India shifts focus from Chip Making to Chip Design

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It has been four years and India’s plans for setting up two chip manufacturing units with an investment of over ₹63,000 crore is still to see fruition. The two main consortiums who had made a commitment for setting up semiconductor wafer fabrication units in India are facing roadblocks in raising sufficient funds. Adding to this, they are also seeing that the fabs operated by their other partners in other parts of the world are facing demand issues.

The two consortiums comprise of one being led by Jaiprakash Associates who had formed partnership with IBM and Tower Semiconductor of Israel. The other is led by HSMC Technologies who had partnered with ST Microelectronics and Silterra Malaysia. The proposed fabs accounted as being the largest component of the Electronic and Semiconductor Policy, which was rolled out in 2012.

As per Ravi Bansal, joint secretary, Ministry of Communications and IT, there is a challenging issue of overcapacity in chip manufacturing with three to four companies within the consortiums who stated that they are unable to get sufficient business options for their existing set ups in other places. Thus far, there is nearly no high-end electronics production happening in India even though several large mobile handset makers have set up their production units in India. He said that there is only assembly happening in India and there is only a value addition of 1-2 per cent.

The government is now shifting its focus from electronics manufacturing to chip designing. Mr Bansal pointed out that the government doesn’t want any regular chip manufacturing firm to receive the Electronics Development Fund (EDF) but to look for someone who can look at certain aspect of chip design and make an intellectual property for it.

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Apart from the government, other top players in chip manufacturing have also stated their concerns. Intel has expressed that it will not make in India even if the fabs are established. As per Intel India’s President, Kumud Srinivasan, India must not focus on chip making domestically as there is already an overcapacity in this segment worldwide. He said that chip design should be the area to focus on as it is close to India’s skill base and an area where India can take the lead.

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