The Missing Puzzle to India’s Semiconductor Ambition?
Indian Electronics and Semiconductor Association (IESA) recently published a State Readiness Report (SRR) which evaluates each state’s ecosystem to attract investments from design and manufacturing companies. Analytics India Magazine spoke to K Krishna Moorthy, CEO, and president of IESA, to discuss certain metrics in the report and understand what India needs to do to compete against well-established global companies in the semiconductor manufacturing industry. To begin with, while discussing the parameters which assessed the states ready for housing semiconductor design and manufacturing setup, Moorthy explained that the report was not a measure of relatively identifying which state is more adept than others but an identification of what makes the global countries/states such as Haifa in Israel, Osaka in Japan, or Taipei in Taiwan a proven ground for attracting investors. The point of the report was to keep these global states as a benchmark and see the gap separating them from about 20 states analysed in the report based on the 140 shortlisted parameters. The shortlisted parameters can be broadly categorised into: current ecosystem, ease of doing business, infrastructure, talent, and policies. Based on this categorisation, the report suggested that about 10 to 12 companies can move forward and build a robust ecosystem—the likes of which states like Tamil Nadu or Karnataka have been able to do. Moorthy further adds that an ecosystem in place is not only limited to tier-I cities, but that tier-II and tier-III cities play an equally important role, if not more. Beyond the main manufacturing entity, several subfabs will be needed—for instance, for handling different chemicals or gases. Hence, there will be various entities surrounding it. For this to be possible, the availability of land is therefore quite important. Lower-tier cities are likely to be advantageous to the growing ecosystem, provided they are also closer to a place that satisfies the requisite location parameters. Dealing with global competition However, India’s hold on the electronics market will take work, even with incoming policies and proposals for the semiconductor plant. Not to mention, the pressure that comes with the strong global competition from established foundries like Texas Instruments, Taiwan Semiconductor Manufacturing Company (TSMC), United Microelectronics Corporation (UMC), and others. To this, Moorthy says, “India cannot prepare for the global competition since many of the established players are already producing semiconductor manufacturing equipment and products. So, it is not a question of competing with them, but India can be a trusted partner.” He cites two key reasons that make India a trusted partner to foreign companies: India—being a neutral state—offers a geopolitical advantage. Therefore, from a strategic point of view, India will benefit from having semiconductor access at all points. The semiconductor market is growing from $480 billion to $600 billion by 2025. Hence, India can leverage the growing capacity by providing the additional components for the extra $100 billion. Moreover, India will consume about $75 billion to $80 billion worth of semiconductors by 2025. So, even if it makes 20–25% of revenue from this, it will still be quite a big amount from a single category. However, this 20-25% revenue is still a debatable figure. Arun Mampazhy, a veteran semiconductor analyst, while speaking to AIM, explains that India imports roughly $26 billion semiconductors right now. Most of these are used for mobile or other consumer electronics assembly plants. The product companies ultimately decide on where they will design or manufacture the chips and where they will assemble their products. Hence, India can be a semiconductor hub and benefit from the growing market if and only if more India-based fabless companies come up and the government also applies necessary policy interventions mandating that if a particular chip can be fabricated in India, and the product company still chooses to source it from outside, then a custom duty will be levied on it. Therefore, getting a market share even for consumable electronics within India will not be easy. Role of private players Further, both government and private players play a key role in India’s semiconductor mission. The government’s play, Moorthy says, is primarily in the form of policies and creating talent. For instance, the Ministry of Electronics and Information Technology (MeitY)-funded ‘IESA’ is working with the government of Karnataka in revising the curriculum of engineering education, diploma holders, ITIs, and more. In addition, on the policy front, certain infrastructural support like access to clean power and water, roads, cooling systems, recycling mechanisms along with capital support, such as providing subsidies, could significantly reduce the cost of the products—thereby adding business value. Also Read: India’s Semiconductor Mission is the Hot Cake No One Wants to Have The rise of cloud computing, and the establishment of data centres, especially in tier-II cities, leads us to believe that perhaps it is not just the product companies but service companies as well that are widely benefiting from the native semiconductor ambitions. In this context, Krishna Moorthy shares that the rise of data centres directly correlates to the data policies of the government which insist that all the data has to reside within the country. Therefore, several servers have to be made for these data centres which will then have to be maintained. However, while the service industry will be ready to provide the services for maintaining data centres, Moorthy adds, “that may not be high value adding; high value adding would be the ability to build data with your own products.” This is where we will observe a lot of activity among private companies in the next two to three years. Robust R&D—The missing puzzle? Discussing the road ahead, Moorthy says that India should focus on parallel R&D so that in the next five to seven years, the new fabs that are now being established become profitable, and we are ready with the next-generation technology. Otherwise, India may rapidly set up manufacturing and suddenly reach a grinding halt, unless the R&D also catches up. Thereby, R&D becomes an important tenet in semiconductor manufacturing and assembly units.
India’s semiconductor ambition can only be realised when there are efforts towards parallel R&D in place.
India’s semiconductor ambition can only be realised when there are efforts towards parallel R&D in place.
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["AI", "analytics", "Aim", "RAG", "cloud computing", "R", "Go", "Rust", "API", "ViT"]
Ayush is interested in knowing how technology shapes and defines our culture, and our understanding of the world. He believes in exploring reality at the intersections of technology and art, science, and politics.