The government’s Rs 76,000 crore Production Linked Incentive scheme for semiconductor manufacturers painting an ambitious picture of making India a ‘global hub’ misses the arduous industrial and technical struggles of producing chips. China is a case in point considering the geopolitical dimension of a US-China tech war — with a Taiwan overlap — that has thwarted Beijing’s efforts to be semiconductor self-reliant.
Indian electronic and semiconductor bodies are pessimistic, given the paltry amount and absence of a complementing manufacturing and infrastructural setup. India currently imports 100 percent of its chips, despite an excellent semiconductor design capability. But it is chip manufacturing at fabrication plants (or fabs) that is key. Chip fabrication operates on an atomic level, with hundreds of processes that rely on highly-specialised suppliers for silicon wafers, chemicals, and equipment, etching transistors on wafer thin chips designed by other companies.
Qualcomm, NVIDIA, or Apple’s chips are manufactured in the Taiwan Semiconductor Manufacturing Company (TSMC)’s fabs. South Korea’s Samsung and US’ Texas Instruments are the only two other foundries, but are predominantly chip designers. The TSMC is an exclusive foundry, fabricating 92 percent of the world’s advanced chips in a highly-complex process of etching millions of transistors on every square millimetre, symbolising the More Moore race. Moore’s Law states the number of transistors that could be squeezed onto a chip would increase as technology progresses.
The Dutch Manufacturer
True chip independence cannot be attained without the Extreme Ultra Violet (EUV) Lithography machines used for the actual fabrication, with the Netherland’s ASML being its only manufacturer. This means even the TSMC, Samsung, Intel, and the Semiconductor Manufacturing International Corporation (SMIC)’s fabs depend on the Dutch company to source the massive, and complicated devices. The intricate process involves zapping tin wafers with powerful lasers tracked by ultrafast cameras, with the entire process happening 50,000 times per second.
The EUV light from the glowing plasma is bounced off 11 special mirrors to draw the desired pattern on the wafer. The mirrors themselves are of precise dimensions measured in atoms, made up 100 nanoscale layers of silicon and molybdenum. Here, India is inviting foreign fabs, and not even setting up its own. Even if it does, it would still need Dutch EUV machines, which too are being prevented from being sold to China.
Size Matters
Even US companies’ efforts to establish fabs at home after moving them abroad decades ago to save costs and please stockholders mark an ironic moment of free market capitalism now requiring State support. The TSMC’s Arizona fabrication plant would not be operational until 2024, and will produce only 5 nanometre chips, while it constructs a more advanced 3 nm chip foundry in Taiwan. Chips below 7 nanometre are ‘logic chips’ for Artificial Intelligence (AI) and cloud computing, the bleeding edge of today’s most advanced chips.
China’s President Xi Jinping’s own ‘Made in China 2025’ — aspiring to produce 70 percent of its chips — was undercut by the Donald Trump administration’s export controls and blacklisting of China’s SMIC in 2019 and 2020. This prevented foundries from selling China US-made fabrication equipment, components, and software. The SMIC so far can produce chips of only 10 nm and above, and not the 3 nm to 5 nm range.
Advantage Taiwan
The global semiconductor shortage itself was because of the US reserving the TSMC’s entire flagship 3 nanometre (nm) fabrication nodes until 2024 for Qualcomm, NVIDIA, AMD, and Xilinx. Taiwan’s ruling and pro-separatist Democratic People’s Party (DPP) even allegedly weaponised the TSMC for geopolitical goals like securing vaccines and an independence referendum, according to China affairs commentator TheDailyMao. The goal was to ensure Chinese dependence on Taiwanese and US-linked semiconductor supply chains.
This also proves that Beijing’s threats to Taipai City are just threats. The TSMC foundries being destroyed in a Chinese invasion would earn it global opprobrium and hurt China’s semiconductor imports that accounted for nearly half of Taiwan’s exports to Beijing — a 33 percent jump in 2021 from 2020. This is beside the fact that China is also Taiwan’s largest trading partner.
China still has a determined national research and development effort, and global business interests rooting for it. The SMIC’s FinFET N+1 process promises to make 7 nm chips without EUV machines, while also developing its own lithography system. The Suzhou Institute of nano-tech and nano-bionics under the Chinese Academy of Sciences (Sinano), along with the National Center for Nanoscience and Technology, in 2020 announced a new 5 nm laser lithography technology.
Given this, the Indian effort is a rather one-off push, with likely no consultation with industry, academia or even defence scientists — given the strategic applications of semiconductors and India's defence self-reliance goals.
Parth Satam is a journalist who has been covering India’s defence sector for more than a decade. Twitter: @ParthSatam.
Views are personal and do not represent the stand of this publication.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
