When the government announced the $10 billion (at that time equal to Rs 76,000 crore) Production Linked Incentive Scheme (PLI) for semi-conductors in December 2021, it was by far the biggest motivation programme. Out of 14 such schemes announced earlier in September, the only one that came close was that for auto components and automobiles – a total of the two worth Rs 52,000 crores; a distant third and fourth were the Rs 24,000 crore programme for renewable energy and a Rs 22,000 crore scheme for pharmaceuticals including Rs 7,000 crore earmarked for bulk drugs. And, just as well, because
(a) it is one of the most difficult, most expensive projects, has closely guarded technology with only a few manufacturers in the world and has historically, a very high gestation period
(b) our demand for the same is growing at a CAGR of about 20 per cent and
(c) we have literally no existing production of the same and the country is solely dependent on imports mainly from Taiwan, China and the USA and also some from Japan,
Anyway, much water has flown under the bridge during the last 29 months and to the government and private industry’s credit we have moved fast. The first one to jump into the fray was a joint venture between Vedanta and Foxconn, but sadly that turned out to be a chimera which influenced many other hopefuls to stop thinking about the sector. Around July 2023 Union Minister of State for Electronics and Information Technology Rajeev Chandrashekhar did some damage control by making highly motivational remarks (after tweaking the scheme to allow for 50 per cent of the project cost) in an interview saying, “India is set to become a key player in the global supply chain in the next decade. We expect to do in a decade what China took 25-30 years to do”. He promised “all help” from the government. He also recalled that, “In 1957 Fairchild (precursor to Intel) came to India wanting to set up a ‘packaging unit’ but we chased them away”.
He went on to add that “In 1987 we were just two years behind the latest node in chips but now we are 12 generations behind”. Permit me to mention here that (I may have misunderstood) this bit about ‘Fairchild wanting to set up a plant in 1957 – the year they started working on chips – might need some more research. Of course, we have our own ‘Semi-Conductors Complex’ in Chandigarh, set up in 1983 – a precursor to the Semi-Conductors Laboratory (SCL) in Mohali – which was at one-time manufacturing chips of 180 nm size (first generation as the world has now moved to infinitely smaller ones of up to 10 nm) long before the Taiwanese king of chips – TSMC – began manufacturing them! Sadly, this has remained mired in troubles for a very long time. There’s a possibility that the government might try to resurrect it and again produce those chips, which are still suitable for a lot of low-tech applications.
Soon, Micron of the USA – a global leader in ‘memory solutions’ – came in. Scepticism began to vanish and our big giants started evaluating their plans. According to Anand Ramamoorthy, Managing Director, Micron India, they are quite optimistic about the ‘first India-made Chips’ rolling out of their Sanand (Gujarat) unit in 2025. Chips to be packaged at this unit will primarily be for data centres, smartphones, note books, IoT devices and a big part of the automotive sector. A bulk of their production is likely to be exported. The progress of the Sanand unit will pretty much depend on how the operations of the foundry unit is being put up by the Tatas in collaboration with Taiwan’s Power Chip Semiconductor Manufacturing Corporation (PSMC). Micron is a big global player in the sector, employing about 40,000 people globally including 4,000 in their R&D centres in Hyderabad and Bengaluru. These two units are also likely to see expansion to about 5,000 persons directly and another 15,000 indirect jobs.
The Prime Minister virtually inaugurated three more units on 24 March 2024 which are expected to create 20,000 new direct ‘advance tech jobs’ and about 60,000 indirect ones. Briefly the three units are:
Before proceeding further, let me look at the global and Indian demand for semiconductors that are now vital for virtually every industry. Google shows the global demand in 2022 at chips worth $574 billion, which declined marginally to $527 billion in 2023 but is growing rapidly in the current year and is expected to top $1trillion by 2030. More importantly, the Indian demand is projected to be over $100 billion or 10 per cent of the global demand! And, just three years ago – in 2021 – we imported chips worth just $5.4 billion. This gives us some idea about how rapidly our industry is growing and how more and more products are now using advanced chips. Incidentally, out of the total imports worth $5.4 billion, we got almost 80 per cent from China.
In addition to Micron and the Tata group, the HCL-Foxconn joint venture has also submitted a proposal to set up a chip outsourced assembly and testing (OSAT) unit and their application is under evaluation for granting of incentives. Going by past records, it shouldn’t be long before A&A (Ambani & Adani) jump into the ring. And, for that matter, why not L & T and Wipro? India is not alone in pushing this critical component. Recently the United States government awarded a $6.4 billion grant to Samsung for their chips plant in Texas. These plants are to produce 4nm and 2 nm chips – a generation ahead of the current state-of-the art ones in use. These chips (or shall I say ‘super chips’) will find application as logic chips and high bandwidth memory chips which are critical for AI applications. The whole world wants to act rapidly to reduce dependence on China and Taiwan because a break in the chips supply line can hold any country to ransom.
*Boarding a Bus We Had Missed
The government of India is taking a truly holistic view of the chips sector – a bus that we had missed 10 or 20 years ago – by giving emphasis on several areas like:
(iv) wooing talent abroad – both PIOs and expats – to come to India
Before concluding, let me reflect briefly on our forgotten early efforts at semi-conductor manufacturing. The current focus is indeed making up for lost time. It is true that we do not have any significant fabrication, assembly and testing facilities, but we do have small niche semiconductor manufacturing capability in two public sector undertakings (PSUs) – Bharat Electronics (BEL) and Semi-Conductor Laboratory (SCL). Bharat Electronics, established in the 1950s, in the pre-ICs era, for manufacturing communications equipment, did make digital C-MOS type small ICs for use in clocks, radios, audio amplifiers, tape recorders and TVs in the 1970s and early 1980s.
Their ICs for black and white television sets were a huge success but those for colour TVs didn’t do well as the manufacturers imported CKD sets including the ICs. Bharat Electronics’ collaboration with American RCA helped it produce many ICs for RCA. They had an IC design team that succeeded in producing an IC imported by the Indian Telephone Industry (ITI) to replace their imported one. Semi-Conductor Laboratory started manufacturing LSI and VLSI ICs in the early 1980s for clocks, codecs, microprocessors etc. They were late in developing the memory chips for 126K RAM using imported ready wafers, as this RAM was nearing obsolescence. They had a 60-engineer design team but the devastating fire in 1989 virtually brought back the show to naught and it just couldn’t recover while the world moved on at a furious pace.
I hope and pray that our Semi-Con Mission 2 succeeds in achieving all its goals. To add to the seriousness of the industry, a recent report in The Economic Times that N. Chandrasekaran, Chairman of Tata Sons, is also chipping in by taking over as chairman of Tata Electronics also – the division that handles the group’s semiconductor business. ‘Icing on the Cake’, shall we say!
