US marches ahead with its semiconductor plans, but India is lagging behind. Is it a cause of worry?

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Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading chip maker, has announced the opening of its second chip plant in Arizona, US for high-end 3 nanometer (nm) chips that will go into production by 2026. The announcement came after TSMC. An initial $12 billion was announced for a fabrication plant in 2021 (which will produce 4nm chips starting in 2024). While the US is securing significant investment for semiconductor manufacturers, India is yet to approve applications received earlier this year under the India Semiconductor Mission.

The Government of India announced its Rs 76,000 crore Semiconductor Scheme on December 15, 2021 to attract semiconductor and display fabs to the country. The government received three semiconductor fab and two display fab proposals in the first round, which closes in February 2022. And following industry concerns, the government amended the scheme in September this year and offered a flat 50 per cent incentive to approved fabs across the board. States had to entice applicants with another set of incentives. As the government has not yet announced the approved applicants under the scheme, this delay in approval has created a slight flutter among the applicants and attracted criticism from some industry experts.

However, industry veterans working closely in the semiconductor space have a different opinion. “The US is offering 30 per cent incentives. India is giving 50 per cent from the central government, and the state governments are giving the other 20 per cent. Forget about state or centre, [in total] 70 percent of the cost of the project is being borne by India. When you have 70 per cent responsibility, it takes time to take such decisions because they have to be very careful not to waste Indian government’s money. It is public money they are taking care of,” explained Ajay Chowdhary, co-founder, HCL Technologies and member of the advisory committee on the India Semiconductor Mission.

long term process

Setting up a fab (chip manufacturing plant) is not a child’s play or as easy as setting up a smartphone or wearable manufacturing unit. While it takes two to three years to build a fab, the planning before setting up a fab also takes about one to two years. After all, it involves high-end technological processes, sophisticated machinery, raw material sourcing, and setting up of an ecosystem, to name a few. And as India is starting its illustrious journey of late, there is a lot to catch up on.

“The US, the leader in the semiconductor world, passed the Chips for America Act [in order] Will invest $ 280 billion to strengthen [its] Semiconductor capacity catalyzes R&D and creates a regional high-tech hub and a larger, more inclusive STEM workforce. The Act was first proposed in June 2020 and was recently approved in August 2022. and Member, Consultative Committee on India Semiconductor Mission.

“The Union Cabinet of India also approved the Semiconductor India Program in December 2021 to showcase the development and manufacturing ecosystem of semiconductors in India. However, since we are in India, we are faced with a much more complex task than, for all practical purposes, starting from scratch to create an entirely new industry,” he said.

changing environment

The environment in which the Government of India operates has changed a lot over the years. Unlike before in the history of semiconductors, the nations that own semiconductors have become very selfish in the last two years. Given the COVID-19 pandemic following the recent chip crisis, there is a general desire to keep those supply chains in-house. An industry expert, on condition of anonymity, explains the scenario as follows: “The US has given semiconductors to the whole world for the last 40 years without blinking. In the last 14 months, he has taken everything back. It has markedly changed the world we operate in. A case in point the US-imposed sanctions and tighter regulations on the sale of semiconductors and chipmaking equipment to China, all designed to counter the Chinese onslaught on chip manufacturing.

India awaits better applications, say experts the entire stock market, in fact, for a 30 to 70 percent drop. So, in that environment, companies that generally view India very positively (because 70 percent is a huge incentive) just trying to save her from drowning.”

ecosystem building

Setting up fabs is not just about getting partners in India and facilitating them to set up fabs. This includes sourcing of raw materials, what kind of technology or chips should be manufactured for domestic consumption and exports, orders to be filled by fabs and many more. “A very important issue before setting up a fab is to ensure customers. This issue is being looked into very deeply by the India Semiconductor Mission as they do not want the plant, where they are going to invest 70 per cent of the money, to fail to get business. If it fails to do business, 70 per cent of the money will be wasted,” pointed out Chowdhary.

Dham echoes a similar sentiment: “An even bigger challenge than making a fab is “filling a fab”—we need a very high amount of chips to fully utilize the fab capacity. percent capacity, poor capacity utilization will drive up chip costs, making our products uncompetitive.

what is next?

Praising the government, Satya Gupta, president of the VLSI Society of India, an association that helps develop Indian R&D and talent in the semiconductors ecosystem, said, “Given the type of technology, the infrastructure, the need for a global partnership And given the complexity of the issue, I think we have made tremendous progress. What also needs to be understood is that it is not a private company but the government to decide. And they have to act in a certain way. Also look at the government. I think this is probably the fastest execution I have seen. Not just from India’s perspective, from a global perspective as well.”

According to sources in the Ministry of Electronics and IT, the government is well aware of the challenge and has tackled all these issues with the insights of industry leaders and members of the advisory committee. The government has shortlisted the applicants and the accepted applicants will be announced soon.

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