Chip By Chip: India Has Taken A Giant Leap Towards Becoming A Semiconductor Hub — From Design To Fabrication

After six decades of dillydallying, a giant step was taken on March 13, 2024, towards India’s vision of becoming a semiconductor hub, vital for the growth and sustenance of modern economy. With India aspiring to become the third largest economy, this will be concomitant to India’s rise as a semiconductor power. The invisible semiconductor chips are becoming the lifeline of the economies of India and developed countries, and in fact have become essential tools for maintaining strategic autonomy. As the Covid-19 pandemic hit the semiconductor supplies, severely impacting and global and Indian economy, the government in December 2021 began a serious discussion and came out with a Rs 76,000-crore production-linked incentive (PLI) scheme for chip and display fabrication unit. India was not alone in luring chip manufacturers to bring chip production on to their shores. From the US to Europe, and developing economies like Vietnam, Malaysia, Thailand etc, several countries have taken measures to attract investments in semiconductors fabrication, design and packaging units, and reduce dependence on China and Taiwan.

The highly capital-intensive and technically complex chip manufacturing, which was monopolised by East Asian giants like China, Taiwan, Korea etc, needed to be diversified to avoid breakdown in the supply chain. Taiwan and China’s aggressive push in semiconductor chips production has resulted in even the US depending on thee East Asian giants for meeting its requirements for chips. Though India is a global leader in semiconductor chips design, it currently imports almost 100 percent of semiconductors. According to an official data released by the Department of Electronics, India’s overall import of semiconductor chips jumped from Rs 67,497 crore in 2020-21 to Rs 129,703 crore in 2022-23. Additionally, imports from China increased from Rs 24,604 crore to Rs 37,681 crore in 2022-23. The Indian semiconductor industry is projected to reach $55 billion by 2026.

It is hoped that recent successes in attracting world’s top semiconductor fabricators to India will lead to substantial reduction in imports, and emergence of India as an important player in the world's geoeconomics. The breakdown in semiconductor chips supplies during Covid pandemic taught a lesson not only to India but also to big powers like the US that had to recalibrate its semiconductor chips sourcing strategy. India came out with the “India semiconductor mission” in 2021, which is expected to make India a semiconductor hub. For this to be achieved, a country needs to provide a suitable ecosystem to facilitate its production. This includes adequate infrastructure like reliable power, water resources, transportation networks and telecommunications, skilled manpower like expertise in engineering, material science and electronics, proximity to major clients, supply chains and target markets, lead times and shipping risks, and most important, geo-political stability. India’s chip ecosystem will have to be adequately evolved to meet these demands.

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India Missed The Semiconductor Bus Once

In spite of certain drawbacks, companies like Intel had shown interest in setting up chip manufacturing facilities in India way back in the sixties and seventies, and later in the middle of first decade of the new millennium, but Indian authorities ignored the offer. Vinod Dham, who is considered the 'father of the Pentium chip', had once revealed that the co-founder of Intel, Robert Noyce, had visited India in 1969 to explore the opportunity to set up a semiconductor manufacturing facility, but the bureaucracy failed to understand the importance of this offer. India thus missed the semiconductor bus then. However, better late than never, the managers of India’s fast growing industrial economy felt the necessity of indigenous chip manufacturing facilities only when the country faced the supply bottlenecks. Serious discussions within the government led to policy evolution and dialogue with world chip makers. 

This resulted in Prime Minister Narendra Modi virtually laying the foundation stone of three very crucial semiconductor projects on March 13 - the Semiconductor fabrication facility at the Dholera Special Investment Region (DSIR) in Gujarat, and Outsourced Semiconductor Assembly and Test (OSAT) facilities at Morigaon in Assam and Sanand in Gujarat. The semiconductor fabrication unit is being set up in partnership with the Powerchip Semiconductor Manufacturing corporation (PSMC), Taiwan. PM Modi described it as a “special day” in India’s efforts to become a hub for semiconductors.

अमृतकाल का Fab Foundation…

3 Semiconductor projects:
• TEPL Fab facility, Dholera, Gujarat
• TEPL OSAT facility, Morigaon, Assam
• CG Power OSAT facility, Sanand, Gujarat

by PM Shri @narendramodi Ji. #DigitalIndia pic.twitter.com/accTpHklTU

— Ashwini Vaishnaw (मोदी का परिवार) (@AshwiniVaishnaw) March 13, 2024

The three projects are worth Rs 1,25,000 crore, and have the potential of giving a strong growth impetus to the Indian economy. According to the Prime Minister’s Office, these projects are in line with the PM’s vision to position India as a prominent global centre for semiconductor design, manufacturing and technology development.

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Three Semiconductor Projects And A Win-Win Partnership

The semiconductor facility at Dholera will be established by the Tata Electronics Private Limited under the modified scheme for setting up semiconductor fabs in India. This unit will be investing around Rs 91,000 crore. The OSAT facility in Morigaon will also be developed by the Tata Electronics Private Limited, under the modified scheme for semiconductor assembly, testing marking and Packaging (ATMP) with an estimated investment of about Rs 27,000 crore. The OSAT facility in Gujarat's Sanand will be established by CG Power and Industrial Solutions under the modified scheme with an investment of nearly Rs 7,500 crore. These investments will fortify the semiconductor system in India. The indigenous semiconductor chips facility will not only ensure the guaranteed availability to India’s high-tech industry ranging from mobile phones to space-based assets, and from defence to electronics and automobile sector in times of all global crisis, it will also save the Indian industry from excessive price pressures on semiconductor sales.

The Indian government has set up India Semiconductor Mission (ISM) as an independent business division within the 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. The ISM developed confidence among international investors to team up with Indian conglomerates for fabricating, designing and packaging of chips on Indian soil. The indigenous chips fab facilities will boost the allied industries in space, defence, electronics and automotive sectors, thus creating vibrant domestic high- tech market. The leading international chip manufacturers must have weighed the advantage of investing in India, which is slated to be third largest economy in world by the end of the decade.

In fact, it's a win-win partnership for world chip giants to collaborate with Indian companies in setting up fabrication centres. This will lead to India emerging as an alternative and reliable source of semiconductors. The world chip giants are already operating in India, which boasts of a 20 percent share of world talent pool, for design and development of chips. India was lacking in chip fabrication facility, which will now be hugely boosted with several more concrete proposals in the pipeline.

The author is a senior journalist and strategic affairs analyst.