NEW DELHI: Work on India’s first semiconductor chip manufacturing plant is expected to get underway early in the new year, in Mysuru, Karnataka. Media reports quoted Ashwath Narayan, state IT minister, to that effect, also indicating that the company is the International Semiconductor Consortium (ISC) comprising the UAE based investment firm Next Orbit Ventures and Israel-based Tower Semiconductor (to be acquired by Intel).
This is a $3 billion project to make 35 nanometre to 65 nanometre analog chips for aerospace and defence and if all goes according to plan, the ISC could be the first to take off, ahead of Foxconn and Vedanta’s plan for a Gujarat plant, and a semiconductor park proposed by Singapore’s IGSS Ventures.
The ISC project could take as long as five years to become operational but India has an advantage in that it has considerable human talent when it comes to chip design.
“There are an estimated 40,000 engineers employed by MNCs in India,” said Dr V.K. Saraswat, former DRDO chief at a recent webinar on semiconductors. “These MNCs have shops in Gurugram, Hyderabad and Chennai where a lot of activities are ongoing. Significant work is also underway at IITs on chip design and these are quite advanced.”
“Governance initiatives like Make in India are driving design opportunities from historical regions in Taiwan or China, or in other parts of Southeast Asia to India,” said Steven Long, Vice-president and GM of Intel’s Asia Pacific & Japan divisions. “We see a big opportunity here.”
Intel has had a long presence in India, so also other U.S. semiconductor majors, Texas Instruments and Micron. But the ecosystem is otherwise seriously deficient. As Dr Saraswat notes, India is yet to design and commercialise a chip and there is no IPR held by any Indian firm. Semiconductor manufacturing is driven by intensive R&D, which is non-existent in India currently. There is no India-headquartered company in this field, a major weakness.
To succeed in this business, India needs to go for international collaboration, says Dr A Paulraj of Stanford University.
“India needs to hire people with long experience of the international semiconductor industry; this cannot be done by bureaucrats. India can only participate in the (semiconductor) industry and buy and sell technology. We cannot be self-reliant since that will take trillions. (Semiconductor business) is very competitive, only the paranoid survive, there are huge entry barriers including geopolitics, so nobody at the top wants others to come in, if you are successful you are targeted.”
Nevertheless, having decided to bite the bullet, the government’s launch of the ₹76,000 crore Production Linked Incentive scheme to draw semiconductor manufacturing has triggered interest. Indian firms like the Tatas are reportedly planning an outsourced semiconductor testing and assembly with a chip fabrication plant going forward.
But ultimately this is about people, says Paulraj, and India has to go about it like the others did.
“To lead you need top people and what’s happened is originally all were in the U.S., so Japan picked up people (from there) and built up their industry, then Taiwan followed and China began picking up people from Taiwan, and so did Samsung 10 years ago. People make this industry, one needs strong Ph.Ds with 25 years of experience, we need to find the right people,” he emphasised.
The investment required is high. Starting from a low base, India would need $100 billion in private investment over 10-15 years. India can join the semiconductor club only when it has an IPR and can sell internationally.
Banmali Agrawala of Tata Sons made another point. “We in India have not seen scale in electronics, nor the precision needed for electronics and especially in terms of the finish and quality in consumer items. The mobile phones ecosystem is shifting to India substantially but I will not quibble about value addition there because we need to start even if we are only putting things into boxes. Things will evolve; the moment you see a plant coming up, others too will.”
He warned that India must recognise it can be a leader only in a few segments and wondered if India has the people who know and understand that the nature of manufacturing has changed. Looking ahead, scale is important, the ability to make say five lakh mobile phones a day, which requires enormous convergence. Currently India manufactures about 300 million phones, a $4 billion to 5 billion business.
HCL founder and former chairman Ajay Chowdhry underscored the importance of volume in the semiconductor business.
“We need to identify large value products that can be converted from system to chip. If we want a semiconductor plant, where will customers come from? Everything is Chinese today. We need to design, build and buy such products here, so go backwards, start from products and then go to chips. Any semiconductor plant will anyway take 5 or 6 years to come up.”
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