The way forward in semiconductors | Tech News

The way forward in semiconductors

In order to reduce the electronics import bill, there is a need for India to take proactive decisions when it comes to semiconductors.

| Updated on: Feb 10 2023, 14:43 IST
What is the way forward for the semiconductor industry in India?
What is the way forward for the semiconductor industry in India?

By Dr. Ajai Chowdhry, Founder of HCL and Chairman of the Epic Foundation

I have been following news articles on the status of semiconductors fabs to be set up in India. Soon enough, the government could be deciding on the first few fabs.

Way back in 1999, when I was part of the PM's Task Force for hardware, I started talking about setting up a semiconductor fab in India. Come 2005, I again wrote a paper for the government on bringing a semiconductor and component ecosystem (SIPS) into India. Both these recommendations floundered. In the 2009 Task Force, which was co-chaired by me and Kiran Karnik, we recommended setting up of semiconductor fabs and predicted that the electronics import bill will gallop to exceed the oil bill. But this also never took off beyond some key areas that did get implemented. But the Fab area remain unaddressed.

Many naysayers said, we should be a fabless country, due to our VLSI design capability. But I have always been a great supporter of creating fabs. And the shortage of semiconductors that affected 250+ industries has now proven that we should have been in semiconductors long ago.

Sometimes, a lot of the commentary around this subject forgets that this is our first step and that we will learn from this experience. We must remember that we can't jump to the leading edge right away. This is a highly complex industry, which only a handful of countries have mastered. And it has taken each of them years, even decades to catch up with those in front.

When a country is starting from scratch, like India is, it isn't always realistic to suggest that an entity with great experience in semiconductors should lead the foray. No Indian company has any experience by definition. And there aren't that many companies globally who have the know-how and the financial muscle to start a fab in a new geography. Those who do, tend to guard their technology closely. And their interests would be driven primarily by where they can earn maximum return for their investment. These companies do not think like countries or governments do, which have a much more encompassing vision and lay out their priorities not only in terms of economics but also security and strategy.

How did we start in automobiles? Maruti was created by the government in collaboration with Suzuki. Suzuki was not a big name in the world. But they both learned and slowly created the country's largest automobile company. And innovated to create products suitable for India and today they export small cars from India.

PM Modi and the Government of India must be complimented for their vision and backing that vision with significant financial resources. The Government will support semiconductor and display fabs with a package of $10 billion, a significant sum for an Sensitivity: Public (C4) emerging economy like India. The Government has clearly understood that this complex industry will not come up organically. It needs big support from the Government. Indeed, that has been the experience in other countries in the past and also the recent US CHIPS Act provides more than $50 billion in incentives for semiconductor fab to reshore to America.

The challenge is, of course, to get private sector entities to avail of the government support and execute the fabs. For the US, with its long experience in the sector, it is relatively easy. For India, it is tough. Logically, it would require a joint venture or consortium of a major Indian company and an international company that brings in relevant experience.

I do believe that the proposals before the government will be looked at deeply. And since the government is putting 50% of the capex (and state governments another 20% or so) it is a decision that needs to be taken carefully.

The Vedanta-Foxconn proposal that is being talked about looks similar to the Maruti - Suzuki story. Vedanta is a big conglomerate, Foxconn is a big Taiwanese company. I have always believed that Taiwan is the ideal country partner for India to be a Product Nation. Foxconn already has considerable involvements in India and would need to bring in a technology partner too. Press report suggest about a perspective relationship with ST Micro. This sounds interesting. In a manner, Foxconn is reinventing itself in India in this JV by being vertically integrated from semiconductors to products.

I do hope more proposals like these come up by creating unique relationships of a big Indian company, a technology partner and a global brand big in electronics. A big electronics brand could also be a customer of the fab. We will need unique Indian solutions for our needs.

For now, it is near impossible to get say a TSMC or Samsung to set up fabs in India. We must go with other options. When those succeed, others will follow. However, to remain on pause while waiting for some ideal investor, is not advisable. The time is ripe for a fab in India.

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First Published Date: 10 Feb, 14:43 IST