India joining the global chip race

Today, India is a $3.1 trillion economy and wants to get to a $5 trillion economy by 2027, of which $1 trillion is being projected for digital, which means the country, the leadership and the government recognizes that a digital platform for India will transform this nation.

Today, India's electronics manufacturing is close to $80 billion. And the number of people employed in the electronics manufacturing sector is 2.5 million. With geopolitical tensions and the world looking for a trusted source, things have also changed and are in some sense in favour of India.

Chips, or integrated circuits imprinted on silicon wafers are at the heart of every kind of manufacturing industry from automobiles to telecom gear, and from defence equipment to solar panels. The demand is going to further spike, in a world of artificial intelligence and electric cars, which need many more chips than petrol-driven ones.

Suddenly, the issue of China has become massive. We can say that it is not just a talking point but there is deep stress around the globe and the cracks that have appeared on this global supply chain is giving India a very good opportunity.

India has its strengths in chip design and the labour-intensive part of chip-making (assembly, testing and packaging). It could also do well in downstream product assembly, as with mobile handsets. With this uniqueness, the ecosystem could develop with global linkages. Now combine that with the PLI scheme that has been ushered in by the government and you can see manufacturing companies lining up to pick up those subsidies to set up manufacturing plants here.

India's dream to become a semiconductor manufacturing hub is finally moving in the right direction. In December 2021, the government of India approved a semiconductor incentive scheme worth Rs 76,000 crores to make India a semiconductor nation.

But while the government has received three silicon fab and two display fab proposals, they haven't taken a call yet. "Typical decisions on semiconductors happen in a timeframe of 14 to 18 months, all over the world," said IT Minister Ashwini Vaishnaw. He further added, "On January 1 of this year is when we uploaded the applications. Going forward, India would get multiple fabs.

The fact is Chip manufacture needs a complex ecosystem. There is a need for strong Inter-dependence, which is unavoidable. The US leads in logic chip design, South Korea in memory chips. Intel and others outsource wafer fabrication to Taiwan. Japan’s chip industry is still focused on older technology (there is a market for this).

Intel in the US has not yet broken through the 10 nm barrier, whereas the Taiwan Semiconductor Manufacturing Company and Samsung produce 3 nm chips. China has just broken through to 7 nm, while Japan and the US are jointly working on 2 nm technology.

As electronics manufacturing grows, the demand for chips is going to increase, and if that demand can be met out of India, it can bring an impactful change in the country.

Dr. Deepak Kumar Sahu, President & CEO, VARINDIA