E-Paper
India’s semiconductor front: Well begun is half done
This article is authored by Ankush Wadhera, managing director, partner and India leader, Semiconductor Practice, BCG.
The demand for semiconductors, the backbone of everything from mobile phones to cars, industrial automation to defence equipment, is surging in India. By 2030, India’s chip demand is expected to touch $117 billion, growing at ~15% CAGR, at almost twice the global pace, and constituting about 12% of global demand. In a world where ~75% of manufacturing capacity is in China, Taiwan, South Korea and Japan, India remains significantly dependent on chip imports.
India has shown how a concerted policy push can change the map. Make-in-India and the PLI schemes have resulted in over 99% of smartphones being sold in India today being made in India as well, an impressive jump from just 26% in 2014-15. Over the last few years, India has been looking to replicate this success in semiconductors, reduce its dependence on chip imports and create a resilient supply chain for semiconductors in India.
The India Semiconductor Mission has done well to attract strong participation from both domestic and global players like PSMC, Micron, TATA, Foxconn, HCL, CG Power and Kaynes, amongst others. All the 10 approved projects, with an investment commitment of over $18 billion, cater to different and, more importantly, strategically chosen manufacturing segments for India.
For instance, TATA’s fab will focus on the 28-90nm mature node segment. Mature nodes constitute more than half of India’s silicon consumption today and are critical for large domestic sectors like automotive, telecommunications, industrial and IT. These 28-90nm chips can be deployed in applications such as smart meters, smart cards used in government IDs, radars and avionics in defence industry, remote radio units in 5G towers, signaling equipment for railways, amongst others. Likewise, the SICSem project will focus on niche silicon carbide chips which are rapidly replacing silicon chips in high-voltage and high-power applications for EVs, solar inverters, drones, and others. This niche market is growing at 20-24% CAGR, nearly three to four times faster than the global silicon market growth, a segment where India can have a global leadership play. Similarly, the various OSAT projects approved under ISM will serve very different needs for the India market. The Foxconn-HCL OSAT plant will produce display driver chips – a key input to the display module assemblers setting up shop in India via.
The CDIL OSAT plant along with SICSem’s SiC fab will create a full SiC wafer to packaged-chip supply chain in India. The 3DGS OSAT plant will use 3D heterogenous integration technology, amongst the most advanced technologies, to drive chip innovation, especially as Moore’s law starts to approach its limitations.
Cumulatively, these 10 projects are expected to create over 70,000 direct and indirect jobs with an annual output of $6-7 billion at full capacity. Early estimates show a $50-70 billion in Gross Value Add impact by 2035 (including direct, indirect and induced impact), with fiscal gains for the government exceeding the total incentives outlay by 2035.
A next version of the semiconductor scheme could help ensure that India becomes a full-stack semiconductor nation. It is important to continue to support areas like display fabs where India has a robust, multifold demand, but depends almost entirely on imports, and is still looking for credible players to set-shop. It is also important to focus on upstream segments of materials and equipment manufacturing. The approved projects will require several different materials and specialised equipment. We now need to build a resilient localised supply chain of critical input materials such as silicon wafers, photomasks, photoresists, specialty gases and chemicals; and of specialised, very high value capital equipment that requires a full-service eco-system for the fabs and packaging units to operate at high yields--a critical aspect for them to be commercially viable.
Another focus area must be commercially-oriented R&D ecosystems. Today, production-grade chip manufacturing technology, and equipment technology is available with only a limited set of global companies. Developing such R&D ecosystems in India will de-risk technology access for Indian manufacturers and could potentially spin-off India’s chip design startups and MSMEs into global brands. For example, TSMC, which is world’s largest and most advanced chip manufacturer, originated from a R&D facility in Taiwan--Industrial Technological Research Institute (ITRI).
This full ecosystem view also mirrors how other competing economies like US, China, South Korea, Japan and others are incentivising not just chip fabrication and packaging, but also other segments like materials, equipment and R&D. Further, these semiconductor projects can potentially account for about 15% of the $150 billion components production target that India seeks to achieve by 2030. This is a part of the overall $500 Bn electronics production target for India and will significantly help in pushing domestic value-addition above 35% compared to the mid-teens estimates today.
Net-net, further policy push with a holistic view of the full semiconductor ecosystem covering R&D, design, materials, equipment, fabrication and packaging will help in creating a sufficiently resilient semiconductor supply chain in India and help in achieving the Prime Minister’s vision of chips that are “Designed in India, Made in India, and Trusted by the World’.
This article is authored by Ankush Wadhera, managing director, partner and India leader, Semiconductor Practice, BCG.
