Semiconductors | The global, local, and focal of India’s chip fab efforts

Representative image (Shutterstock)

The World Semiconductor Trade Statistics (WSTS) recently calculated that the semiconductor market, most of which are Integrated Circuits or chips was $555 billion-strong in 2021, and predicted growths of 13.9 percent and 4.6 percent respectively for 2022 and 2023.

ICinsights estimated that the market may have crossed or neared $600 billion in 2021 itself.

Future Horizons, however, predicts only a 4 percent growth in 2022, negative growth in 2023, followed by an upswing, thereby taking it to a trillion by 2032.

Semiconductor companies are predominantly of three types. Fabless like Qualcomm design but do not fabricate. Pure play foundries (PPF) like Taiwan Semiconductor Manufacturing Company (TSMC) fabricate chips on contract basis. Integrated Device Manufacturers (IDM) like Intel and Samsung do both design and fabrication.

India’s desire to have commercial semiconductor fabs in the PPF or the IDM model is beyond the recent chip shortage. Finance Minister Nirmala Sitaraman in her July 2019 budget speech said that the government will launch a scheme to invite global companies through a transparent competitive bidding to set up mega-manufacturing plants in sunrise and advanced technology areas such as Semiconductor Fabrication (FAB).

The scheme was launched in December 2021, and three groups had applied in the most-important category of Silicon fabs by February 2022.

The Ministry of Electronics and Information Technology (MEITY) may still be in a learning mode, going by recent tweaks made to the policy, and the fact that more than eight months after the deadline, yes or no decisions have not been taken on the applications.

The policy notification says, “Approval shall be granted to at least two applicants under the scheme”, and so it is also possible that not all requisite conditions have been satisfied yet by “at least two” applicants, and the government is giving them a long rope.

Local and global politics may be the other factors playing in. The news of Vedanta-Foxconn picking Gujarat as its location was quite likely timed to upcoming assembly elections. That in itself is not necessarily a bad thing as long as the project qualifies by merit. What Foxconn seems to have promised as a joint venture partner is that it will bring huge market, but as an “assembler” it hardly has a say in which chip goes into the product.

Foxconn does not own or operate the type of semiconductor fabs that India’s policy has asked for, namely, 300mm wafer size fabs. If a recent news is to be believed and interpreted in this context, it now appears that MEITY is taking an unusual step of signing an agreement directly with Belgium-based Interuniversity Microelectronics Center (IMEC), and asking applicant(s) to buy the technology to be run from them.

The IMEC is a research organisation and does not have high-volume manufacturing expertise or experience. It is also doubtful whether the pieces of technology they own will qualify as “production grade” technology that the policy asks for.

Foxconn’s existing and expansion plans in India in its core business of electronics assembly play a significant part in India’s success at capitalising on China-Plus-One strategy. ‘Help’ with fab approval may be a trade-off. However, with China’s continued threat of a full takeover of Taiwan, India should not limit to looking at only Taiwan for help with its fab efforts.

It will also be advisable for MEITY to study what happened to some of the past and recent project proposals that came in the news related to Foxconn — in particular display fab plans in Brazil between 2012 and 2017, semiconductor fab plant proposed in Zhuhai (China) around 2018, display fab proposed in Wisconsin (USA) a few years back, semiconductor plants proposed in Saudi Arabia, and Malaysia recently.

One of the other applicants — the International Semiconductor Consortium (ISMC) — who has picked Mysore as its location, is getting production-grade technology from Israel’s Tower Semiconductors, which is a high-volume manufacturer. Some news reports suggest that the approval is expected around February, and yet again one wonders if it will be timed to the Karnataka elections.

The third applicant — IGSS — is said to looking for an Indian business partner, and has not yet revealed the name of the partner from whom it will get its production-grade technology.

There are local and global factors at play, but India’s focus should be in getting the construction of one or more fabs started at the earliest, attract more after a few years, and get to a 1-2 percent global market share by 2030.