With the industry, academia and policies collaborating; the semiconductor ecosystem is slowly taking shape. But what lies ahead? Does India have the capacity to be involved at every stage of the supply chain from semiconductors to electronic devices? How will demands affect manufacturing? How far will local and global demand play a role?
“If you really want to control the supply chain, the best thing to do is own the product,” says Sagar Sharma, Chief of Staff, India Semiconductor Mission. Semiconductors have proven to be revolutionary, even though they were not given much importance, a few decades ago.
One may ask why or how, to which the simple answer would be the influence of the ‘chip’. A semiconductor chip is no more used in just one sector of any industry. In simple words, this would mean that semiconductors are reigning, anywhere and everywhere. Right from healthcare to automation; telecom to wearables and any industry you name, semiconductors are no more an option but a necessity.
Where is India in the global semiconductor market?
The semiconductor industry contributes significantly to the total bill of material for any electronic product. During the pandemic, the need for semiconductors was seen more especially when the shortage was evident. The variety of applications that semiconductors were catering to, expanded. Previously one class of systems were mapped to multiple applications, however, currently, systems now need to address a variety of configurations, leading to a variety of semiconductor chips being needed.
During the semiconductor revolution in the 1980s, countries like China and Taiwan raced ahead. This has now accounted for 24% and 21% share respectively in the current global market. Apart from the lack of infrastructure and skilled labour; the competition that India faced from its neighbouring countries led to its low share in the semiconductor manufacturing market. Currently, India has fulfilled only 9% of the demand, locally.
India previously was importing 100% of the chips from Taiwan, Singapore etc., as MNCs preferred engineering rather than manufacturing services. There would be a delay in time to market, considering all aspects that had to be ticked off before commercialisation. Thankfully, the country has now taken measures to no more be 12-generations behind, but ace its way up to being on the global platform. “India is chasing semiconductors, but in reality, semiconductors need India,” says Raja Manickam.
How is the government playing a role in supporting the industry?
“We ended up matching dollar for dollar. If the industry is putting $1 then the government is putting $1.”
-Satya Gupta, on the Semicon India Program
The Rs 76,000-crore PLI scheme for semiconductor manufacturing approved on 15th of December 2021, by the Union Cabinet was a result of a massive consultation. As Chief of Staff for the mission, Sagar Sharma recalls, “What started off as an exercise of expression of interest from the 15th December 2020; gauged interest in the Indian market.”
The massive consultations for the silicon semiconductor fabs, display labs, semiconductor packaging etc. not only led to an Rs. 76,000-crore (USD$ 10-billion) incentive package to come up but also led to providing incentives to every part of the supply chain right from electronic components to finished goods.
The Semicon India Program 2022 conference specifically catalysed this outlay for India’s Semiconductor ecosystem. The four major schemes as per the program are as follows
- Scheme for setting up of Semiconductor Fabs: Fiscal support (50% of the project cost) will be provided to eligible applicants for setting up of Semiconductor Fabs.
- Scheme for setting up of Display Fabs: Fiscal support of up to 50% of Project Costs will be provided to eligible applicants subject to a ceiling of INR 12,000 crore per Fab.
- Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor Assembly, Testing, Marking, and Packaging (ATMP) facilities: Fiscal support of 30% of the Capital Expenditure will be provided to the eligible applicants.
- Design Linked Incentive (DLI) Scheme: It offers financial incentives for the development and deployment of semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores, and semiconductor-linked design.
Many veterans view the quality of this program as one of the best in the world, as momentum is being built towards the final finale or in semiconductor manufacturing terms, the stepping C stage, after which the chip heads to production.
Dr Gupta adds, “No country has given a 50% incentive for semiconductor manufacturing so far. In one of my conversations with my friend, he said that if the government can give 50 cents for every $1 put by the industry that will be great. However, we ended up matching dollar for dollar. If the industry is putting $1 then the government is putting $1.”
“The Semicon India Programme is providing domestic manufacturing capabilities the necessary boost needed. This would eventually reduce the dependency on imports while promoting exports.”
The government has definitely backed up the industry by aligning itself with the need of the hour. The ‘India Semiconductor Mission’ (ISM), aims to establish a reliable semiconductor supply chain, including raw materials, speciality chemicals, gases, and production.
With the product ecosystem in place, the demand for semiconductors will rise automatically.
Can India meet this demand in terms of manufacturing?
Thankfully in India, we do have a market along with every aspect of the ecosystem except manufacturing. The entire semiconductor manufacturing in the world is run by 4-5 fabs, with the top 5 OSATs (???) controlling close to 70-75% of the OSAT business. Countries like Taiwan, China, and Korea who basically export fabs do not have a market as such, breaking myths like a market-is-needed-to-start-manufacturing.
Raja with reference to OSATs says, “Most of the equipment for OSATs is highly automated. Once the technicians are trained for setup and maintenance, they will be more than enough in number. In terms of engineers, fortunately for us, there are a lot of Indians working in key positions in Southeast and other parts of Asia who are longing to come back to India.”
Abu Dhabi-based Next Orbit Ventures and Israel’s Tower Semiconductor, the International Semiconductor Consortium (ISMC), are also said to invest USD$3 billion in Karnataka to build India’s first chip manufacturing plant.
Figure 1: MoU between Karnataka and ISMC
Figure 2 : Intel’s Engineering Centre
With respect to incentives for manufacturing:
- Negotiations are done with the applicants, to further understand the technology that is bought in the visibility of the project.
- The designated team takes care of the financial appraisal since the incentive covers 50% of the project costs. Unlike previous times, these incentives are on an upfront basis.
- Parallelly active discussions with different state governments are taking place, for their support with respect to land and power.
With over 996 semiconductor companies in India, startups are advised to branch out with their design and work for hand in hand with big organisations that can manufacture these designs.
Dr Gupta is of the view that product design is the fulcrum of the industry that drives manufacturing, research, capacity building etc. “On the industry side, we need a lot of people to take this opportunity and come out with scaling and not just creating innovative products. On the other hand, from academia, many good technologies have been developed that need to move from lab to fab. Hence leveraging India’s existing design capabilities, from both areas is needed.”
Is India capable enough to handle such manufacturing demand?
“He said, “The hunger for people to learn and the basic innovative thinking they have, is not found at any other place.””
-Raja Manickam, as he recalls an interaction with a Singapore delegate
India is abundant in terms of talent and skilled labour. The Electronics and IT Ministry (MeitY) aims to train over 85,000 engineers on chip design by expanding the infrastructure available, however, this number could increase exponentially. Dr Gupta comments, “With the increasing global demand and India pushing forth its policy, it looks like we will need almost 200,000 VLSI design engineers in the next five years. Talent development is vital at this stage.”
Figure 4: The panel discussion on Shaping the Future of Semiconductors in India
This more-than-double figure of earlier estimation would definitely serve both the domestic and global demand. In order to train potential individuals of the country, the following point could be implemented by Academia.
- Setting up technology centres in polytechnics can help candidates understand the intricacies of the field. For those who would rather prefer working on their skills development, either after their +2 or even during their degree; there are frameworks that give a much more intensive lab enrolment like VLSI design and applied electronics that would be useful.
- Programs are being set up for those students who appear for the Joint Entrance Examination but do not get admitted. “With the current cloud infrastructure, we could scale such types of online degrees, even diplomas and polytechnics in a big way.”
- The Special Manpower Development Program by MeitY for VLSI is looking at cloud-based infrastructure tools, thus removing the restriction of only the students from academic institutions have access.
- Virtual fabs are the in-thing in the industry. It means people are trained in the semiconductor device fabrication process before accessing the physical fab. In simple words, engineers are learning how to run a fab virtually.
“With the current cloud infrastructure and virtual fabs being spoken about, we could scale online degrees, even diplomas and polytechnics in a big way. Thanks to virtual and augmented reality, training can be given to the product as well.”
Prof. V Kamakoti
Prof Kamakoti assures that capacity building will never be a miss. He adds, “These courses can be scaled out to people who get associated with an institution (like a hub or spoke model). The institution, in turn, can adopt multiple other institutions including polytechnics and through them, access to the infrastructure can be gained.”
Such measures could help companies and industries, resulting in minimal training needed for hired candidates. It reduces the time cap to a month or so, giving industries ample time for a hands-on platform experience. In this way, capacity building will not be a miss when skill sets are fine-tuned.
How will India commercialise its own chips?
The basic rule in commercialisation is decent pricing. Even though the best of technology is used, making it commercial at a proper price is the winning point.
In order for a large number of wafers to be consumed, Dr Gupta suggests two rules that need to be followed, which may eventually lead many startups to fab.
- The 80-20 rule. Wafer consumption must be 80% globally and 20% locally. “It would be unfair to the system if 100% of the fab is due to local demand.”
- The initial demand rule. Ideally, the demand should be from either large fabrication companies or specified product chips that would be developed for commercialisation. “The products may range from education tablets to smart metres.”
For 90+ per cent utilisation of the wafers, the product ecosystem should be able to assure the government and the investors regarding the consumption of wafers.
What lies ahead for the India Semiconductor Mission
“For investors to reap success, the government, industry and academia; the major three parts that form the ecosystem need to create enabling conditions,” says Dr Gupta.
The heart and soul of this whole endeavour have been set up as the independent business division of Digital India Corporation. Despite being independent in terms of finances, autonomy, etc., it is driving the entire semiconductor strategy program for the country.
Apart from the technical and financial appraisal of the proposals, and awarding incentives, this program will drive the long-term strategy in terms of figuring out the right kind of technology. The progression of the government is quite evident, from the PLI schemes to getting deep in the value chain to own the product. Different working groups for capacity building, skill development, design equipment, silicon CMOS, displays, packaging etc., are being set up to emphasise owning the product. Experts in these groups are bringing in knowledge for the country so that different sectors can be addressed and have proper priority.
Manpower is needed at different levels, from PhD scholars to managers and shop floor workers. This manpower is being segmented with tailor-made courses needed for the semiconductor industry. “All India Council for Technical Education (AICTE), Electronic Skill Council of India (ESCI), are providing their overarching effort in terms of capacity building. The target is to have a sustained pipeline of highly skilled manpower and semiconductor fabs in the next 2,3 years.”
India on the global semiconductor platform
“On the industry side, we need a lot of people to take this opportunity and come out with scaling and not just creating innovative products. On the other hand, from academia, many good technologies have been developed that need to move from lab to fab. Hence leveraging India’s existing design capabilities, from both the areas is needed.”
Dr. Satya Gupta
When compared to China, India is asked to follow the same path. What did China do? It first created a strong manufacturing ecosystem, after which leadership on electronics products was created. In spite of much criticism all around the world, 5 of the top 10 electronics categories are Chinese brands. This shows how their manufacturing capacity is a very strong brand with the product ecosystem driving the semiconductor ecosystem. With the product ecosystem in place, the demand for semiconductors will rise automatically driving the demand.
With the semiconductor ecosystem, consisting of the industry, policies, and academia being made perfect in India; the next step is to lead with excellence in design. This is an area where we are much ahead when compared to other countries. Hence our next target is owning the end product from the level of semiconductor manufacturing and chip design.
The current market share India has in the top 10 consuming electronics products is less than 5%. To penetrate through to 25% of the market the country’s electronics products must be upscaled.
In conclusion, with global Indians, who are at the centre of the industry driving almost all companies, leveraging is needed so that this semiconductor mission to place India on a global platform can be accelerated. At the same time upscaling Indian electronic brands is needed, so that the demand for semiconductor manufacturing will be further driven. This would eventually not only make investors successful but would give the country a grip on its supply chain and the whole nine yards after that.
This article is inspired by a panel discussion at the VLSI Conference 2022. The panellists are Professor V Kamakoti (IIT Madras), Raja Manickam(Tata Electronics), Sagar Sharma (Chief of Staff-India Semiconductor Mission) and Dr. Satya Gupta (VLSI Society, India). It was moderated by Mr. Nirmal John (Economic Times).
Transcribed by Sharon Abhignya Katta, who is passionate about innovation.