Answer: 

The demand for semiconductors has experienced a rise in recent years because of factors such as the adoption of 5G technology, consumer electronics, automobiles including EVs  and the government's continuous efforts towards digitalization.

Indian semiconductor industry in 2022 was USD 27 Billion, with over 90% being imported from countries like China, Taiwan, USA and Japan, and therefore a significant external dependence for India. 

Semiconductor chips as the lifeblood of the modern information age

• ICT development: Semiconductor chips are the drivers for ICT (Information and Communication Technologies) development.
• Semiconductors drive the processors, memory chips and communication modules within Mobile phones and laptops.
• Critical infrastructure: They are used in critical infrastructures such as communication, power transmission, etc. that have implications for national security.
• For instance, Semiconductors helps in multiple aspects from capturing data to encoding, encryption, transmission and decryption of the data in telecom infrastructure..
• Internet of Things: Semiconductors play an important role in IoT, allowing devices to collect and communicate data to create a connected ecosystem.
• For instance, Smart cities rely on semiconductors to manage traffic systems, monitor energy consumption and enhance public safety.

• Automotive Innovation: Semiconductors enables numerous advancements in safety, efficiency, and entertainment in automobiles. 

• For instance, Electric vehicles heavily depend on semiconductor technology for battery management, motor control, and charging infrastructure. 

• Healthcare: Semiconductors have led to advancements in diagnostics, treatment, and patient care.

• For instance, Medical devices like MRI machines, ultrasound systems, and pacemakers rely on semiconductor technology for accurate imaging, data processing, and precise medical processes.

Challenges for India in semiconductor manufacturing

• Infrastructural requirements: There are challenges in meeting the infrastructural requirements of a cluster of semiconductor manufacturing fabs such as continuous supply of water, uninterrupted electricity etc.
• Massive investment: Semiconductor Fabrication is a capital and technology intensive process. 
• Cost of building a new fabrication unit is over one billion U.S. dollars with values as high as $3–4 billion.
• Complex value chain: The semiconductor value chain has three major components: Design, Fabrication, and Assembly and Testing. Companies focus on their niche and add specific value to different stages of production. 
• For example, companies from the United States and South Korea dominate the design stage, while Taiwan holds a significant share of fabrication and assembly markets. Hence, there is an incredible amount of interdependence. 

• International events: The Russian invasion of Ukraine severely constrained the supply of neon, a noble gas needed for lasers in chip manufacture.

A robust semiconductor industry necessitates a holistic approach, incorporating strengthened infrastructure with a focus on capacity planning and logistics. Stable government policies, addressing the interconnected nature of the semiconductor value chain are pivotal for long-term success, emphasizing collaboration through trade and foreign policy.