(This is the second article in a two-part series on the US-China semiconductor war and India’s position in it. Here’s the first part)
When Chandrayaan 3 landed on the moon on August 23 last year, one place in Mohali was particularly filled with joy: the state-run Semiconductor Laboratory (SCL). It was a personal triumph for the engineers at SCL, the unsung heroes who worked for months on creating a variety of semiconductors crucial to controlling and commanding the mission. The spacecraft used the chips to make its way to the landing destination, using sensors and cameras to enable communication with Earth and transmit data and messages.
Mohali’s SCL is India’s only known chip-making foundry. It began production in 1984, three years before the founding of Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest semiconductor manufacturing company.
Today, while TSMC produces 90% of the world’s most sophisticated and advanced semiconductors or microchips, making the most valuable 5-nanometer (nm) chips in size, SCL can only make legacy chips of 100 nm and above, which are obviously several generations old. TSMC’s annual turnover exceeded $70 billion last year, far more than SCL’s meager $5 million. And while TSMC’s clients are some of the world’s leading tech firms like Apple, AMD and Nvidia, SCL’s top client is just ISRO (Indian Space Research Organisation). TSMC’s factories are state-of-the-art; SCL is in dire need of modernisation and upgradation.
misfortune of india
SCL could have been TSMC’s biggest rival had it not been for a very unfortunate incident that pushed India back into the dark ages of semiconductors. On February 27, 1989, a mysterious fire broke out at the plant, destroying most of the facilities. To this day, no one knows if it was an act of sabotage or an accident. The factory later rose from the ashes, but by then it was far behind in the race.
Dan Hutcheson of Canada’s TechInsights, one of the global voices of the industry, surprised me when he said he has been following the Indian chip industry since the 1970s. “I have seen India strive for this industry throughout my career. There have only been failures. It is important for India to succeed now.” Dan is not wrong, as India’s semiconductor history is made up of a series of broken dreams and unfulfilled promises. Many multinationals tried their luck at setting up chip production projects, but they did not succeed for various reasons.
Micron project, a sign of good times to come
It took more than three decades for India to see positive developments in its semiconductor journey after the 1989 tragedy. In August last year, a foundation stone laying ceremony was held for Micron Technology’s state-of-the-art semiconductor assembly, testing and packaging facility in Sanand, Gujarat. Its owners claim that the facility will become operational early next year. The plant will be completed in two phases at a cost of $2.75 billion – $825 million will be invested by Micron, and the rest by the Centre and Gujarat government.
The Micron project appears to be the beginning of the country’s bright chip future. Since the groundbreaking ceremony last year, four new projects have been announced, the latest on Monday when the government said it had approved Kynez Semicon’s proposal to set up a semiconductor unit in Sanand. All the new units are testing and packaging units except Tata Electronics’ fab unit in Dholera, Gujarat. Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC) and Tata Electronics had announced in February this year that they would set up a fabrication unit in Dholera. I am sure the government will be more than keen to see the progress of this project as it is India’s first private sector fab unit.
India has seen many false dawns in the last few decades, but now things are changing rapidly. There was a time when India could not even dream of making cutting-edge smartphones. This was a field that was dominated only by China. Today, India is a manufacturing hub for iPhone and other smartphone brands. Citing this success story, Prime Minister Narendra Modi had said last year, “We have succeeded in making India a manufacturing hub for mobile phones in the last decade. Now our next target is to make the country a leader in semiconductor manufacturing.”
India is located in only one region
The semiconductor manufacturing ecosystem requires infrastructure for designing, manufacturing, research, testing, and packaging. In addition, sophisticated equipment, minerals, and gases are needed to make chips. While India severely lacks large-scale semiconductor manufacturing facilities, it has built a strong ecosystem for chip design and related services. Major global semiconductor companies such as Intel, Qualcomm, Texas Instruments, NVIDIA, AMD, and Broadcom have set up significant design and R&D centers in India. Indian engineers contribute to the design of the most complex chips used in cutting-edge technologies from artificial intelligence to 5G networks. Companies such as Wipro, Tata Elxsi, and HCL Technologies also offer outsourced semiconductor design services to serve global clients.
“Learn to walk before you run”
Now, the Modi government wants India to become a hub for manufacturing, R&D, testing and packaging. This is indeed a tough task, as India is just at the beginning of the chip race – but not impossible. I have spoken to many industry experts from around the world over the last two years, and they believe India can become a semiconductor hub and a global player in 10-20 years if it stays as focused, patient and committed as the Modi government.
To put India’s efforts in perspective, we should remember that semiconductor superpowers Taiwan and South Korea took decades to get to the point where they are in today’s race. “Realistically, it will take 10 to 20 years, provided it is executed well. You have to learn to walk before you can run. That is the important thing – making sure the Micron project succeeds,” says Hutcheson, who calls the Micron packaging project “a big step forward.” Of course, South Korea, Taiwan and China all started with packaging units.
India’s challenges
Chip manufacturing, which allows the production of 5nm or even 2nm microchips, is widely considered the key to the success of the semiconductor mission. Many things need to happen before manufacturing can begin 10-15 years later. This is not a simple industry; it requires a lot of work and high-end equipment and materials.
1. Investment
According to estimates by the Semiconductor Industry Association, it takes at least 10 years for a state-of-the-art manufacturing factory to produce chips. The initial capital investment and operating costs can run anywhere between $10 billion and $40 billion. If India dreams of becoming a chip hub, it will have to invest heavily in this sector over the next 10-15 years. China is doing the same, spending billions of dollars to become self-sufficient in semiconductor manufacturing. The US has invested over $100 billion in its industry since 2022. In contrast to these dire figures, India has only been able to put about $15 billion into its semiconductor projects.
India is in desperate need of private investors and global players.
2. Deficiency of gases and minerals
Semiconductor chip manufacturing uses more than 150 types of chemicals and more than 30 types of gases and minerals. Currently all of these are available in only a few countries. The challenge for India is to become self-reliant in this sector.
3. Ancillary Industries
Some experts believe that the main task for India is to create supporting industries for the emergence of the chip industry. This issue is related to some basic things, such as stable power grid and constant availability of water, which makes the creation of the semiconductor industry possible.
4. Political will
The chip industry is capital-intensive and time-consuming, requiring deep commitment from both the government and private players. It requires the will of successive governments to stay in the game. PM Modi wants India to become a developed economy by 2047. A long-term semiconductor strategy will be needed if India is to truly become a developed country by 2047.
5. Skilled Manpower
India has abundant manpower, but there is a shortage of skilled manpower required in the semiconductor industry.
6. Brain drain
If we manage to bring back home the large Indian talent pool serving global companies, India can achieve its goal of becoming a semiconductor hub in about five to six years instead of the traditional 10-20 year time frame. Can we entice them by offering them equal pay packages and perks? Can nation building be a motivator? Can we reform our work culture to make it more professional and productive?
Taiwan’s success story is thanks to Taiwanese-origin executives who brought in semiconductor expertise and experience from the US. In the 1980s, the Taiwanese government decided to bring back its talented people to boost the semiconductor industry. It offered them salaries comparable to Western companies. These overseas Taiwanese played a huge role in making Taiwan a truly global chip hub.
The chip revolution in South Korea also began when the government encouraged many Korean experts working in Japanese companies to come back to Korea and work there.
There is no dearth of Indians doing well in the semiconductor business in the US and elsewhere. About a dozen leaders of the world’s leading chip-making companies are either Indians or of Indian origin. I have met some of them. They all love India. But India needs to create the right conditions to bring them back, and also stop the brain drain of young engineering graduates who are in great demand abroad.
a new dawn
India is on the verge of signing deals with several multinational companies to start new projects. The Modi government has recognised the fact that if India has to become a major geopolitical player, it must become a leader in the semiconductor sector. Whatever happens after the Micron factory will determine the future of India’s semiconductor industry.
(Syed Zubair Ahmed is a senior London-based Indian journalist with three decades of experience in Western media)
Disclaimer: These are the personal views of the author