India playing catch-up game in semicon space

Semiconductor space in India witnessed several news flows in the last one month. While some bring good news for the industry, others may act as dampener to India’s quest towards self-reliance in semiconductor segment. Vedanta and Foxconn terminating their joint venture to make semiconductor in India is one such setback that doesn’t augur well for India. Hon Hai Technology Group (Foxconn) and Anil Agarwal-led Vedanta had announced their joint venture to manufacture chips and display panels in India in February 2022.

This joint venture was part of India’s Semiconductor Mission under which the country wants to make its own chips for making its strategically self-reliant. According to reports, differences had cropped up between two partners, leading to end of the joint venture. Union Minister for Electronics and IT, Ashwini Vaishnaw reacting to the development said this wouldn’t derail India’s semiconductor mission. “Both the companies Foxconn and Vedanta are committed to India’s semiconductor mission and Make in India programme,” Vaishnaw tweeted. However, sources in the know said that such development would delay the semiconductor mission of the country.

India is a net importer of semiconductor with minimal manufacturing base in the country. In recent years, the country imported around $10 billion worth chips in a year from other countries, out of which 70 per cent was sourced from China. India has launched its Semiconductor Mission in its bid to bridge the critical gap in chip manufacturing. Many countries including the US, Japan, South Korea, and several European nations have already been ramping up their existing capacity or building up new fabrication units. India is the latest to join the race in building up a strong chip manufacturing base in the country. The country will provide incentive in the form of investment to players coming up with plans to set up fabrication units.

Against this backdrop, US chip maker Micron recently received the government’s nod to set up a local chip unit in India. Micron Technology will invest $2.75 billion (around Rs 22,000 crore) in a chip assembly testing marking and packaging (ATMP) facility. Out of the $2.75 billion, Micron Technology will invest $825 million, and central and Gujarat governments investing the rest. This is a major boost to India’s self-reliance quest in the semiconductor space. Though India doesn’t have a strong chip manufacturing base, it is one of the leaders in the chip design space with many global firms operating out of the country. Firms such as Intel, AMD, Nvidia, Qualcomm, Texas Instruments and many more medium and small companies have their major research and development centres operating out of the country. Moreover, Indian engineering services companies have also sound domain expertise in chip design area.

Given the expertise in the chip design area, the country can emerge as a major player in the semiconductor segment if it comes up with its own fabrication units. The ongoing Russia-Ukraine war has showed the world that a huge country like India has to be self-reliant on critical sectors like defence, electronics and related areas. It’s high time that the country leverages its expertise in chip design area to reduce its dependence on other nations for semicons.