India's Semiconductor Industry

SEMICONDUCTOR INDUSTRY IN INDIA

Context : 

In June, 2023, the Union Cabinet had approved the proposal of Micron for setting up a semiconductor unit in Sanand, Gujarat.

Construction of this unit is progressing at a rapid pace and a robust semiconductor ecosystem is emerging near the unit.

The approved three semiconductor units are:

1. Semiconductor Fab with 50,000 wfsm capacity:

Tata Electronics Private Limited (“TEPL”) will set up a semiconductor fab in partnership with Powerchip Semiconductor Manufacturing Corp (PSMC), Taiwan.

Investment: This fab will be constructed in Dholera, Gujarat. Investment in this fab will be Rs.91,000 crore.

Technology partner: PSMC is renowned for its expertise in logic and memory foundry segments. PSMC has 6 semiconductor foundries in Taiwan.

Capacity: 50,000 wafer starts per month (WSPM)  

 

Segments covered:

• High performance compute chips with 28 nm technology

• Power management chips for electric vehicles (EV), telecom, defence, automotive, consumer electronics, display, power electronics, etc. Power management chips are high voltage, high current applications.

2. Semiconductor ATMP unit in Assam:

Tata Semiconductor Assembly and Test Pvt Ltd (“TSAT”) will set up a semiconductor unit in Morigaon, Assam.

Investment: This unit will be set up with an investment of Rs.27,000 crore.

Technology: TSAT semiconductor is developing indigenous advanced semiconductor packaging technologies including flip chip and ISIP (integrated system in package) technologies.

Capacity: 48 million per day

Segments covered: Automotive, electric vehicles, consumer electronics, telecom, mobile phones, etc.

 

3.   Semiconductor ATMP unit for specialized chips:

CG Power, in partnership with Renesas Electronics Corporation, Japan and Stars Microelectronics, Thailand will set up a semiconductor unit in Sanand, Gujarat.

Investment: This unit will be set up with an investment of Rs.7,600 crore.

Technology partner: Renesas is a leading semiconductor company focussed on specialised chips. It operates 12 semiconductor facilities and is an important player in microcontrollers, analog, power, and System on Chip (‘SoC)’ products.

Segments covered: The CG power semiconductor unit will manufacture chips for consumer, industrial, automotive and power applications.

Capacity: 15 million per day

Strategic importance of these units:

• Within a very short time, India Semiconductor Mission has achieved four big successes. With these units, the semiconductor ecosystem will get established in India.

• India already has deep capabilities in chip design. With these units, our country will develop capabilities in chip fabrication.

• Advanced packaging technologies will be indigenously developed in India with today’s announcement.

Employment potential:

• These units will generate direct employment of 20 thousand advanced technology jobs and about 60 thousand indirect jobs.

• These units will accelerate employment creation in downstream automotive, electronics manufacturing, telecom manufacturing, industrial manufacturing, and other semiconductor consuming industries.

India’s semiconductor industry started in the 1980s with semiconductor corporations limited to a PSU established at Mohali, Punjab and DRDO & ISRO’s fab lab for their own needs. Later on this industry progressed slowly as it depends on cheaper imports from china, taiwan, singapore, hong kong and south korea. In this lecture we will be discussing the semiconductor industry potential and challenges in India.

What is Semiconductor?

• It is a material product usually composed of silicon, which conducts electricity more than an insulator, such as glass, but less than a pure conductor, such as copper or aluminium. 

• Semiconductors are critical technological components for emerging technologies viz. artificial intelligence (AI) and internet of things applications, 5G communications, cloud computing, automation, electric vehicles, with a wide coverage of applications from basic consumable electronic gadgets and automobiles to areas of strategic operations.

Semiconductor chips 

• It is an electric circuit with many components such as transistors and wiring formed on a semiconductor wafer. 

• These semiconductor chips are the drivers for ICT development and one of the key reasons for the current flattening of the world.

• Semiconductor chips are the lifeblood of the modern information age. 

• They enable electronic products to compute and control actions that simplify lives. 

• The manufacturing cycle of a semiconductor chip from sand to a finished product, sees it change hands approximately 70 times across international borders.

• Concentrated Areas 

• The semiconductor is the cornerstone of all electronic products. However, the semiconductor manufacturing capacities are concentrated in a few geographies.

• Nearly all leading edge (sub 10nm) semiconductor manufacturing capacity is limited to Taiwan and South Korea, with nearly 92 per cent located in the former. 

• Further, 75 percent of the semiconductor manufacturing capacity is concentrated in East Asia and China. 

Opportunities for India 

• India’s consumption of semiconductors is expected to cross $80 billion by 2026 and is expected to reach $110 billion by 2030.

• India has xceptional semiconductor design talent pool, accounting for up to 20% of the world's semiconductor design engineers.

• The current decade presents a unique opportunity to India. Companies are looking to diversify their supply chain and for alternatives to their bases in China. 

• The establishment of the value chain for semiconductors would ensure a multiplier effect on the entire economy. 

• The semiconductor manufacturing and testing bases are heavily concentrated in East Asia, the Act East policy provides an opportunity to connect and strengthen ties with key players in the region. 

Challenges /Issues 

• Huge requirement of Investment 

• Multi billions of dollars are needed to set up a fab manufacturing unit.

• The conversion of raw water to water of ultrahigh purity is thus a significant and costly activity for all semiconductor fabs. 

• Water and Electrical supply

• Semiconductor manufacturing consumes large quantities of water for a variety of purposes ranging from equipment cooling to wafer surface cleaning. 

• Technological competitiveness 

• The making of a semiconductor chip involves some technological skill .

• Inadequate logistics and absence of proper waste

•  Inadequate logistics and absence of proper waste disposal have further exacerbated the poor state of its production. 

• Uninterrupted quality electricity supplies.

•  Covid-19 

• The trigger point was the beginning of the Covid-19 pandemic and the subsequent lockdowns across the world that forced shut crucial chip-making facilities in countries including Japan, South Korea, China and the US.

• The chip shortages due to Covid-19 have hit automakers with a revenue loss of $110 bn in 2021. 

• Russia-Ukraine conflict 

• The Russia-Ukraine conflict and its implications for raw material supplies for the semiconductor value chain has also poised chipmakers to invest in strengthening the semicon supply chain.

Initiatives  taken by india 

• Semicon India programme

• It provides $10 bn fiscal support and other non-fiscal measures 

• The Semicon India Program aims to provide attractive incentive support to companies / consortia that are engaged in Silicon Semiconductor Fabs, Display Fabs, Compound Semiconductors / Silicon Photonics / Sensors (including MEMS) Fabs, Semiconductor Packaging (ATMP / OSAT) and Semiconductor Design.

• India Semiconductor Mission:

• It has been set up as an Independent Business Division within Digital India Corporation having administrative and financial autonomy to formulate and drive India’s long term strategies for developing semiconductors and display manufacturing facilities and semiconductor design ecosystem. 

• Production Linked Incentive scheme

• The government also recently announced the PLI and DLI schemes as major steps towards building a semiconductor ecosystem in the country..

• The recent Cabinet approval with an outlay of  Rupees 76,000 crore spread over a period of six years for the development of semiconductors and display manufacturing ecosystem is expected to be a shot in the arm. 

• This move claims to attract rupees 1.7 lakh crore private investment in India.

• Under the modified program, a uniform fiscal support of 50 percent of project cost shall be provided across all technology nodes for setting up of semiconductor fabs. Given the niche technology and nature of compound semiconductors and advanced packaging, the modified program shall also provide fiscal support of 50 percent of capital expenditure in pari-passu mode for setting up of compound semiconductors / silicon photonics / sensors / discrete semiconductors fabs and ATMP/OSAT.

Conclusion and Way Forward 

•  Semicon diplomacy

•  India must seize opportunity and become an attractive alternative destination for semiconductor manufacturing.

• The way ahead is conceptualizing a semicon diplomacy action plan.

• Semicon diplomacy is pivotal to India’s Act East Policy, which aims to build resilient ties in the Asia Pacific region. 

• It can be leveraged by increasing multilateral and bilateral cooperation and Quad has immense potential in this regard.

• Development of Policies 

• The semiconductor value chain is interrelated and linked with several industries, governments must develop policies that address all the crucial characteristics in the long run. 

Government policies should also focus on assuring and securing access to foreign technology suppliers through trade and foreign policy to ensure a global level of collaboration.