Make In India needs Fab In India First

Make In India needs Fab In India First

In today’s world electronic parts plays a great role in almost all kinds of product. Be it consumer products like mobile phones, tablets, smartwatches or many other gadgets or industrial products like sensors, network swtiches, power controls, home automation or the upcoming IOT revolution. Ubiquitous usage of electronics in products is known fact.

Chip manufacturing is a very specialized field which is more or less absent from Indian manufacturing scene as of now. Chip manufacturing facilities are normally called “Fab” or “Foundries”. A typical fab takes more than two years to build from the scratch and investment of over billions of dollars ($3-$4 Billion investment is very common)

Major fabs/foundries are spread across USA, South Korea, China, Japan, Taiwan, Singapore and few other European countries. Most of these companies have made huge investment in building these world class chip manufacturing facilities. It can be seen from figure below and there isn’t one in India.

Fab/Foundries Around the World

Fab ,as it can be seen, is a huge investment with massive infrastructure requirement. Also every 18 months there is a recurring expenditure to upgrade the Fab due to change in node and technology. There are not many players in world today who are ready to invest such huge investments themselves. Most of the companies are using common facilities like TSMC or Global Foundries as they cannot bear such huge costs sustaining these facilities. Intel is one major semiconductor company which still maintain there own Fab.

I think with all this information it is very clear that making a fab facility and maintaining is not that simple one and need lot of commitment in terms of investment in infrastructure as well a very specialized man power (mostly fabs are automated and hence they don’t create lot of jobs).Currently India imports majority of semiconductor needs.

So what is the status as of now in India, as per my research of publicly available document Indian government is keen on developing Fab in India and there are possibly two Fabs being planned as of now. One in Noida, UP where Jaiprakash Associates in collaboration with Tower Semiconductors (operate the fab) and IBM (technology for CMOS manufacturing process ) but lately it has been in news that JP Associates has pulled out and this project has gone into jeopardy as government and other partners are looking for investors . Another one is being planned by HSMC (Hindustan Semiconductor Manufacturing Company) in Prantij, near Gandhinagar, Gujarat with ST Microelectronics (probably technology partner) and Silterra (operating the fab). This project has also got support from AMD and looks to be in better shape. There is some news also regarding Cricket Semiconductor that wants to start a pure play analog foundry in Indore, Madhya Pardesh.

All these three fabs have been in news but it is not very clear how and when these may become operational. Since this is very capital intensive and the chip industry as such has overcapacity globally so raising money has been of great concern.

As chip manufacturing is generally getting outsourced and many successful companies have moved to Fabless Manufacturing retaining the design of chips in house and generating IPs. ARM is one such company that has its processor core in 99% of mobile devices but does not manufacture their chips. So if this condition lingers on for a while the enthusiasm may go down and there may be push to get into design and develop IP and rather than getting in to hugely capital intensive chip manufacturing.

But as far as Make In India is concerned and if we really want to make a dent in the global market these Fabs would be in the core. Once Fabs are operational, manufacturing of printed circuit boards and assembly would also pick up and world class facilities would crop up in order to utilize the availability of local resources.

Hopefully Modi Government realizes this and if the groundwork is not completed and construction of kick started they may not see this operational by the end of their current tenure and Make In India will remain as a fancy name with companies just taking advantage of these by importing knocked off units and assembling it India which is a very low value add in the whole ecosystem of products.

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