While India has excelled in chip design and electronics manufacture, there have long been difficulties in establishing Semiconductor Wafer Fabrication (FAB) units.
The digital age has moved the world towards new levels of technology consumption. In 2019, 2.2 billion devices will be shipped around the world, including PCs, tablets, and smartphones. All of these gadgets rely on semiconductor chips to work, and economies that produce a lot of these chips have clearly profited the most in terms of raising GDP. The United States, Japan, Korea, China, Singapore, and other significant semiconductor chip producers all have a strong presence in the global economy.
What is the position of India?
While India has excelled in chip design and electronics manufacture, it has long had difficulties in establishing Semiconductor Wafer Fabrication (FAB) facilities. This is due to a number of causes, not the least of which being the country’s lack of infrastructure and skilled labour. It’s also tough to compete with neighbouring countries like China and Vietnam, which have long been preferred locations for global semiconductor manufacturers due to lower costs. Intel claimed in 2014 that it had no plans to start production in India because of these factors.
Private firms in the nation have attempted to establish semiconductor fab units here:
The Hindustan Semiconductor Manufacturing Corporation (HSMC), a partnership of firms that included ST Microelectronics and Silterra Malaysia, was planning to establish a chip manufacturing plant in Gujarat for a total investment of 30,000 crores. In 2019, the government revoked HSMC’s letter of intent, and no private company has proposed launching such a project since then. The consortium was unable to provide the government with the necessary documentation for the establishment of a Semiconductor Wafer Fabrication (FAB) plant. HSMC has received money from Next Orbit Ventures in Mumbai, as well as AMD.
Another consortium, led by Jaiprakash Associates, collaborated with IBM and Israel’s Tower Semiconductor to begin chip manufacturing in UP. The debt-ridden Jaiprakash (JP) Associates withdrew out of the 34,000-crore deal in 2016. If the government’s only two private sector consortiums approved to set up large-scale chip production in the country failed to do so, it’s a clear sign that India is falling behind.
What are the stumbling blocks to it?
The fact that building up fab manufacturing units necessitates a large investment is one of the most significant roadblocks. Aside from the exorbitant price tag (in the billions of dollars), even a single chip requires hundreds of litres of pure water, which may be difficult to come by in sufficient amounts in India. Another significant stumbling block is a reliable power supply.
The crux of the problem is that India lacks the basic infrastructure required to undertake chip manufacturing endeavours. Other global companies are always putting pressure on prices, particularly China, which is developing a homegrown chip programme that aims to use local semiconductors in 70% of its goods by 2025.
Chip manufacturing has no shortage of talent:
It’s not as if India lacks the technological know-how to produce semiconductor chips. Indeed, the government considered a 2,500 crore feasibility assessment based on a Gallium Nitride semiconductor fab at the Indian Institute of Science (IISc) to develop a domestic semiconductor sector. Gallium Nitride-based semiconductors avoid the already developed silicon-based fab technology that is dominated by countries such as the United States and China entirely.
While large-scale semiconductor makers struggle to gain traction, a number of companies developing chips for embedded systems such as IoT and telephony on a much smaller scale are upending the industry. Many well-known startups are situated in Bengaluru, such as Signalchip, a semiconductor company that has released 4G and 5G modem chips. Another Bengaluru-based business, Saankhya Labs, has been developing chipsets for military, satellite, and broadcast applications.
Another example is the Shakti microprocessor, which was developed at IIT Madras and can be utilised in mobile computing devices, embedded low-power wireless systems such as cellphones, security cameras, and networking systems.
When it comes to India becoming a prominent player in semiconductor chip manufacturing, there is clearly no shortage of skill. Despite this, the government has struggled to build the fab units required for large-scale manufacture. India is becoming a big net importer of semiconductor chips, thanks to increased demand for electronics.
Experts estimate that India spends more money on semiconductor imports than it does on oil. The creation of semiconductor manufacturing units within the country is one strategy to lessen reliance on chip imports. The government must ensure that sufficient infrastructure is in place and that investments are made in order to build scalable industrial units. We should also study China’s success in chip production and learn from it.