India’s Resources and Capacity to Manufacture Semiconductors

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Vedanta has recently signed an MoU with the government of Gujarat to open India’s first semiconductor fabrication unit. The factory is a joint venture between Vedanta and Foxconn. Ground-breaking may be complete by the end of this year and operations are expected to start by 2024. This is not the first-time country has seen hope for indigenous semiconductor fabrication. Previously, a consortium led by HSMC Technologies India try to set up the country’s first electronic chip manufacturing plant but that didn’t materialize. 

Semiconductor manufacturing is a complicated task. It requires huge capital investment along with raw materials like heavy metal, ultra-clean facilities, water, etc. 

“Fiscal Incentives from Central and State Government and State Government’s commitment and ability to build a world-class sustainable infrastructure are the main requirements for manufacturing semiconductors,” said Dr. Satya Gupta, CEO, EPIC Foundation & President, VLSI Society of India.

Running a Semiconductor fab is a costly affair. For that, companies need a sound business model and in-depth knowledge of business and technology. “A sound business model with a strategy to attract high volume customers for the wafers, ability of the promoters to raise capital from institutional investors and an empowered leadership team with a depth of knowledge on business and technology are must,” Satya added. 

New trends like 5G, autonomous cars, IoT, and medical devices are fuelling the consumption of semiconductor chips in India and around the world. According to a study by IESA and Counterpoint Research, Semiconductor consumption in India was worth USD 119 billion in 2021 and it will be growing at a CAGR of 19%. The government has announced Rs. 76,000 crores to encourage semiconductor manufacturing in India. 

“The government’s ₹76,000 crore investment for a production-linked incentive (PLI) scheme towards semiconductor and display production was a positive move towards uplifting the industry. This policy announcement is significant as it strengthens the India Semiconductor Mission and incorporates chip design-to-production in its overall ESDM enablement program,” said Ashwini-K Aggarwal, Director-Government Affairs, Applied Materials India.

Explaining India’s resources and capacity to manufacture semiconductors, Dr. Satya said, “India has the infrastructure resources for semiconductor manufacturing such as connectivity, water, electricity, land, logistics, etc. To make optimal use of these resources and other parts of the ecosystem, it is imperative that we consolidate multiple semiconductor manufacturing efforts (Semiconductor Fabs, Display Fabs, ATMP/OSAT), etc. by many promoters and investors into a mega semiconductor technology park with about 2,000 Acre of land.” 

Supporting consolidation strategy with a Mega Semiconductor Technology Park to start the semiconductor journey, Dr. Satya said, “Creating infrastructure and the ecosystem at multiple locations will be very tough, expensive, and will not yield optimal results. Based on the learnings from Hsinchu Science Park, Taiwan and Kulim Technology Park in Malaysia, we must consolidate multiple semiconductor efforts into a single Mega semiconductor tech park.”

Vedanta’s semiconductor unit will operate on the 28nm technology nodes with a wafer size of 300mm; and the display manufacturing unit will produce Generation 8 displays catering to small, medium and large applications. “The selection of technology node, capacity and the type of products to manufacture in a fab is a commercial/business decision. Making Fab commercially successful should be the main thrust in choosing a technology node,” said Satya.