Sunday, May 29, 2022

Why is India unable to make cutting edge silicon fabs though it possesses the finest engineers?

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Piyush Goyal, India’s Minister of Commerce and Business, once invited Indian industry to build a semiconductor fabrication unit in the country, but industry experts are divided on whether this is a viable proposition because the risks are too high and the investment necessary is too large.

In the backdrop of the India-China conflict, the government sees the building of such facilities as critical to the development of the electronics industry.

This wasn’t the first time a semiconductor fab had been attempted in the country. Since 2006, India has been attempting to obtain a private semiconductor fab, but all previous attempts have been unsuccessful.


Front-end fab fabrication and back-end assembly, which included packaging and testing, were all part of semiconductor manufacturing. Only a few companies undertook front-end manufacturing on a large scale around the world.

Although India did well in the design and verification of semiconductors, with most major semiconductor companies having an R&D presence in the nation, we import 100% of our chips, memory, and displays. We’re definitely looking at approximately $10-12 billion in semiconductor chip imports this year at the very least.

“The government’s past track record does not inspire any confidence that the private sector partner will be treated well,” said PVG Menon, President & CEO, VANN Consulting Pvt. Ltd. and former President, India Electronics & Semiconductor Association (IESA). When one or two attempts fail, one can point the finger at the private sector; nevertheless, when multiple attempts fail, one must begin to question government policy.”

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Menon believed that government backing for private sector companies is critical for the establishment of high-tech manufacturing facilities such as fabs, as has been the case in the United States, Taiwan, South Korea, Japan, and China.

“In India, the government has a history of treating every private-sector initiative with mistrust. “I am concerned we are very far away from establishing up National Technology Infrastructure Assets with the support of the private sector if the government intends to play the role of a suspicious policeman rather than a facilitator,” he says.


SITAR, a unit of the Defence Research and Development Organisation (DRDO) in Bengaluru, and a semiconductor laboratory in Chandigarh are two Indian fabs that produce silicon chips for strategic applications such as defence and space, rather than for commercial usage.

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The initial investment in semiconductor fabs is roughly $8 billion, and the numbers quickly rise. According to industry observers, they have high operating expenses and require technology upgrades every three to four years.

To develop the semiconductor manufacturing ecosystem, according to Menon, a very aggressive and persistent fiscal support package will be required. “Past history cannot be changed, and I believe the industry will wait to see the specifics before investing.”

Moschip CEO Venkata Simhadri thought the government must comprehend the country’s demands and the types of semiconductor fabs being discussed.

Venkat Simhadri

“Having a land bank is the smallest need for establishing a fab.” Setting up a cutting-edge CMOS fab costs billions of dollars, and there are only a few businesses in the world that have the technology, so there is no compelling reason for them to locate their fabs in India. Furthermore, they cannot solely rely on the local market to fill the fab’s capacity,” he argued.

Instead, Simhadri believes the government should concentrate on developing India’s fabless semiconductor eco-system. “For example, top semiconductor companies like as Qualcomm, Broadcom, and Meditek do not have their own fabrication facilities.” India may concentrate on forming comparable businesses to produce products for the Indian market.”


“To support this goal, the government will develop a “fabless semiconductor policy” and a “dedicated budget.” Cutting-edge CMOS fabs are not required to meet the increasing demand for semiconductor components in IoT devices, solar equipment, and electric cars.

Local demand for speciality fabs such as Gallium Nitride and Silicon Carbide may be sufficient, and they are significantly less expensive to set up. In the medium term, India should concentrate on these specialist fabs and develop a clear support strategy,” he added, emphasising that it is not simply about supplying land.

According to IESA, the Indian semiconductor component market would be worth $32.35 billion by 2025, with a CAGR of 10.1 percent from 2018 to 2025.

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