India has a long way to go in the semiconductor sector

The COVID-19 pandemic and the Ukraine war have forced India to accelerate the Atmanirbhar Mission

The world is immersed in the use of electronic devices.

By Girish Linganna 

Many positive developments take place a bit late. But it is better than never. One such development is India’s decision to give the semiconductor industry the much-needed priority it deserves.The world is immersed in the use of electronic devices. There is no microelectronic device that has no semiconductor, which is also known as chips. Then how come India did not become self-reliant in the semiconductor manufacturing sector? It is nothing but a lack of leadership – both political and industrial – which has made India heavily dependent on China and other countries.

The COVID-19 pandemic and the Ukraine war have forced India to accelerate the Atmanirbhar Mission. In fact, there is no choice but to become self-reliant for India because the global supply chain can snap for any reason, including geopolitical. Even America and Europe are not an exception to this urgency. Overdependence on China, Taiwan, and Vietnam for manufacturing is forcing even America to return to the chip manufacturing field, regardless of cost.

Examples of devices using microchips are computers, smart phones, sensors, LEDs, flat panel displays, and microvens. Scores of chips are used in each device. In simple terms, semiconductors are the tiny circuits that are present in plenty of electronic devices. Those facilities which are involved in manufacturing these microchips are broadly known as semiconductor fabrication plants, or fabs for short. Silicon is the primary material found in microprocessors.

The recent signing of a memorandum of understanding to house a semiconductor fabrication plant in Mysuru is a good development in the given circumstances. The International Semiconductor Consortium ISMC Analog Fab has signed an MoU with the Karnataka government to invest Rs 22,000 cr ($3 billion) in a 65nm analogue semiconductor fabrication plant to be located about 5 km away from the Mandakalli airport.

The ISMC is a joint venture between Abu Dhabi-based NextOrbit Ventures and Tower Semiconductor of Israel. Intel, an American multinational corporation and technology company, is a giant in the semiconductor design sector. Intel has already signed an agreement to take over the Tower Company.

The stated aim of the Mysuru project is to generate not less than 1,500 direct and 10,000 indirect jobs. The government has to facilitate the acquisition of 150 acres of land in the Kenchanahalli industrial area. The plant could materialise in four years’ time, provided all goes according to the plan. This means the government would have to give incentives which it has promised under the India Semiconductor Mission. Access to high quality water and power is very essential for the industry. While zeroing in on Mysuru, the ISMC is confident of getting talent and high quality living in Mysuru, besides a customised incentive package. So far, the government has not made public the promises made to the investors in the form of incentives. There is no word on how much water would be supplied to this multi-crore industry.

Water-intensive sector

The chip making industry is a highly ultra-pure water-intensive industry. It is said that a chip manufacturing unit uses no less than two million gallons of water a day. A report states that nearly 10 gallons of water are required to make a single computer chip. The world is witnessing the production of millions of chips, while water availability is dwindling.

A decade ago, Intel used nine billion gallons of water in California, the Silicon Valley of America. Taiwan is the world’s largest third-party chip manufacturing country. In 2021, it was reported that Taiwan occupied 63% of the global market. Whenever there is a drought in Taiwan, the industry has to depend on tank supply to continue production of microchips. The wastewater produced is high in metal and toxic content. So they have to process the effluent before letting it go to mother earth. The government must explain the conditions laid down to the company regarding the environmental protection it is going to ensure. Most advanced establishments operate through robots to avoid pollution.

Citizens have every right to know all the details of the ISMC coming up in Mysuru. All that is in the public domain so far is that the Mysuru fab will manufacture 65nm analogue chips which will be used in automotives, telecom, consumer electronics, defence, aerospace, and industrial automation. The 65nm process is an advanced lithographic node which was developed by the Tower way back in 2015.

 Why waking up late? 

Now the question is why India has woken up now to get to the chip industry and whether India will be self-reliant in the years to come. The world saw a big boom in electronic usage in the 1970s and 80s. It was America which pioneered the development. California became the first chip manufacturing place to earn the distinction of being the Silicon Valley of the globe. Over the years, American companies focused on design aspects while transferring manufacturing work to Taiwan because of the cheap labour. It is said that not less than 90% of the most advanced chips are made by the Taiwan Semiconductor Manufacturing Company Ltd. (TSMC), which is now putting up an advanced chip plant in the US. But it is running behind schedule because of the pandemic.

Taiwan is a major supplier of chips to both the US and China. These two giants are not on good terms. Anytime, China can cut off Taiwan from the outside world. Since the beginning of the Ukraine war, Taiwan has been on tenterhooks. Taiwan’s situation is no better than Ukraine’s in terms of getting international support. To cut its dependence on Taiwan, America is also getting back into manufacturing. While China leads the world in semiconductor production, South Korea, Singapore, Malaysia, the United States, Japan, Germany, the Philippines, the Netherlands, and Thailand are also in the top 10 list. Apple Inc., the American giant, is the world’s biggest microchip buyer as of 2021.

In the case of India, till a decade or so ago, it was more inclined towards Russia than America, and thus lost out in the industrial sector. The semiconductor sector is a cost-intensive one where returns trickle over the years. It is also a fact that the demand for electronic devices fluctuates a lot. It is probably that Indian industrial giants did not want to lock in their money but were happy with imports. But India’s electronic sector suddenly saw unprecedented growth and, with this, demand for computers, laptops, smart phones, and other devices has touched the sky in the last two decades. The scaled up demand is seen after the pandemic as the medical sector has upped its usage. 

India is heavily dependent on China for chips because China is in a position to supply as it has automated the industry. During the pandemic induced lockdown period, China began squeezing America by shutting down its chip industries as well as those of Taiwan operating in China. While the demand has tremendously increased, the supply has dwindled.

 The pandemic and the Ukraine war have redefined the world order. It has broken supply chains in many sectors. India can’t relax anymore, irrespective of the availability of financial resources. India’s baby steps in the field are welcome. But it can never be a market leader in the near future. It may not be able to meet its domestic demand because all sectors, including automobiles, are growing in India. If there is a third world war, China may have a soft corner towards Russia and definitely not towards India. It takes decades to become Atmanibhar Bharat.

(Author is Space and Defence Analyst & Director ADD Engineering Components (India) Pvt Ltd ( An Indo- German Company) Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited).

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