ATMP companies generate more employment and require less investment than full-fledged fabs, an expert said
India may have to wait a while before bleeding edge chips from companies such as Intel, TSMC, and Samsung are manufactured here. For now, the country’s journey in the semiconductor sector is more likely to start with assembly, testing, marking, and packaging (ATMP) and specialty fabs.
India’s large mobile phone market has often been cited as the harbinger of a thriving semiconductor manufacturing base, but the lack of infrastructure and the absence of legacy in the business is keeping top players in the business away, according to industry experts.
“We recommended (to the government) that we need to really focus on the 28nm technology node," said Rajeev Khushu, chairman of the India Electronics and Semiconductor Association (IESA). The “right first step" for the country would be to go with semiconductor ATMP companies, which generate more employment and require less investment than full-fledged fabs, he said.
IESA had also urged the government to start with specialty fabs, which play a key role in sectors such as power, electric vehicles, and medical devices, Khushu said. “The advantage with those specialty fabs is that it’s still a new thing and thus you are not far behind and can catch up," he said. “ATMPs will take off first, followed by specialty fabs, and then the high-tech fabs," he said.
The government may have received close to 20 expressions of interest (EoIs) for this technology, according to a top executive from a semiconductor firm operating in India.
The government has received EoIs from global players and would come up with “concrete schemes" for semiconductor manufacturing in India in six months, Ajay Prakash Sawhney, secretary, ministry of electronics and information technology, had said at an industry event in May.
The Tata group and the Vedanta group have reportedly been in talks to enter the space, though Vedanta may set up a display fabrication plant instead of a semiconductor plant. “Big names" in India have started recruiting talent for semiconductor ATMP, while others have started reaching out to global players to explore joint ventures, the executive quoted above said.
However, the biggest semiconductor firms in the world are not considering India at all, experts said. “India has been trying to bring chip manufacturers into the country for a number of years, to reduce reliance on imports and to have trusted partners for critical applications. But it always has been and still continues to be difficult to attract multinational companies to set up chip fabrication units in India," said Gaurav Gupta, Research Vice President at Gartner.
The capital investment for this is very high and companies want to ensure they have the right support, Gupta said. “The government could support (such initiatives) by providing funds and subsidies, but infrastructure is a big problem. You need 24-hour supply of power, water supply, and the surrounding ecosystem of equipment players and materials," he said. “Companies are very hesitant to go ahead with that sort of a big investment in India," he said.
Bleeding edge chips, of the kind that Intel, TSMC, Samsung, and others make, require investments of $15-20 billion, according to Gupta. Even other chips could require investments of $5-7 billion. “Though the government could support it to some extent, the rest of the infrastructure is very hard to set up. You also need very consistent policies," he said.
The second wave of covid infections has also deterred multinational corporations from making big investments, as it has “exposed the country’s health infrastructure", he said.
Companies such as TSMC and Samsung have progressed to 3nm technology nodes, leaving 28nm nodes far behind. In semiconductor manufacturing, the technology node refers to the chip’s design rules and manufacturing process and is directly related to the amount of power and efficiency a chip can deliver.
“They are trying to break down the components, so that they can be assembled here," said Parv Sharma, research analyst at Counterpoint Research. “A lot of investment needs to be done in the space. It’s not a 5-10-year time span, it’s a 15–20-year period," he said. The country can look at smaller components, such as battery cell packaging and grow slowly from there, Sharma said.
IESA is also in the process of submitting a report to the government recommending that India should try to become a raw material supplier to the global semiconductor industry, Khushu said. “Semiconductors are no longer just nice to have. It has become more strategic. There are many countries who are trying to control the supply chain. They want to be self-sufficient at least in some areas, such as defence," he said.
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