Part 2 - Semiconductors - India’s Lost Opportunities and Initiatives by GB Reddy Sir

Part 2 - Semiconductors - India’s Lost Opportunities and Initiatives

India’s semiconductor initiative dates back to 1976 when the Semi-Conductor Laboratory was set up at Mohali, Punjab, which suffered a set-back due to fire destroying its facilities. For over four decades, successive governments failed to reactivate the initiative. As a result, India lags behind in the field by at least 10-15 years.

After a four decade delay in 2019, the NDA government adopted the National Policy on Electronics to position India as a global hub for Electronics System Design and Manufacturing and creation of a vibrant semiconductor chip design ecosystem. In 2021, Rs.76,000 crore was allocated to provide incentive support to companies engaged in silicon semiconductor fabs, display fabs, compound semiconductors/sensors fabs, and packaging and design. In 2022, the India Semiconductor Mission (ISM) was launched.

The Semicon India futureDESIGN - Design Linked Incentive (DLI) Scheme to offset the disabilities in the domestic industry involved in semiconductor design to not only move up in the value- chain but also strengthen the chip design ecosystem. The CDAC is the “Nodal Agency” for implementation of the DLI Scheme. The first road show was organized at Karnavati University, Gandhinagar on 18th October 2022, 2nd road show at IISc Bangalore on 24th February 2023 and 3rd futureDESIGN Roadshow at IIT Delhi on May 12, 2023.

The Race - Initiatives

A brief review of initiatives till date provides a perspective into where India stands in the semiconductor technology race. A series of approvals accorded and partnerships forged till date include: Taiwan’s PSCM, U.S. Micron and FORGE, Japan’s Renesas, Thailand's Stars Microelectronics, Kaynes Semicon, Israel’s Tower and others. On 29 Feb 2024, the Union Cabinet approved 5 chip making units with investment of Rs.1.6-lakh crore. Step wise developments include:

Ø Step 1: Foundry Equipment & Materials. No breakthroughs in EUV lithography machines.

Ø Step 2: Chip Design – L&T has set up a fabless chip design company, L & T Semiconductor Technologies. Location – Bengaluru, Chennai, U.S. Europe and Japan. Status: In the process of creating in-house IP, acquiring chip start ups on boarding clients.

Ø Step 3: Pre-Silicon Validation - HCL Tech, Tech Mahindra, TCS, Infosys, Wipro and Tessolve have been involved in providing re-silicon validation services.

Ø Step 4 –Wafer Fabrication:

· Tata Electronics to set up a fab (manufacturing unit) in tie up with Taiwan PSCM to produce high-performance computer chips (28nm x 55,000 WPM) for electric vehicles, telecom defence, automotive, consumer electronics, display and power electronics.. Rs. 91,000 crore. Dholera in Gujarat.

· Bharat Semi, and 3rdiTech with U.S. Space Force named “SHAKTI” at Jewar (UP) with net investment of … manufacturing advanced semiconductors, including infrared, gallium nitride, and silicon carbide types essential for a range of applications, particularly in national security, self-driving vehicles, and green energy initiatives.

· Adani Group is planning to set up an analog fab in partnership with Israel Tower Semiconductor. Rs.83,947 crore. Panvel. Maharashtra.

· Compound semiconductor unit in UP. Rs.25,940 crore

· ZOHO applied to set up a compound semiconductor fab. Location ???. $600-700million.

Ø Step 5 – Water Level Micro Bumping – No player as yet.

Ø Step 6 – Water Thinning, Dicing, Packing, Assembly and Testing (OSAT) :

· Tata Group with Taiwan’s PSCM at Morigaon, Assam, at an investment of Rs.27,000 crore. 48 million per day.

· CG Power at Sanand with Taiwan’s PSCM at a cost of Rs 7,600 crore in partnership with Japan’s Renesas and Thailand's Stars Microelectronics. 15 million per day.

· Micron Technology at Sanand at an investment of $2.75 billion.

· Kaynes Semicon at Sanand with Rs.3307 crore. 63 lakh chips per day.

· HCL (60% stake) and Foxconn (40%) JV in UP. $.100 to 150 million.

Ø Step 7: SMT (Surface Mount Technology) to mount on PCB boards. No player as yet

Ø Step 8; Component Level Assembly such as smartphone – FOXCONN and PEGATRON.

As per plans in the next five years, there should be at least seven or more units:

· Israel chip maker Tower with Adani at Taloja MDIC at Panvel, Maharashtra at Rs. 83,947 crore – 40,000 wafers in Phase 1; 80,000 wafers in Phase 2.

· RRP Electronics has tied up with a consortium of European companies to set up an OSAT facility in Maharashtra. Rs. 5,000 crore over the next five years. In the second phase, it will invest another Rs. 5,000 crore.

· Simmtech, a South Korean company, is building a semiconductor chip component plant in Sanand.

· Suchi Semicon at Sanand will commence OSAT production in November 2024.

· FOXCONN Technology Gp with HCL applied for OSAT at Yeida location in UP. Foxconn reportedly invested more than $1.4 billion in India as of August 2024. The business has grown to $10 billion.

· Tarq Semiconductors (Hiranandani Group) applied for an ATMP facility and a compound semiconductor unit.

· Telangana’s Advanced System in Packaging Technologies (ASPT) and South Korea's APACT Ltd have entered into a joint venture for setting up an OSAT facility in the state with an investment of `890 crore. Application awaiting approval.

Furthermore, the government is planning for a Graphics Processing Unit (GPU) cluster as part of the Artificial Intelligence (AI) program to support the growth of startups focused on training AI models within India. An MoU had been reached between India and the EU on semiconductors. Recently 22 Memorandums of Understanding (MoUs) were announced between the Centre for Development of Advanced Computing (C-DAC), and industry partners for the implementation of the FutureLABS. The FutureLABS, with C-DAC as the nodal agency, will concentrate on sectors like Automotive, Mobility, Compute, Communication, Strategic Electronics, and Industrial IoT. It will facilitate collaboration between startups, MNCs, R&D institutions, and academia to jointly develop systems, standards, and IP cores. Also, IBM and the C-DAC entered into a on March 5 2024, to collaborate on the creation of a joint working group to accelerate High Performance Computing (HPC) in India. As part of this MoU, both parties will promote IBM’s Power processor for HPC applications across Indian start-ups, MSMEs, research organizations, and academic institutions.

In retrospect, the semiconductor industry in India is at a take off stage only. The key barrier is lack of semiconductor manufacturing capabilities (i.e., foundries). India is reportedly developing Extreme Ultraviolet Lithography (EUV) lithography machines. The likely date of availability is not known. And, for advanced deep ultraviolet (DUV) lithography systems, India depends on Dutch Company ASML. As of now, Tata Electronics Ltd has started exporting limited quantities of semiconductor chips packaged at a pilot line at its Bengaluru-based R & D centre to partners in Japan, the US and Europe. The company is in near final stages for a successful tape-out of chips in 28, 40, 55, 65 nm and other higher nodes. Some of these products will be sent to select customers to obtain feedback for testing and improvement.

India-US initiative on Critical and Emerging Technology (iCET)

In May 2022, iCET was launched by Joe Biden and Modi. In June 2022, the Mineral Security Partnership (MSP) was announced to secure critical minerals supply chains. Silicon is abundantly available. Lithium is a key resource for the growing electric vehicle (EV) industry. But, India imports all of its lithium. Earlier this year, it announced a $24 million lithium exploration project for five blocks in Argentina and a rare earths deposit in Africa. In June 2023, India joined the MSP — a US-led alliance of 14 developed countries and the EU.

Semiconductor R&D and Chip Design Initiatives

Integrated circuit (IC) design is undoubtedly India’s greatest strength: approximately 20% (about 125,000 engineers) of the world’s semiconductor designers. But, most of the design work performed in India services foreign multinationals. About 3,000 individual ICs are designed in India each year. India accounts for 15% of global production of very large-scale integration (VLSI)—which refers to the process of creating an IC by combining millions or billions of MOS (metal-oxide) transistors onto a single chip. In reality, our semiconductor designers are great at receiving a specification and designing it, but historically they haven’t been great at conceptualizing that spec themselves. India should, therefore, focus on building its own chip design companies rather than relying on multinationals to establish manufacturing bases.

Almost every one of the world’s top-25 semiconductor design companies—including Intel, Texas Instruments, NVIDIA, and Qualcomm—have design and R&D centers in India. Much of this presence is centered in the south Indian city of Bengaluru) in the state of Karnataka:

· Texas Instruments (TI) was the first global technology company to set up an R&D center in India, in Bangalore in 1985: employs over 2,500 (mainly engineers) and working closely with over 1,000 engineering colleges across the country.

· Synopsys provides solutions across markets including high-performance computing, automotive, security, and manufacturing solutions by employing over 5,500 across the country. The company recently signed MOUs with IIT Bombay and IISc Bangalore on research partnerships, educational software and curriculums, and faculty development programs to support workforce development. Synopsys is working with more than over 400 universities for talent creation in various domains.

· AMD, U.S. chip design company, has plans to invest up to US$400 million to establish its largest design facility in Bengaluru - Technostar research and development campus - expanding its office presence to 10 locations in the country as well as the addition of approximately 3,000 new engineers, bringing total workforce to nearly 10,000 by 2028.

· Samsung Semiconductor India Research (SSIR) inaugurated its R&D facility at Bengaluru (Feb 2024).

· US semiconductor major Qualcomm’s Design Centre is in Chennai.

· Beyond IC design, India is also a hub of semiconductor manufacturing equipment design.

· In 2000, Lam Research Corporation—a U.S. manufacturer of equipment for thin film deposition, plasma etch, photoresist strip, and wafer cleaning processes—launched Lam Research India. The unit now employs over 2,000 Indian workers and focuses on software development and support, hardware engineering, global operations management, and analytics. In June 2023, Lam announced plans to train up to 60,000 Indian engineers through its Semiverse Solutions virtual fabrication platform to accelerate India’s semiconductor education and workforce development goals. Lam signed an MoU with the Centre for Nano Science and Engineering (CeNSE) at the Indian Institute of Science (IISc) in Bengaluru. Lam also proposed a $25 million investment to set up a new lab in the state of Karnataka.

· In June 2023, Applied Materials announced plans to invest $400 million over four years to launch a new engineering center, which will support more than $2 billion of planned investments and create over 500 new advanced engineering jobs.

In June 2024, India and the U.S. launched a new strategic semiconductors partnership - between US firm General Atomics and 3rdiTech, a government of India-recognised startup - to co-develop semiconductor design and manufacturing process for precision guided ammunition. Apart from this, both countries also agreed to launch a partnership between the US Space Force and Indian startups such as 114ai and 3rdiTech. The partnership would include advancing space situational awareness, infra-red sensor semiconductor manufacturing and data fusion technologies. The fact-sheet also pointed out that the two NSAs took note of the recent finalisation of the India-US Open RAN Acceleration Roadmap and ongoing collaboration by the 5G and 6G research and development (R&D) Task Force.

R&D and chip design require substantial funding input. For example, a standard semiconductor fab requires roughly $5billion of investment, while an advanced fab can cost over $20billion. Semiconductor companies spend more than 18% of their revenue on R&D. Japan is investing roughly $25 billion by way of subsidies to develop the chip ecosystem; it provides up to 50% of the investment costs. Similarly, the EU, Korea, China, Singapore, and Taiwan, are giving tax credits and grants. In the Budget for 2024-25, Rs.One lakh crore allocated as ‘Research and Innovation Fund’ by Government of India. This fund is a 50-year interest-free grant aimed at catalyzing R & D through an industry-academia partnership model.

Chip Designing - Fabless Strategy

Of significance among the “Chip Designing” initiatives worth mentioning is the “Fabless Strategy” by L&T Semiconductor Technologies, which is not only focused on building and launching multiple chip designs, with 6 already under development and 15 parallel product designs by the year end, but has plans to build a semiconductor manufacturing unit after reaching a revenue range of USD 50 million to USD 1 billion for different chip technologies. By such a strategy, L&T controls its intellectual property and reduces India’s dependency on foreign chip manufacturers. By the end of 2024, L&T expects to have completed its team, and consequently, will be ready to manage the entire pipeline of semiconductor projects. L&T Semiconductor aims to begin production of its semiconductor design chips within two years – by 2026.

Former CEO of Tata Electronics OSAT, P Raja Manickam who has launched iVP Semi, fables start up unit focused on localising design and chip production, highlights that “We have good chip design companies. What we need are product companies that can put this together and build products, which is what iVP will do.” iVP Semi is setting up chip design centers in Chennai and Bengaluru and also licensing product IP from Taiwan, Japan, and the US. The company is also working with the Tamil Nadu government to set up a 20,000 sq ft production test facility in Chennai, with a planned second facility at another location in South India. iVP Semi will offer employment opportunities to around 250-300 people in the next 3 years.

IT giant Accenture has acquired Excelmax Technologies, a Bengaluru-based semiconductor design services provider, adding approximately 450 professionals specialising in areas such as emulation, automotive, physical design, analog, logic design and verification. Excelmax Technologieprovides custom silicon solutions used in consumer devices, data centres, AI and computational platforms that enable edge AI deployments to the clients in the automotive, telecommunications and high-tech industries.

In 2023, India fielded an estimated 21 start-ups. The number is expected to grow to 50 by the end of 2024. Of all of them, Mindgrove Technologies, a Chennai-based systems-on-a-chip (SoC) developer specializes in designing 28 nm chips for connected devices such as automobiles, medical devices, wearables, smart electricity and water meters, and home appliances. Next, Saankhya Labs established in 2006, was India’s first fabless semiconductor solutions company and developer of the world’s first production software-defined radios chipsets and develops for broadband, satellite, and broadcast applications including 5G, Direct To Mobile (D2M) broadcast, rural broadband connectivity, and satellite communication modems for Internet of Things (IoT) applications. Also, Signalchip is a fabless design company developing innovative chips to enable high-speed wireless communication standards such as 4G-LTE/3G-WCDMA and 5G-NR.

Compound Semiconductors – Emerging Field

The emerging field of “Compound Semiconductors”, which are semiconductors made from two or more elements from the groups of the periodic table represent an emerging area of semiconductor design innovation. Compound semiconductors such as silicon carbide (SiC) or gallium nitride (GaN) are particularly well suited for applications requiring both high power and frequency, as they limit energy loss. Increased sustainability and electrification is spurring the adoption of SiC and GaN power devices. The market for GaN semiconductors reached $2.17 billion in 2022 and is expected to grow at 25.4 percent from 2023 to 2030. For instance, the Indian start-up Agnit Technologies is working on developing GaN semiconductors, particularly relevant for 5G amplifiers. Following an agreement between India and the US, the two nations will work to set up a semiconductor fabrication plant that will make infrared, gallium nitride and silicon-carbide semiconductors. Support from the India Semiconductor Mission as well as a “strategic technology partnership between Bharat Semi, 3rdiTech, and the US Space Force,” will facilitate the setting up of the facility.

Need for Strategy Review

Some insider experts opine that the present strategy focusing on manufacturing – bottoms up - in partnerships with foreign companies needs a review. They believe that a “top-down approach” could be more effective. What India needs is control over product companies, not just manufacturing. The focus should be on building homegrown product and design companies. The government, through policy support, can help set up companies that design chips for industries like automotive, smartphones, and AI. As these companies grow, they can eventually set up their own manufacturing in India. Building India's own semiconductor industry doesn't require massive investments; but relatively modest investments. It just requires government investment and policy support. Of the $10 billion set aside for semiconductors, just 20%—around $2 billion—could easily fund 5-10 design companies. In contrast, design will generate far more wealth and employment.

To sum up, India lags behind others by at least 10 to 15 years. To catch up with the rest and to emerge as the “Global Hub” by 2030 in the face of competition from foreign company’s is not easy. Significant government incentives and tax exemptions are vital to build a self reliant ecosystem. Of utmost necessity is high-tech equipment to include foundry and testing. India needs to re-evaluate the present initiatives and examine the benefits of “Top Down” strategy. Startups and even MSMEs need to be given opportunity. Of vital importance is the indigenous foundry and testing equipment besides assured lithium material supplies.