India must leverage its chemical industry to integrate itself into global semiconductor supply chains.
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The India Semiconductor Mission was launched in 2021, with a financial outlay of INR 76,000 crores. This ambitious policy is part of India’s push to develop a sustainable semiconductor and display ecosystem after witnessing the widespread effects of semiconductor shortages. As chips became requisite for more industries, and as the pandemic reshaped demand, bottlenecks in the industry prevented supply from keeping up. The United States (US)-China trade war has further aggravated the situation as the two countries compete by withholding technology and raw materials. Disruptions in industries ranging from automotive to consumer electronics have highlighted the critical need for diversified and resilient supply chains. Localising the entire value chain, however, is impossible for a single country due to the complexity and specialisation required at each stage. Instead, countries need to look at how they can make themselves indispensable to the rest of the world by integrating within the global value chain. Apart from investing in building fabs, Outsourced Semiconductor Assembly and Tests (OSATs), and Assembly Testing Marking and Packaging (ATMP) plants, India must look at where else it can create value in the ecosystem by leveraging its existing strengths.
As chips became requisite for more industries, and as the pandemic reshaped demand, bottlenecks in the industry prevented supply from keeping up.
Semiconductor manufacturing uses more than 150 chemicals and over 30 gases and minerals across production processes. The first stage is wafer processing, where ingots of single-crystal silicon called boules are drawn from molten silicon in an oxygen-free environment using high-purity gases.[1] The silicon boules are ground to a uniform diameter and then cut into wafers. They are then sliced and passed through a slurry containing hard abrasive materials.[2] Dopants[3] are introduced into the silicon crystal lattice in controlled amounts to alter its electrical properties to meet certain specifications. Surface defects are removed using solvents and the wafers get polished using abrasive chemical mechanical planarization slurries.
Silicon wafers need to be kept extremely clean to prevent contamination through chemical cleaning processes at each stage of manufacturing.[4]
The process of photolithography uses photoresist materials[5] to transfer circuit patterns onto wafers. Lithography also uses developers, primers, photoresist strippers, and deep UV (Ultraviolet) gases.[6]
Once the wafers are manufactured, metals, insulators and semiconductors are deposited onto the silicon wafer surface to build the desired circuitry. This is accomplished by chemical vapour deposition, which requires specialty gases[7] in highly controlled environments. Circuits are also etched onto wafers by selectively removing layers deposited on the silicon wafer. Etching can be done either through a wet process that submerges wafers in acids, [8] or via dry processes that use specialty gases.[9] Apart from input processes, chemicals like fluoropolymers[10] are used to protect semiconductor manufacturing equipment from corrosion and contamination. This makes the chemical industry a key contributor to the semiconductor ecosystem.
The first stage is wafer processing, where ingots of single-crystal silicon called boules are drawn from molten silicon in an oxygen-free environment using high-purity gases.
This ecosystem calls for extremely high purity standards, often measured in parts per billion or parts per trillion levels of metal content and moisture. The exceptional level of specialisation has meant that there is an overreliance on a small number of suppliers based largely in Japan, South Korea, the US and Germany. Achieving and maintaining purity standards limits the speed at which production capacity can be scaled. Chipmakers are generally hesitant to switch to new sources or chemical formulas because any changes in the process risk lowering production yields. This concentration has made supply chains vulnerable to disruptions. The COVID-19 pandemic led to factory shutdowns, labour shortages and logistical challenges that had cascading effects on the supply chain. Geopolitical issues have further aggravated shortages. In response to a South Korean court ruling that penalised Nippon Steel, Japan introduced export restrictions on photoresists and hydrogen fluoride[11] to South Korea, creating a bottleneck. The US-China trade war and an increasing focus on semiconductor self-sufficiency have led to imbalances in global supply chains. China has been aggressive in its push to limit its foreign dependence on all material inputs by boosting local chemical manufacturing through subsidies and regulatory flexibility. The Russia-Ukraine war has also impacted the supply of niche materials such as Ukrainian neon, which is a byproduct of Russian steel manufacturing. 45 to 54 percent of the world's semiconductor-grade neon comes from two Ukrainian companies, Ingas and Cryoin, which have had to halt operations since Russia’s attack.
Chipmakers are generally hesitant to switch to new sources or chemical formulas because any changes in the process risk lowering production yields.
These gaps are currently being filled by China, but with rising prices and the China Plus One strategy, India has immense opportunities to establish itself in the electronics chemical industry. India already has a robust chemical manufacturing industrial base that it can develop and scale to meet global demands.
The Indian chemical industry is the sixth largest in the world and contributes to 7 percent of the country’s gross domestic product (GDP). It is expected to grow to US$304 billion by 2025, of which the specialty chemicals segment is poised to contribute a significant portion. Specialty chemicals account for over 50 percent of India's chemical exports, with dyes, pigments, and active pharmaceutical ingredients being the leading sub-segments. However, India has the potential to channel its existing expertise in chemical manufacturing to feed into the India Semiconductor Mission. India already produces several bulk and specialty chemicals, including acids, solvents and industrial gases. However, these products currently lack the ultra-high purity required for the semiconductor industry. The production of photoresists, ultrapure water, high-purity hydrogen peroxide, and etching chemicals is minimal to non-existent. Global leaders in specialty chemicals for semiconductors like BASF and Solvay have operations in India. However, these cater to the broader chemical market rather than the semiconductor niche. This gap presents significant potential for Indian manufacturers to develop capabilities and transition to semiconductor-grade chemical production.
Integration into global supply chains requires a concerted effort to produce chemicals at the standard and scale that semiconductor manufacturing entails.
Practices such as responsible waste management systems, recycling of by-products, and the minimisation of emissions must be mandated through environmental audits and certifications to ensure industry-wide adherence.
India's aim to establish a robust semiconductor ecosystem requires a broader outlook than just fabrication and back-end facilities. To safeguard its strategic trade interests, India must establish itself as a key enabler in the wider semiconductor ecosystem. Aligning its existing capabilities with the industry’s needs would allow India to integrate deeper into the global value chain as a supplier. The country’s existing chemical expertise offers a significant opportunity to do so. Specialised, sustainable research and infrastructure development would not only support domestic semiconductor manufacturing but also foster relationships with like-minded global players who are seeking trusted and reliable partners for critical supply chains.
Amoha Basrur is a Junior Fellow with the Centre for Security Strategy and Technology at the Observer Research Foundation.
[1] Nitrogen and argon
[2] Silicon carbide, boron carbide, and aluminium oxide
[3] Phosphorus, boron, arsenic, antimony, and bismuth
[4] Isopropanol, propylene glycol ethers, acetone, methyl ethyl ketone, n-butyl acetate, pyrrolidone, sulfuric acid, ammonia, hydrogen peroxide, and hydrofluoric acid
[5] Cyclic polyisoprene resins, glycidyl methacrylate, and ethyl acrylate.
[6] Mixtures of argon, fluorine, neon and krypton
[7] Nitrogen, argon, oxygen, helium and hydrogen
[8] Hydrochloric acid, sulfuric acid, ammonium hydroxide, tetramethylammonium hydroxide, ammonium fluoride, and hydrofluoric acid
[9] Silane, phosphine, tungsten, hexafluoride, arsine, carbon monoxide, fluorocarbons, sulfur, hexafluoride, and nitrogen trifluoride
[10] Polytetrafluoroethylene, perfluoroalkoxy, polyvinylidene fluoride, and ethylene chlorotrifluoroethylene
[11] Gas used in the etching process.
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Amoha Basrur is a Junior Fellow at ORF’s Centre for Security Strategy and Technology. Her research focuses on the national security implications of technology, specifically on ...
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