Will India ever Manufacture Chips?

India is growing digitally and with the occurrence of COVID-19 epidemic, it is more important than ever for India to maintain its pace towards digital growth. So the basic thing required for this digital growth is of course the gadgets but what India needs to focus on, for more sustainable future, is developing what’s inside these gadgets, the semiconductor chips.

Undoubtedly the countries which are able to manufacture these chips are contributing more towards their GDP whether you talk about US, China or Japan. However, you may be pleased to know, India is a high performer in terms of chip design. At present 3000 chips are designed every year in India and almost 30,000 engineers are involved in this process involving design and verification. The Indian semiconductor industry, growing at 10% annually, is set to be worth $ 33 billion by 2025, according to the Indian Electronics & Semiconductor Association. However what lies as a problem is when it comes to the chip manufacturing, India is much behind, probably not even in the race yet. There is a constant need to set up a Chip Fabrication ecosystem in India.

Chipmaker Qualcomm invests $97 million
in Jio Platforms

The recent deals of Jio with Intel and Qualcomm for developing 5G systems in India has created a huge ray of hope for the semiconductor chip industry in India. But again I believe this partnership would mainly compromise of chip designs from India and manufacturing of these chips would take place outside India in Qualcomm and Intel fabrication factories.

So what are we doing? Has India never tried or took steps to manufacture their own chips? Well the answer is of course we did try but eventually failed. The biggest example can be given of HSMC. Hindustan Semiconductor Manufacturing Corporation (HSMC), a consortium of companies that included ST Microelectronics and Silterra Malaysia was aiming to kick-start a chip manufacturing plant in Gujarat, a project worth ₹30,000cr. The government in 2019 cancelled the letter of intent granted to HSMC and now there is no such proposal from any private company to initiate such a project. The reason was that the consortium could not submit the required documents asked by the government for setting up of Semiconductor Wafer Fabrication (FAB) unit. HSMC had been backed by AMD and had also received ₹700cr in funding from Mumbai-based Next Orbit Ventures. 

Now keeping companies apart, this is the time for start-ups right? Did the start-ups tried towards this field? The answer is again the same, of course they did. Mymo Wireless, a Bengaluru-based company incubated out from the Indian Institute of Science, Bangalore, started its efforts to become a competitor to Qualcomm. The company initially gained expertise in chip making, focusing on building IP, licensing its technology and building chips for other companies. It was a strategic decision that helped it earn a steady 30% profit. However, it soon realised that chip-making was an expensive proposition. When the company tried raising $20 million a year ago, no venture capitalist was willing to invest in the effort. The simple reason is Indians lack the risk-taking ability to invest this much money for a longer time period. Mymo Wireless still has the same vision and is working to develop 5G mobile chipset, but again chip manufacturing in India at larger scales didn’t go according to the plan. Another interesting factor to put is India however is a large importer of semiconductor chips. In fact, experts say that India is spending more money on import of semiconductor than on oil.

What lies as the major problem is obviously money capital. Setting up a chip manufacturing unit requires a huge investment and continuous uninterrupted power supply. Apart from this, another factor is the skilled workforce. Definitely there is no shortage of talent in India but more focus at this area is still required. Also the availability of raw materials requires massive payments in turn. So lack of correct infrastructure or ecosystem is the major cause of our failure. Presently at the moment no one is willing to take such huge risks. Therefore the biggest hurdle for India in its chip manufacturing vision is developing the right ecosystem.  Hence for India to reduce its dependency on chip imports and to establish their own chip fabrication industry the government needs to make sure there is proper infrastructure and investments are  made so that scalable manufacturing units can be created however  the companies must also come up with effective plans for the government’s approval.

As always your valuable comments and suggestions are welcome.

The views expressed above are personal and belong to the author.

This post has been written by Satyam Basu.