Semiconductor fab: the unfinished agenda
There is a growing market for semiconductors in India.
Semiconductor fab: the unfinished agenda
There is a growing market for semiconductors in India. Setting up a semiconductor fabrication plant is also strategically important as it will reduce our dependence on imports. In this light, government's 2022 Semiconductor Mission is laudable.
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 process of miniaturisation is accompanied by higher complexity and costs.
China, although started in this industry only 20 years ago, is today one of the major producers of chips. In this, it is aided by its market supremacy in rare earth, which are essential in chip-making. Recently, U.S., the traditional leader in this game, and the E.U. have sanctioned billions for semiconductor manufacturing. India now will have to contend with these countries.
Investment in semiconductor fab is one of the riskiest. It necessitates substantial productions volumes for economic viability. It has to reach levels that can meet global demand, instead of just focusing on domestic market. The advantage of semiconductors having a small freight to price ratio, and a zero custom duty regime under the IT Agreement, 1996, facilitates production in a single location and global sales.
Setting up a fab requires hundreds of chemicals and gases, people training and abundant clean water, as well as the art- of chip making. Among different kinds of chips, logic chips are strategically important and generate most profit, while analog chips have the least value.
India plans to build a new logic fab. Acquiring an existing fab, like China, will have multiple advantages: they are reasonably priced, have stabilised technology, a supply chain ecosystem and an established market. Much lower subsidies would be required and the funds saved could be used for R&D. Another strategy could be setting up ATMPs (Assembly, Testing, Packaging and Marketing).
• Semiconductors are– Any of a class of crystalline solids intermediate in electrical conductivity between a conductor and an insulator.
• Semiconductors are employed in the manufacture of various kinds of electronic devices, power devices and optical sensors.
• Semiconductor Mission– The Mission was launched in 2021 with a total financial outlay of Rs 76,000 crore under the aegis of the Ministry of Electronics and IT (MeitY).
• It aims to build a vibrant semiconductor and display design and innovation ecosystem to enable India’s emergence as a global hub for electronics manufacturing and design.