India's 360-degree strategy for semiconductors: Can it become one of the top 5 chip makers by 2029?

Back in 1969, when Robert Noyce, having co-founded Intel barely a year ago, visited India to see if he could build a fabrication unit to make integrated circuits, no one had imagined a world dominated by electronics and semiconductor chips, as ICs are called. India offered him the opportunity to set up a fab, but it was too small for Intel’s ambitions. Later, India did make a beginning with the Semiconductor Complex Ltd, but its facility in Mohali, near Chandigarh, was destroyed in a fire in 1989.

Today, in a post-Covid world, every major economy that has outsourced semiconductor chip manufacturing for decades, is seeking self-sufficiency. And so is India, with a Rs 76,000-crore semiconductor and display fab scheme.

While Intel hasn’t considered India yet for a fab, some leading names, such as the US-based Micron, Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC), and Japan’s Renesas have shown trust in the country’s semiconductor ambitions. Micron is setting up an assembly, testing, marking, and packaging (ATMP) plant. PSMC and Renesas are working with Tata Electronics and CG Power on a semiconductor fab and a packaging plant, respectively.

But the government isn’t stopping at fabs, testing and packaging plants: it is working on a 360-degree approach to creating an ecosystem and leading chip innovation.

The setting up of semiconductor fabs and ATMPs in any country usually leads to the development of a downstream ecosystem—industries that utilise the output to manufacture finished products. Putting in place such an ecosystem is critical to India’s semiconductor dreams, says Ashwini Vaishnaw, Union Minister for Electronics and IT. “When semiconductor manufacturing begins in a country, many downstream industries start instantly, like laptop manufacturing, server manufacturing, electric vehicles, automobiles, machines used in factories, where semiconductors are used,” he says.

For instance, South Korea’s Simmtech, which makes printed circuit boards or PCBs, is coming to India to support Micron’s semiconductor testing plant in Sanand, Gujarat, with an investment of Rs 1,250 crore. “This is not our first time supporting our key customers. We did our project with Micron in China over 10 years ago. We have recently executed another project in Malaysia together. We have proven to the market that co-location investment boosted the growth of a semiconductor ecosystem in the region,” says Simmtech CEO Jeffrey Chun.

Anticipating the needs of the downstream industry, Vaishnaw’s ministry is open to introducing a scheme like SPECS or the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors. As Vaishnaw says, having manufacturers of wafer fabrication equipment or WFE is an important part of the India Semiconductor Mission. Industry experts say this is the most important success factor for a fab. WFE—large machinery employed in the production and processing of raw wafers to manufacture finalised chips—is the largest component of the expenditure on a fab.

Danish Faruqui, CEO of Fab Economics, says, “With the entire world reeling under the constrained supply of WFE, which has a delivery lead time of multiple years in some cases, it is indeed existential for including semiconductor WFE manufacturing as part of India’s decadal semiconductor road map.”

He says India’s WFE announcement was a masterstroke. Many across the world have cited India’s entry into semiconductors as copying what China did 30 years ago, but India’s approach is different and it factors in learnings from China’s cardinal mistake.

While China invested billions over two decades to build its chip manufacturing and packaging ecosystem, it missed making big investments in WFE manufacturing. Instead, it relied on WFE from the US, EU, and South Korea.

“Eight types of equipment are used for semiconductor manufacturing. Preparations have begun to make five of those eight categories. There are other categories for which India must work hard and attract more talent,” says Vaishnaw.

He says a major component of lithography [the equipment used to etch electrical circuit patterns on silicon wafers] is also being developed in India, but “the government will share details later”.

As the demand for chips is forecast to surge by 2030, semiconductor companies are building more fabs. A critical question remains: where are the workers who can operate these fabs? A joint study by the Semiconductor Industry Association of the US and Oxford Economics has projected a deficit of 67,000 technicians, computer scientists, and engineers by 2030, with a broader gap of 1.4 million such workers anticipated in the US alone. Fabs are coming up not only in the US; many countries, including India, are building their fabs.

As India aims to become a leading chip producer, the government has initiated a mission to train over 85,000 engineers. The All India Council for Technical Education (AICTE) has tailored a curriculum for a BTech in Electronics (VLSI design and technology) and a diploma in IC manufacturing.

Rajeev Chandrasekhar, Minister of State for Electronics & IT, says, “We have witnessed an impressive enrolment of almost 12,000 engineers in VLSI degree programs under the new curriculum this year and it is gratifying.” The tangible results: Micron has already recruited talent from Gujarat’s Nirma University for its ATMP unit in Sanand.

Setting up fabs is fine, but true leverage comes from creating semiconductor intellectual property (IP). An industry expert working with one of the world’s leading chip firms says, “I believe it is also a good time to take a more long-term approach in the form of strategic and advanced R&D pillars by applying the same approach that India has adopted in manufacturing from an incentive policy and orchestration standpoint. India must also build capacity and skills and have IPs in differentiated semiconductor R&D and manufacturing areas. I can’t think of a better time to do it.”

Singapore and Taiwan are some of the countries that have adopted these templates, and India can leverage them, too. Recently, the US announced plans to invest over $5 billion in the newly set up National Semiconductor Technology Center, a public-private consortium that will encourage semiconductor R&D. The NSTC is expected to keep the US ahead in semiconductor R&D and reduce the time and cost of commercialising new technologies, among other things.

India has already conceptualised its Bharat Semiconductor Research Centre (BSRC), which Chandrasekhar says will be a world-class partnership of academia, government, and the private sector.

Faruqui says the BSRC’s technology portfolio is even more diverse than the NSTC’s, as it will work on advanced silicon fabrication, advanced packaging R&D, compound/ power semiconductor, chip design and electronic design automation.

Having lost 50 years, India is now strategically directing its efforts across all sectors of the semiconductor ecosystem. From design and skill development to ATMPs, fabs, chemicals and gases, equipment manufacturing, and R&D, India aims to secure a position among the Top 5 semiconductor players globally in the next five years.

That’s important because experts say that 30-40 years from now, nations engaged in semiconductor production will be among those calling the shots.

@nidhisingal