India’s Semiconductor Fab and 5 G initiatives: Opportunities and Challenges


India’s Semiconductor Fab and 5 G initiatives are good but challenges remain

The quest for India’s semiconductor fab seemed to end with the government announcing a mega scheme for the same (,high%20quality%20and%20high%20reliability.%22). )

The ambitions are very high as the PM announced the scheme sometime back. Indian Prime Minister Narendra Modi said at the opening of Semicon India 2022 about seizing the opportunity to establish India as a semiconductor manufacturing hub of “high quality and high reliability.”

PM Modi’s statements come as the government rolls out a slew of incentives to attract global chipmakers to manufacture in India. “Semiconductors are playing a key role in the world in more ways than we can imagine,” PM Modi said. “A new world order is forming and we have to seize the opportunity.” It is the first time the renowned semiconductor industry event has been held in India. Experts from leading companies such as Taiwan Semiconductor Manufacturing Co. (TSMC) and Intel are participating in the three-day event. In his opening speech, the prime minister said the country’s talent pool, infrastructure, and reforms should all make it easier to do business in a more attractive manufacturing destination. 
The Indian government has been wooing global chipmakers as they seek to pare back dependence on China and strengthen supply chains. The desire to reduce reliance on China was sparked by an unprecedented global chip shortage that badly impaired makers of smartphones, computers, automobiles, and other crucial products. The government hopes to establish India as a global electronics hub with a turnover of $400 billion by 2025. 

The national policy on electronics put out in 2019 envisaged domestic manufacturing of 1 billion phones worth $190 billion by 2025. Of those, 600 million worth $110 billion would go for export. Such plans assume demand for electronic components will soar in the years to come. The government estimates that in the financial year ended March 2020, India imported electronic components worth 1.15 trillion rupees (about $15 billion), of which 37% came from China. In December, the government approved $10 billion in incentives for semiconductor makers that establish production bases in India. Those eligible are to receive support for up to half the cost of setting up factories.
A total of $7.5 billion has been sanctioned under PLI (Production Linked Incentive) for large-scale electronics manufacturing, PLI for IT hardware, SPECS (Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors), and the Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme. There is also the PLI for the quantum of $13 billion that has been sanctioned for allied sectors that include ACC batteries, auto components, telecom and networking products, solar PV modules, and white goods. All in all, the government has made a commitment of $30 billion “to position India as a global hub for electronics manufacturing with semiconductors as the foundational building block.”  

Several industry houses have shown interest in the same including the Vedanta group. It announced to form of a joint venture with Taiwan’s Foxconn and committed about $15 billion to build manufacturing facilities for chips and displays. Other parties that have shown interest include Bombay Stock Exchange-listed Sterlite Technologies, jewelry maker Rajesh Exports and Indian manufacturer ISMC Analog Fab.
The Tata Group is reported to be in talks with a number of international semiconductor companies including the Taiwanese TSMC and UMC for chip manufacturing in India. The Tata Group reportedly wants to develop an outsourced semiconductor assembly and test (OSAT) facility, with an investment of $300 million. They have identified Tamil Nadu, Karnataka, and Telangana as possible sites for the facility.  Reportedly, the plant will “assemble and test semiconductor chips after sourcing the sophisticated silicon wafers from semiconductor foundries like Taiwan-based TSMC, Fitch Solutions.” The government appears to be excited about the Tata proposal. 

Similar to the semiconductor Fab scheme the government has also announced to take 5G to its final phase of deployment. Announcing the same Union IT minister Ashwin Vaishnav said that 5G services will commence in about 20-25 cities of the country by late 2022 which is just around the corner. Pointing out that data rates in India are at about $2, against a global average of $25, Union Telecom Minister Ashwini Vaishnav said low rates would continue with 5G.

But are they Feasible?

Both are ambitious and well-needed schemes. India has been lagging in the semiconductor space for decades and though it has excellent semiconductor engineers that work for the industry across the globe, it could not take the plunge so far. There was a Government enterprise Semiconductor limited which could not keep pace with changing technology and failed as soon it was set up in Chandigarh years back. 
Chip manufacturing is arguably the hardest technical exercise humankind currently undertakes—correctly etching and connecting tens to hundreds of billions of transistors 50 times smaller than a virus—and it’s getting harder. Twenty years back, there were 30 chip companies at the leading edge; now there are only two, and it’s unclear if a new entrant can break-in

Advocates of the chip manufacturing dream point to China. Through huge tax breaks, upwards of $50 billion in semiconductor funding in just the last decade, and over two decades of persistence, China has gone from manufacturing none of the world’s chips in 2000 to 16% in 2020.
But China is less inspiring on closer examination. Chinese chip manufacturers are at least five years behind the leaders in terms of technology, despite investment and time. Chinese chips are mostly commodity memory chips as opposed to high-end semiconductors. U.S. and E.U. export controls on semiconductor technologies may only widen the gap. China may be able to develop some of these technologies domestically, but doing so may require at least a decade.

Besides the commercialangle, there is also this technology factor that plays an important role in the semiconductor industry. The current semiconductor fab runs on 3- 5 Nm. It is learned that the India Electronic and semiconductor association (IESA) has recommended 28 nm technology which is quite practical in terms of commercial feasibility. However, what has been also reported which is quite worrisome is that the government may go with 60Nm or above which makes things slightly if not overall doubtful over the long-term viability and feasibility of the industry. The manner in which the semiconductor industry operates is one of the most difficult and challenging technologies of our times and that is the reason not many companies or nations could set a foothold in the same. Only Intel, TSMC, and another 1 or 2 have been able to continue their run over the decades. It is important to understand that chip designing which is a software part is different from Chip manufacturing that we are talking about and is essentially a hardware operation.

Similarly, there are headwinds in the 5G deployment also. Arpu for 4g is the lowest in the world. Average Indian is getting 3g speed with 4g. The market has not consolidated after the unfair entry of Jio. Jio itself is opposing 5g due to a clear lack of a business case. Now new 5G license means an extra burden on the balance sheets of providers which will bleed an already bleeding sector. The so-called indigenous solutions are neither scalable nor deployable. They are mere POC that cannot scale. The handset cost is huge and we don’t have any local 5G handset. The upgrade cost from 4g to 5G will kill every provider. then there are questions about Indigenous technology developed by Reliance Jio. If Jios indigenous 5G was ready then why is it opposing 5G license? Birla’s Voda Idea is completely going to be killed after the license. 


As nationalists and working for India’s overall interest we support the government and its initiatives. However, we are also compelled to highlight the vulnerabilities so that the schemes do not fail to go ahead and become an embarrassment for the government. 
It is with these intentions that we have written this blog. We hope and expect the government to review and fine-tune its schemes so that they are feasible and can be sustained going forward commercially and through other means. 
There is no doubt that India needs to be in this arena and we have been advocating the same over the years. The only issue is the implementation for which the government must get the right advisors and not just pick those around. 
We wish the government all our BEST wishes for these two very important and critical technology domains. 

Author: admin

To create policy awareness for a better INdia

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