India’s Semiconductor Dream
The India and United States announced an MoU today, for collaboration in semiconductor supply chains. It seems to be largely generic with its stated aim to establish a collaborative mechanism for supply chain resiliency and innovation. It comes on the heels of various global developments following the recent semiconductor supply shortage — caused due to unprecedented sales of electronics devices during pandemic lockdowns. The US recognized the need to again increase its share in semiconductor manufacturing and passed the CHIPS Act (Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022), in concert with steps to nullify China’s ability to set-up its own manufacturing or fabrication. India has been active as well with the launch of the India Semiconductor Mission and its associated incentive packages for the development of a robust semiconductor ecosystem in the country.
India’s incentives are aimed at creating an end-to-end ecosystem, driven by the already existing design talent (Design Linked Incentives), packaging and testing (ATMP/ OSAT), and fabrication (Semiconductor Fab). While there is tremendous government frenzy regarding the same, we are yet to see concrete announcements from industry for the manufacturing and testing segments. The design scheme is operational with several startups being selected for support. This is expected to yield dividends sooner owing to India’s existing talent pool, with the government citing that 20% of the world’s global semiconductor design talent is Indian, and most of the industry majors have large development centers here.
The primary ambition is the setting-up of a manufacturing ecosystem, initially with one or multiple fabs or fabrication units in the country, along with several packaging and testing units. In fact, various states have also created incentives to support fabs set-up in their jurisdiction, above and beyond the capital subsidies announced by the union government. Most commentators seem to support the government’s efforts especially in light of the burgeoning electronics import bill and various strategic considerations. And given that this industry already underpins communications, computation & AI, defence, energy, and transportation, it is imperative that we establish a presence for ourselves in the global value chain. Although our specialty could potentially be fabless design or contract servicing, it would also be advantageous to have the ability to manufacture domestically.
Establishing a commercial fab or foundry in India is a challenging task, as previous attempts have not been successful. Although the country has several research and mission-driven fabs, they are limited to older technology and lower output. Achieving a cutting-edge technology node fab will require persistent effort and investment from policymakers and industry, with a potential timeline of 15–20 years or more. However, Taiwan’s success has shown that it is possible to overcome these challenges. India will require continued government investment, technology partnerships with leading companies for know-how and know-why, skilled manpower which may need to be lured from abroad, and a mission-focused approach until success is achieved. With these elements in place, India could establish a successful semiconductor industry and secure its place in the global value chain.
A vibrant semiconductor ecosystem requires more than just investments, technology, and timelines; it is a reflection of a nation’s determination to carve out a unique space in the world of high technology. It remains to be seen if we are up to this challenge.
