The new semiconductor game plan

With Micron’s plant, Vedanta’s new partnership, and AMD and Applied Materials’ million-dollar ventures, India’s networking market could get a major boost

On 22 June, US memory chip major Micron became the first benefactor of India’s USD 10 billion semiconductor production-linked incentive (PLI) scheme. A month later, the Centre hosted Semicon India 2023, the largest semiconductor conference in India to date. Helmed by Prime Minister Narendra Modi, the event featured multiple notable stakeholders of the global semiconductor industry, including Young Liu, Chairman of Hon Hai Precision Industry Co (Foxconn), Mark Papermaster, CTO of AMD, and more.

The spree of activity in the semiconductor space saw India draw a spate of investments, with Micron’s USD 825 million (which adds up to USD 2.75 billion including government subsidy), and Applied Materials and AMD’s USD 400 million each leading the fray. This could have a far-reaching impact on India’s quest to build its semiconductor ecosystem and play a major strategic role in the long run.

ARE THE INVESTMENTS SIGNIFICANT?

For a start, yes. Industry experts say that the biggest advantage that India will draw from Semicon India and its peripheral announcements is in signalling firms in the semiconductor supply chain to consider setting up shop in India.

For instance, with Applied Materials and AMD setting up engineering and research operations in India, the two companies will contribute to generating chip design and research in the country. This, in turn, will see them supply these designs to startups and smaller chip design firms, who can licence these technologies to build custom chips for various purposes.

But, to do so, these startups will require companies to offer supply chain solutions, such as raw ingredients, specialised machinery, skilled workforce and more for these chips to be built and designed.

It is for this that groundwork is being laid down, and Semicon India was pivotal to that effect.

CAN INDIA MAKE ITS CHIPS?

Well, not quite. Or, not yet, to be specific. The reason for this is that chipmaking is an incredibly complex and multi-tiered procedure. Setting up chipmaking in any destination requires a constant supply of electricity and clean water, as well as multi-billion-dollar investments that contribute towards setting up sophisticated machinery for fabrication.

It is because of these constraints that chipmaking right now is concentrated across a select few geographies like Taiwan and China. India, in this regard, aims to break into this fold.

While India does not have a chipmaking market share at the moment, it designs nearly 20% of global chips, thanks to its skilled engineering workforce.

However, the starting step for this will come through Micron’s chip assembly, testing and packaging facility where chips will be tested for efficacy and ‘packaged’ into units that are deployable in products. Think of this as taking the core semiconductor chip, and packaging it into a system-on-chip (SoC) integrated circuit that is then used in products such as servers, routers, and more.

Having assembly facilities is crucial since this helps in setting up a market of chip supply to vendors in the country and globally as exports. Micron, for instance, produces NAND flash storage chips and memory chips that are used by enterprises in data centres, private and public networking equipment. From its India facility, the company can produce these chips that are then supplied to global networking majors, such as Nokia and Cisco, to be used in their products.

THE IMPORTANCE OF SEMICON INDIA

The Semicon India conference was a shot in the arm from the Centre, signalling its intent to create a market that attracts global chip suppliers. Conferences such as these also rope in startups that are looking to innovate with various chip designs that solve enterprise purposes, for instance, with custom chips that reduce latencies in optical fibres, and create faster chips for enterprise routers.

By announcing engineering and R&D initiatives, Semicon India also showcased the country’s position as a leading chip design hub. While India does not have a chipmaking market share at the moment it designs nearly 20% of global chips, thanks to its skilled engineering workforce. Companies are investing accordingly as well. AMD, for instance, announced that it will hire 3,000 more employees in its largest global engineering hub in Bengaluru which is being set up. This will bring its workforce in the country up to 9,500, a major centre for a fabless chipmaker like AMD.

Semicon India 2023 saw a spate of investments, including USD 825 million by Micron and USD 400 million each by Applied Materials and AMD.

Mark Papermaster, during his session at Semicon India on 28 July, added that Indian engineers already contribute to both enterprise and consumer-end chips across AMD’s entire portfolio. Going forward, the company will see contributions ramp up further from India.

THE GEOPOLITICAL ADVANTAGE

At the crux of setting up the entire semiconductor industry is clear geopolitical leverage. Taiwan, which presently makes more than half of the world’s chips, stands in a precarious position in terms of its proximity and relations with China. However, Taiwan makes its chips based on intellectual property on chips held by the USA. With relations between the US and China souring, Taiwan comes under a line of fire, which could put the global chip ecosystem on a tense edge, a factor noted in Chris Miller’s 2022 non-fiction novel, Chip War.

India, in this regard, can establish its supply chain of chips that reduces dependencies on geopolitical conflicts and relations. By becoming a supplier, India can add to its export economy, while ensuring that its networking and communications equipment sector has ample chips to be made. Given that such equipment is crucial in the core operations of any modern global major economy today, independence regarding manufacturing networking hardware is also critical at the cyber security forefront.

It is this advantage that India can eventually leverage. Doing so, however, is not an overnight task; it is a process that will take a decade to establish. With events such as Semicon India, the nation is taking foundational steps to cater to the upcoming decade.

Author- Vernika Awal

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