India appears to be still undecided more than three years after a budgetary promise, nearly two years after an expression of interest, and one year after a programme announcement.
On September 12, 2008, the globe commemorated the advent of semiconductor-based integrated circuits (ICs), also referred to as silicon chips, after 50 years.
A little over a year earlier, Forbes claimed that “India lost out on a multibillion-dollar chip facility because the government dragged its feet on drafting an investment strategy on semiconductors.” That wasn’t the first or the last time in the past 20 years that media headlines such as “India’s first semiconductor chip production fab will come up shortly” caused a lot of excitement, but nothing ever materialised.
This area similarly saw no advancement during Prime Minister Narendra Modi’s first term (2014–19); nevertheless, in his second term, the pledge to introduce an incentive programme for semiconductor fabs was made in the Budget Speech on July 5, 2019.
In order to determine who could be interested in opening chip fabs in India if incentives are granted and what kinds of incentives they are seeking, the Ministry of Electronics and Information Technology (MEITY) opened a “Expression of Interest” on December 15, 2020. The Union Cabinet approved an incentive programme with an initial overlay of Rs 76,000 crore for silicon fabs, various types of semiconductor fabs, semiconductor design, and display fabs one year later, on December 15, 2021.
The most significant silicon-based fabs will take at least three years to build, outfit, and be ready for production, therefore the incentive plan announcement was not intended to address the acute chip shortage that was at its height at the time. One year after the scheme’s launch, it is remarkable that the review and approval process for the initial batch of applications—including three for silicon fabs—has still not been finished.
Ashwini Vaishnaw, a Union Minister, was quoted as saying on February 24 that “the government will undertake a detailed evaluation of applications it has received in response to the mega semiconductor scheme and expects to complete the entire process and sign agreements with companies in the next 8-10 months.”
There have already been numerous instances of new fab building taking off, and some of them are ready for equipment move-in, in nations like Japan and the United States that began preparing semiconductor incentive schemes about the same time or even after India started planning.
India appears to still be having trouble deciding more than three years after a budgetary pledge, almost two years after an expression of interest, and a year after a plan launch. Vaishnaw was once more quoted on November 21 as saying, “The Centre will also approve at least two semiconductor fab proposals in the next two months,” though he did not give a specific time frame or say whether the two would be silicon fabs or other, more compact facilities like compound semiconductor fabs.
Many have wondered if India will once again miss the boat due to the minister in charge of India’s semiconductor mission’s vacillating pronouncements, the global semiconductor industry’s slowing down amid recession fears, and the US-China chip conflict.
Theoretically, even if the application is accepted by the beginning of 2023, India might be able to manufacture silicon chips domestically by the middle of the decade if the applicant fab obtains the technology from a worldwide fab that is currently using it in high volume production. The earliest orders for such an Indian manufacturing facility are probably going to involve employing it as a secondary supplier for the identical chips that the parent facility produces. These early commercial chips made in India are likely to be exported unless both the chip packaging and the assembly of the end product that it goes into are also done in India, while they may later be imported as a component of goods.
Since the customers can use the same Process Design Kit (PDK) as the parent fab and design new chips, some of which may be for India-specific use, there may be new orders that the India fab can receive later or concurrently from the same global fabless customers as the fab from which the technology transfer was done. Indian fabless design firms are most likely to be the third step of orders pouring into the Indian fab, and the chips may be for local or international application.
Practically speaking, though, all of this requires a laser-sharp execution focus and steadfast dedication to keeping promises. The top-five foundries in the world may not have applied to India’s semiconductor fabs in the first round, but they will be watching how the current applications — including one from a foundry that is on the list of the next five top foundries — are handled, how quickly decisions are made, and how smoothly execution is carried out before they express interest when the scheme opens for a second round.
Even though the semiconductor sector is predicted to grow nearly flat in 2022 and maybe negatively in 2023, the second half of this decade is predicted to see substantial growth once more. Even if not the best in the world or using the most advanced technology node, breaking ground for one or more silicon fabs by early 2023 can place India on the map of the world’s semiconductor fabs by the time the next upswing is anticipated.
The India Semiconductor Mission is a 20-year goal, according to Vaishnaw. Although a long-term vision is desirable, it must be accompanied with immediate, practical action.