Chip dreams: Persistence will be key for India to truly emerge as a semiconductor powerhouse

Exactly one year, five months, and 22 days after Prime Minister Narendra Modi’s Cabinet unveiled the production-linked incentive (PLI) scheme to boost the semiconductor ecosystem in India, news came of a company committing to build a $2.7-billion assembly and testing unit in Gujarat. This isn’t the first such application received under the scheme. What makes it special is the company involved: US-headquartered Micron Technology, which makes its own chips and packages, tests them, and directly sells to electronics product companies.

More importantly, Micron will enable assembly and testing of both DRAM (dynamic random-access memory) and NAND flash memory products, which can practically go into every type of use case from mobiles to laptops, cars, data centres and more. “Our new assembly and test location in India will enable Micron to expand our global manufacturing base and better serve our customers in India and around the world,” Sanjay Mehrotra, CEO of Micron Technology, had said when the deal was announced.

“The product it focusses on—memory—goes to directly feed the electronics ecosystem that is being built in India,” says Rajeev Chandrasekhar, Minister of State for Electronics and Information Technology (MeitY). “It will be an input in smartphones, and the servers and data centres that the IT hardware PLI is focussed on. So, it is a very important part of the electronics and semiconductor ecosystem.”

While the announcement came during Modi’s visit to the US, the deal had been in the works for long. Indeed, right before the Prime Minister’s visit, Union Minister Ashwini Vaishnaw made a three-day trip to meet the leading stakeholders in the ecosystem to help them understand India’s vision, build trust, and impress upon them that the country means business this time around.

Other than meeting Micron’s CEO, PM Modi also met Gary E. Dickerson, President and CEO of Applied Materials. After that, the company announced it will invest $400 million over four years to establish a new centre in India. Even Lam Research, the leader in semiconductor manufacturing equipment, has committed to training 60,000 Indian engineers in nanotechnologies over a 10-year period.

“The Indian top brass inviting key players and meeting them personally sends a strong statement [that] India [is] serious about being an alternative to China and other key markets on which the entire supply chain heavily relies,” says Neil Shah, Vice President of Research at Counterpoint.

While there was some rejoicing, India is yet to receive a proposal from any of the leaders in this space for setting up silicon fabrication units. The likes of TSMC, Samsung, and Intel are nowhere in sight. However, sources at MeitY confirmed to Business Today that after the revision of the PLI scheme and reopening of applications, some well-established players are showing interest. The joint venture between Vedanta and Foxconn, for instance, which they claim has a credible technology partner in 40 nanometer node, has submitted its application again.

Business Today has also learnt that Japan’s Renesas Semiconductor—a leader in microcontrollers, analogue, power and system-on-a-chip products—is keen on investing in India. Renesas CEO Toshi Shiabata even met PM Modi in May. It has partnered with Tata Motors and Tejas Networks, and has acquired India’s Steradian Semiconductors.

Meanwhile, even Tata group is seriously looking at semiconductor manufacturing, through its greenfield venture Tata Electronics.

However, one company is clearly not jumping at this opportunity: Intel. In June, it committed to building a $33-billion chip manufacturing site in Germany, followed by $4.6 billion for an assembly and testing facility in Poland. Nonetheless, India’s slow progress towards becoming a chip hub has received a boost with firms like Micron reposing faith. “Micron’s plan to set up assembly and test in India is a very big milestone because it signals to the world that our semiconductor ecosystem is coming of age. This is a $3-billion investment—not an insignificant [amount]—and an important product line as well. It is a big signal to the world,” adds Minister Chandrasekhar.

But persistence will be key. Unlike other sectors, semiconductors require heavy investments. And results can’t be expected in months or even a couple of years. This is a long journey, with results likely to be visible only in five–10 years.

@nidhisingal