Semiconductors made in India: A journey from apathy to intent

India lost in the semiconductor race in the 1980s due to some wrong decisions, and today, India is behind 12 generations in the global semiconductor race. 

India got opportunities again and again but kept losing.

Semiconductors, better known as chips or processors, are the most important component in various machines today. From mobile phones to computers, games, cars, smart appliances, defence equipment and even satellites — all depend on semiconductors. Remember the long waiting time for car buyers in 2022? It was due to a shortage of semiconductors in India. That was when India did not manufacture chips.

India imports 100% of its semiconductor needs (approximately $15 billion in 2020), with 37% of the procurement coming from China. This demand is expected to increase to $32 billion in 2025 with the use of 5G.

Currently, Taiwan, South Korea and China are the major chip-manufacturing countries. It's a Rs 37.4 lakh crore industry today.

Chip-making involves 3 stages

1. Design

2. Fabrication (Chip manufacturing)

3. Testing, assembling etc

India has 1 and 3 but doesn't have 2: Fabrication. Some companies do steps 1 to 3, like Intel. They are called IDM: Integrated Device Manufacturers.

ARM, Nvidia, Qualcomm, and Apple do only design. They outsource fabrication (wafer-processing) and assembling. When dealing with chip manufacturing, step 2 will be covered.

Chip fabrication is done in big manufacturing plants called fabrication foundries (FAB). FABs are the main job providers.

How India missed the bus

It started in 1960.

1960: A company, Fairchild Semiconductor, considered building an FAB in India, but due to the Indian bureaucracy, they left India and went to Malaysia. 

1962: Government sector company Bharat Electronics Ltd (BEL) set up an FAB to manufacture silicon and germanium transistors. BEL couldn’t match the global quality and price standards and had to be shut down.

1987: IISc professor AR Vasudeva Murthy helped to establish Metkem Silicon Ltd which, in partnership with BEL, was supposed to produce semiconductors. That was the moment. This could have catalysed an electronics revolution in India.

But bad luck struck again. Without government support, especially the promised supply of subsidised electricity, Metkem couldn’t produce high-quality polysilicon chips, and they failed.

1984: The most tragic story was Semiconductor Complex Ltd. (SCL), Chandigarh, starting with a 5000 nm process and advancing to the 800 nm technology, which was the cutting edge only a year or two before.

At the time, China and Taiwan had not even entered the FAB space. The complex was reduced to ashes in an incident of fire in 1989.

2005: A prominent multinational semiconductor corporation commenced its operations in southern India, employing experienced professionals and establishing a class 100 cleanroom to inspect semiconductor impurities. However, the project encountered numerous obstacles, ultimately resulting in its failure. Equipment imported from the United States remained stranded at the port for several months. In addition to facing significant import duties, they incurred substantial demurrage fees. Despite multiple visits to South Block in an attempt to persuade the government, no progress was made in overcoming the bureaucratic challenges.

Eventually, the equipment departed from India without ever making contact with its territory. China seized this opportunity and embraced the project, providing the company with all the necessary resources. As a result, India not only forfeited a valuable semiconductor facility but also relinquished 4,000 jobs to China. Furthermore, another multinational semiconductor firm that was in the process of establishing its fabrication plant in India decided to withdraw after observing the troubling experience of this multinational corporation.

2006: The Manmohan Singh government reacted to the loss above by announcing the first Indian semiconductor policy, but it always remained on paper. For 6 years, there was no follow-up action.

2011: The then government invited an "expression of interest" to foreign companies to invest in India.

Another chip-making MNC was in the process of setting up its FAB in India. They withdrew after seeing the horrific experience of the MNC that had just left the country.

In 2013, the World Semiconductor Council was forced to write a letter to the Indian government for cooperation in the promotion of the semiconductor industry in India.

Chip plant requires full government support, a huge investment and a humongous electricity supply. But until 2014, the Indian administration had no vision or the political will to support it. The infrastructure was absent and there was no market to promise investors.

After 2014, the Narendra Modi government built massive infrastructure in India. India became a major mobile phone manufacturer, self-sufficient in energy. The Indian economy is fairly mature now.

The US has offered $25 billion to TSMC  (Taiwan Semiconductor Manufacturing Company) to set up an FAB in Arizona and proposed $52 billion in funding through the CHIPS Act to subsidise companies to make their chips in the US.

Under the leadership of Prime Minister Modi, a comprehensive semiconductor program was formulated to provide a uniform incentive of 50% to support the design, manufacturing and packaging of chips in India. The programme also supports R&D, talent and capacity building.

Micron, which is IDM in chip making, is setting up an assembly, testing, marking and packaging (ATMP) facility in India. The government approved Micron’s proposal to invest ₹22,516 crores with fiscal support of 50% of actual capital. This investment will create 20,000 direct and indirect job opportunities in 5 years, besides creating a massive ecosystem. It will give India skilled manpower.

The presence of a global semiconductor company like Micron will also give confidence to other global semiconductor companies to come to India.

Foxconn is another company that has announced that they are preparing to apply for Silicon FAB and Display FAB. Similarly, Vedanta will establish an FAB with new partners; earlier, they were supposed to work in a joint venture with Foxconn, but now both will work separately.

India's Semiconductor Conferences

2022, Bengaluru: Catalysing India’s Semiconductor Ecosystem

2023, New Delhi: Supply Chain Ecosystem

2023, Gandhinagar: Catalyzing India’s Semiconductor Ecosystem

2024, New Delhi: Positioning India as a Trusted Partner in Global Semiconductor Supply Chain

2024 Greater Noida - Positioning India as a Trusted Partner in the Global Semiconductor Supply Chain

Recently, Prime Minister Modi visited Singapore and signed an MoU on semiconductor cooperation. It has set an ambitious goal to establish at least 10 FABs in the next 10 years.

Semiconductor investments in India so far

1. Tata in Gujarat: ₹91526 crore 

2. Tata in Assam: ₹27120 crore 

3. Micron in Gujarat: ₹22516 crore 

4. CG Power in Gujarat: ₹7584 crore 

5. Kaynes in Gujarat: ₹3307 crore 

6. Tower & Adani in Maharashtra: ₹83974 crore

RRP in Maharashtra: ₹24000 crore

The way the Modi government has done homework in supporting the semiconductor industry, one can say India is ready to catch the bus that it missed in 1987. Not only has India joined the race, but India is now running like a cheetah.