Opinion
Our chip-making game shows welcome realism
Summary
A focus on niche semiconductors is pragmatic in the face of a crowded worldwide race for silicon fabs. Better odds of success are not a guarantee of it, but India is determined to tryFor a latecomer in any industry, it is never easy to displace the incumbents and establish a lead. Unless a major cost edge can be wielded, the best odds of success are assured by betting on some sort of inflexion point (technological perhaps), or going for an emerging segment that remains largely unexploited. Comments made by India’s electronics and infotech minister Ashwini Vaishnaw on the country’s semiconductor ambitions need to be seen in this backdrop. He recently said that India will focus on niche categories such as the manufacture of chips using gallium nitride and silicon carbide. Although silicon chips are the most commonly used, manufacturers have begun to tout ‘compound semiconductors’ as the next big thing. Said to be more energy efficient, such chips boast of superior thermal conductivity and enable faster speeds, among other advantages. Their high cost has restricted their use so far to specialized telecom, power equipment and automobiles. The segment’s sales potential is considered vast by market analysts, although its trajectory will depend on various factors like raw material availability and how these chips ascend the performance curve.
By way of strategy, a niche focus makes sense. Rather than trying to challenge chip majors or grab a slice of the global market dominated by Taiwan Semiconductor Manufacturing Company (TSMC), for example, this game-plan looks realistic. In new fields where all contenders are in nascent stages of competence, our local chip-makers would have a better chance of achieving global competitiveness. The silicon race is already crowded, in contrast, with large sums committed to fabrication units in the EU, US and China, much of it aimed at reducing import dependence on Taiwan. Note that this is a highly demanding field on the whole, one that takes a lot more than capital mobilization. As announced by Prime Minister Narendra Modi, India is ready to put in half the investment to get semiconductors made locally by private chip-makers. While Vaishnaw was speaking soon after Micron’s project got underway in Gujarat, where the US-based chip-maker has begun building a facility for chip assembly, testing, marking and packaging, the precise patterns of demand this plant aims to satisfy remain unclear. The hope, of course, is that entire value chains will be set up in India, including cutting-edge labs for research and development.
A focused approach improves the odds of India emerging as a hub for semiconductors. While this is welcome, attaining world leadership even in niche zones may still prove hard going. It is a field caught in geopolitics. In response to tech denial by the US, China, which produces an estimated 80% of the world’s gallium, restricted exports of this metal earlier this year. As traces of it are found in bauxite and zinc ores, Chinese hoarding need not cripple efforts elsewhere. In fact, a prospective player like the Vedanta Group, with its aluminium and zinc operations, may even spot supply synergies in going for gallium compound chips. After that would come the challenge of chip-making itself. Here again, there’s no saying what headway locally made niche chips will make. In the government’s view, as reflected in the huge sums it’s willing to put in, it is vital to try. The Tata Group looks set to venture forth too. Over time, investments by diverse business groups could deliver success. What’s sure, however, is that public funds ploughed in will invite an especially close track kept of all progress made.
