Six months after asking “Can India chip in to pull the world out of the semiconductor crisis?”, there’s a variety of answers right now amid the intensifying chip war between the US and China.
In a bid to emerge as a competitive alternative and reduce global dependency on China in the semiconductor sector, India and the US recently signed an MoU to establish a collaborative mechanism on semiconductor supply chain resiliency and diversification in view of the US CHIPS (Creating Helpful Incentives to Produce Semiconductors) and Science Act and India’s Semiconductor Mission (ISM).
Gartner analyst Gaurav Gupta said that with the MoU, the US considers India a future partner in building a resilient supply chain. However, considering the entire semiconductor space, the only area where “India has a decent presence today is in chip design or the fabless ecosystem”, pointed out Gupta. The most important task now for India is to “demonstrate its first commercial fab [a manufacturing plant where raw silicon wafers are turned into integrated circuits]”, he added.
So, what has India done in the recent past?
To become a key player in the global semiconductor supply chain, India approved a $10 billion incentive scheme in December 2021 to attract investments for semiconductor manufacturing and display production. Since then:
- Four global semiconductor companies, including New York-based GlobalFoundries, in talks with the central government to set up fabs in India.
- India likely to invite more companies to set up semiconductor units.
- Vedanta group announced a $18.7 billion (Rs 1.54 lakh crore) investment for setting up semiconductor and display manufacturing units in Gujarat along with Taiwanese contract manufacturer Foxconn, IGSS Ventures, and Abu Dhabi-based Next Orbit Venture’s ISMC.
- Vedanta and Elest Pvt Ltd proposed to build a display manufacturing unit
- Israel-based International Semiconductor Consortium (ISMC) plans to begin construction on India’s first semiconductor fabrication plant this year.
- The Tata Group intends to invest $90 billion in the semiconductor industry across the group companies over the next five years.
- Tata Motors and Tejas Networks Ltd partner with Japan-based chipmaker Renesas Electronics Corp to design, develop, and manufacture Renesas’ semiconductor solutions for India and emerging markets.
- Having applied for PLI scheme, Rajesh Exports plans to investment $3 billion to set up India’s first electronic-display plant in Telangana.
- Ruttonsha registered for making compound semiconductors when the government invited bids for semiconductor fab units.
- SPEL Semiconductor registered for semiconductor packaging under the PLI scheme.
- IBM and STMicroelectronics in talks with India to set up India’s first chip-making facility.
- Cadence Design Systems acquired Cosmic Circuits Private Ltd, a Bengaluru-based provider of analog and mixed signal intellectual property (IP) cores.
- Hitachi High-Technologies Corp establishes Hitachi High-Tech India in Gurgaon and will demonstrate its global sales and global sourcing capabilities in India.
- Atrenta Inc opens an R&D facility in Noida that houses Atrenta's current staff and meets near-term growth requirements.
- Forte Design Systems partners with CircuitSutra to provide VLSI design services throughout India.
HCLTech joins IFS
HCLTech recently joined the Intel Foundry Services (IFS) Accelerator Design Services Alliance and will now be able to build advanced solutions for the global chip manufacturing ecosystem by leveraging its capabilities across digital, engineering and cloud.
“At HCLTech, we are committed to helping our clients, including integrated device manufacturers, fabless manufacturers, IP vendors, foundries and semi-equipment providers, with innovative, sustainable and agile solutions,” said Vijay Guntur, President and Head of Engineering and R&D Services, HCLTech.
“As a member of the IFS Accelerator Design Services Alliance, we look forward to collaborating with IFS to bring added advantages to chip manufacturing. This collaboration brings together the in-depth domain expertise of HCLTech and IFS’ advanced process technologies to ensure delivery of high-performance chips.”
The market scenario
Even though at a very nascent stage, the global chip manufacturing giants find India as the next stop for their ventures with a Deloitte report recently stating that the Indian semiconductor market is predicted to reach $55 billion by 2026.
Smartphones and wearables, automotive components and computing and data storage will consume more than 60% of the market, the report added. The firm also predicted that by 2030, this market will expand to almost $85 billion and generate 6,00,000 employment opportunities.
According to government officials, the India-US deal could have some main positive aspects from New Delhi’s perspective.
In the global electronics supply chain, India has a chance to get aligned to a more central role. This can be even more impactful with finding potential convergence in the country’s chip manufacturing incentive scheme and other countries.
As opposed to interested yet marginal players in India’s incentive plan so far, component manufacturing projects from industry leaders like Intel Corp and Taiwan Semiconductor Manufacturing Co. (TSMC) can be dovetailed.
What also seems likely and beneficial is a further realignment of the regional collaborative effort that’s being fostered by the US in a central role with Washington—in a bid to avoid duplication of efforts—is trying to diversify the sourcing supply base for semiconductor chips.
With a sea of talent, India is perhaps the next school that can produce employees in a sector that’s already struggling to find the right people globally, especially for the fabs that Samsung or TSMC may be opening in America.
The Biden government in return could back manufactures like Intel as they conduct mature node technology transfers (licensing) to India.
“At this point, I won’t really focus on when India becomes a viable alternative against the established countries. The current priority is to take small steps and prove that it can be a player in this space. We have government schemes, proposals, interest, and agreements, but the key would be how and when projects are actually executed,” Gupta told Computerworld.
The semiconductor industry is not easy and has various phases that include raw silicon wafers, wafer fabrication, chip design, assembly including test and packaging, raw materials including chemicals and electronic design automation.
Therefore, the government is taking its time to evaluate the applications it received because of the complexities, including sourcing raw materials and generating enough orders to be profitable, involved.
While the promising proposal from ISMC—a consortium formed by Abu-Dhabi’s Next Orbit Ventures and Tower Semiconductor—is collecting dust for the last 12 months, Intel’s acquisition of Israel-based Tower Semiconductor is still in limbo. These kept India waiting for the deal to be finalized before considering approving the application by ISMC to set up a wafer fab in Karnataka for analog chips.
Once a fab is approved and construction commences, new challenges could appear, including the sourcing of a variety of high-purity gases and wafers to fabricate the chips to put a proper supply chain in place.
And finally, ‘filling a fab’ with chip orders will need a high volume of chips to utilize the fab capacity fully to avoid chip costs go up.
Is there still hope for India?
“As India is starting its chip manufacturing sector from a lower base, the $10 billion incentive program will provide a substantial boost to the country’s chip-making capabilities,” Chris Miller, Assistant Professor of International History at the Fletcher School of Law and Diplomacy at Tufts University told Business Today.
There are two things that are important for India at this moment. It must find a sweet spot in the global chip manufacturing ecosystem and expedite its decisions.