up, the 1991 economic reforms opened up the Indian economy to world wide competition. Without firm footing in manufacturing to face competition, India also joined the World Trade Organization (WTO) in 1996. Later India signed Free Trade Agreements (FTAs) with ASEAN countries in 2004 & 2009, South Korea in 2010, Japan & Malaysia in 2011 and China in 2018.

The new policies allowed import of the microelectronic devices and other electronic components at lower custom duties thus diluting incentives for local production units. The policies proved counterproductive for the Indian electronics industry. Most of the states’ owned electronics companies established during the 1970s and 80s could not compete and had to shut down their manufacturing operations.

India could not provide the required leadership through structural policy interventions, improvements in the business climate, financing and investment strategies, Infrastructure development, subsidized market support; the requisite overall ecosystem to sustain the electronics industry.

4. Poor infrastructure and logistics

No country can afford to put up a mega microchip plant costing billions of dollars if the facility is not set up to compete globally in a fast changing microelectronics space. A good infrastructure coupled with sound logistic support is a prerequisite for the microchip industry. Such plants typically use hundreds of specialized materials comprising Silicon wafers, chemicals, gasses, special alloys and thousands of vital high grade spare parts to run the plant round the clock. Most of the processes are run in 24hr x 365 day format.

Such stringent requirements call for sound infrastructure and logistic systems to be in place for sustaining operations. The Index of ease of doing business from this standpoint had been very poor.

5. Unfriendly custom import procedures

The majority of raw materials, consumables, chemicals, gasses and spare parts used in the microchip plant were imported. The average custom clearing time per consignment varied from a minimum 30 days to 6 months which was detrimental to this kind of industry. The chip manufacturing processes are continuous in nature and production facilities had to be idled for want of materials or spare parts held up for clearance in customs. The complex and long procedures has been one of the criteria factored in to set up a big chip plant in India as the costs involved in stopping the chip production processes are huge.

6. Requirement of expensive resources

The prerequisite to set up a mega microchip plant is uninterrupted power supply and ultra clean water to support its operations. The building which houses the state-of-the-art equipment ought to be vibration and earthquake proof, dust free with class 10 or better cleanroom requirements. To keep chip-plant running all the time requires resources, technical expertise and inventory of spares parts. The raw materials, consumables, chemicals, gasses, spare parts are of semi grade with ultra high purity mostly sourced from foreign vendors.

It is quite expensive to run and maintain such a plant without scaling it up. Putting up a mega chip plant requires an enormous amount of foreign exchange and millions of dollars every year to maintain the same.

7. Exodus of process engineers and chip designers

For its time, SCL was a state-of-the-art and one of its kind manufacturing facility in India. After the fire accident in 1989, many brilliant, experienced and competent process engineers and chip designers left SCL in view of uncertainty and years of delay in approving the rebuilding of SCL. In fact, more than a dozen chip design centers run by SCL and other government institutions became a training ground for engineers who would join but leave quickly after having received their training. Leading chip manufacturers and design houses of the world took advantage of the availability of such competitive chip designers’ and opened their chip design centers in Bangalore, Pune, Chennai and Hyderabad.

8. Fear of obsolescence

The microelectronics technology changed in terms of device design, manufacturing processes, raw materials and equipment capabilities coupled with capacities every few years with a shift to lower geometries. Indian Private companies never came forward to enter this new and high-tech field owing to the fear of obsolescence and complexities involved in the setting up of a microchip plant. They considered it highly risky to invest in the field of chip making.

With the above historical narrative and enumerating causes that restricted growth of the microelectronics industry, the moot point remains what can be done at this stage to establish a mega chip making facility in India?

Microelectronic devices and Systems rank the second highest in India’s import bill.This is going to increase further with the digital revolution, automation looming large and higher growth of the Indian economy. India is realizing that it can no longer afford to ignore the microelectronic industry with current supply and chip shortages worldwide.

In this scenario with questioning of being reliant on others, a worldwide pandemic and aggressive postures, some of the countries are contemplating to shift their manufacturing operations elsewhere, there exists an opportunity for India to develop the microelectronics industry for self-reliance.

Is India destined to miss the opportunity or can something be done at this stage? If India could license the 5 Micron chip technology from American Microsystems Inc, (AMI) in 1982 and train its engineers to learn the technology to design, develop and manufacture microchips successfully on a small scale, it can do it now more confidently on a mega scale. Today India is in a better position to address the probable causes which hindered the microelectronics industry earlier and can support it strongly like other countries.

Here is a proposed roadmap to revitalize the microelectronics industry in India:

  1. Identify microelectronics devices being consumed in mass by the Indian industry to source appropriate process technologies for manufacturing microchips. (refer Note-1 for an illustrative list).
  2. The government shortlists two or three big Indian private companies which use a mix of microchip devices in their end products. Ideally, these companies should have experience in electronic systems design, software design, micromodules assembly, testing operations and knowledge of special chemicals. The shortlisted companies identify foreign technology partners, transfer the chip technology and train their engineers for gaining knowledge in chip design, fabrication, packaging and testing operations.
  3. The government supports these companies with fiscal policy measures, price support, offers all possible incentives at its command, tweaks import policies/ tariffs in select cases and simplifies custom clearance procedures for ease and fast delivery of input resources and award national project(s) as an additional incentive e.g. all electronic energy meters manufactured in India shall be based on Indigenized microchips. (refer note-2 for more details)
  4. Identify brilliant chip and process designers of Indian origin working in local/ foreign companies, invite them to build the Indian microelectronic industry as a national priority on attractive salary packages and recognize their contribution through the institution of national awards.
  5. All concerned government organizations/ PSUs help indigenise raw materials, consumables, gasses, spare parts used in this industry for self reliance and sustenance. The government promotes an overall ecosystem to sustain the chip making industry on a regular basis rather than a one time measure.

If India aspires to sit on the big table and realize its dreams, our policy makers must collectively strategize to bring the leading chip manufacturers to India. India’s resolve to be self-reliant in microelectronics technology should be made a national goal and receive top priority.


1. Harmonious Approach for Self-reliant Development of Microelectronics: Aug 1986
2. JSC Report date June 1988 on Microelectronics in India- A Blueprint for 2001
3. IED March 1991: Microelectronics- World Scenario and the Indian Experience
4. Forum for Indian Science Diplomacy (Aug 2019): A Case Study of SCL
5. India’s Electronics Manufacturing Sector – Economic & Political Weekly (Aug 2018 Vol-34)
6. Industrial Policies on Microelectronics by GoI from time to time

Note-1 Illustrative list of microdevices of mass consumption

1. Chips for Automotive, Telecom/ Mobile and Consumer Electronic Industry
2. Electronic Chips for Energy Meters, Water Meters and Kitchen Gas Meters
3. Chips for LED Bulbs’ Drivers’
4. Electronic Fast Tag Chips
5. General Purpose Microcontroller Chips


Electronic Energy Meters meant for recording electrical energy introduced in India around 1997 are here to stay. The energy meters produced by the Indian manufacturers come in different variants. During the last two decades more and more features have been added on to the electronic energy meters to make these smart (similar to mobile phones) to address needs of the Indian Electric Utilities and Electricity Consumers.

The microchips used in electronic energy meters have a mass market and will remain so for a long time. These chips are not manufactured in the country and presently being imported from Analog Devices and Atmel of the US, ST microelectronics of France, SAMES of South Africa and a few Chinese companies.

India should therefore undertake the design, development and manufacture of the energy meter chips as a National Project on a war footing to stop their import.

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