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What's the article about?
- It talks about the developing semiconductor fabrication industry in India.
Relevance:
- GS3: Effects of Liberalization on the Economy, Changes in Industrial Policy and their Effects on Industrial Growth;
- Essay;
- Prelims
Context:
- Semiconductors are the backbone of the present digital era. Thus, developing a versatile semiconductor manufacturing industry is the need of the hour.
- India, too, realised this point and started to build semiconductor fabrication plants there. But India’s efforts could not bring the desired success.
- In this article, the writer analyses these efforts and offers some suggestions.
Analysis:
Importance of semiconductor fabrication industry:
- Semiconductor fabrication represents the ultimate frontier of human tech advancement.
- The frontier has been advancing adhering to Moore’s law that the number of transistors in a unit area doubles every 18 months.
- But the progress of miniaturisation is accompanied by higher complexity and costs. As a result, the industry has seen a decline in the number of participants.
Reasons for India’s failure in successfully setting up semiconductor fabrication industries:
- The first serious attempt was made in 2007 in the form of a Special Incentive Package (SIP), but it yielded no response. The second attempt in the form of Modified SIP in 2012 fared better.
- Greenfield vs Assembly, Testing, Packaging and Marking (ATMP):
- India’s strategy has been to set up a new logic fab from scratch. But China started with ATMPs and became one of the leading global players.
- Developing an ecosystem for chip manufacturing in a greenfield location is a major challenge.
- Hundreds of chemicals and gases are required for chip fabrication, people need to be trained, and abundant clean water be made available.
- Technological challenges:
- There are other issues, such as whether to set up a logic/processor, memory or analog fab.
- Electronic equipment and its functionalities are characterised by their logic chips, which are therefore strategically important and generate the highest profit.
- The most advanced set of technologies is needed to manufacture them.
- Other challenges:
- Investment in a semiconductor fab is one of the riskiest. Billions of dollars need to be recovered before the technology becomes obsolete.
- This necessitates substantial production volumes for economic viability, often reaching levels that are adequate to meet global demand.
- It is therefore difficult to conceive of a fab which is based on the domestic market only.
Lessons from China:
- India’s strategy has been to set up a new logic fab. China, which acquired loss-making fabs and then set up its own logic fab, provides lessons.
- Acquiring existing fabs has many advantages: they are reasonably priced, have stabilised technology, a supply chain ecosystem, an established product line, and market.
- Another strategy could be setting up ATMPs.
- Tessolve, now acquired by Tatas, had set up an ATMP in 2013-14. This ATMP is successfully packaging chips upto 7 nm feature size.
- China has over 100 ATMPs.
Way Forward:
- Lessons from China needed to be incorporated in India’s strategy to develop the semiconductor fabrication industry in India.
