India’s Semiconductor Ambitions
Asia News Agency
According to a government official, “SK Hynix has shown interest in our scheme, and is currently evaluating it to assess it from their business’s perspective. We believe they are in the final stages of submitting a proposal to set up a packaging plant, similar to that of Micron’s.”
Though SK Hynix is yet to officially submit its proposal, managing to convince the company in setting up a packaging plant in country will come as a big boost to India’s chip-making plans as it looks to build out the overall ecosystem in country, even as it waits for a marquee name to set up a fabrication plant.
The development follows Micron’s decision to set up a packaging facility in Gujarat at a total cost of $2.75 billion, of which 70 per cent will come in subsidies from the Central and state government, with the company expected to invest 825 million from its own pocket.
Samsung and SK Hynix dominate global sales of dynamic random-access memory chips, with data from research agency TrendForce showing they held market shares of 41 per cent and 29 per cent respectively, in the final quarter of 2022, followed by Micron at around 26 per cent.
Centre’s incentive scheme
The Centre’s incentive scheme for the semiconductor, worth a total outlay of $10 billion, offers capital subsidies to the tune of 50 per cent of the total project cost for setting up assembly and testing plants. While such plants are not the most sophisticated part of the ecosystem, they are an important component.
“With the bigger firms, it is understood that they will first test the Indian market through packaging plants since they are less capital intensive, and as result less of a risk. If things click, we expect some of them to also eventually start manufacturing chips here,” the official said.
For instance, Micron is said to start production at its Gujarat plant by the end of 2024, but the expectation is that they will also, at some stage, produce chips in India. “Our strategy is that packaging will create a global presence for us in the labour market and the supply chains, and we can use that capability to vertically integrate back into fabs. Certainly it is clearly our expectation that Micron, at some point, will also start making the wafers,” Rajeev Chandrasekhar, Minister of State for Electronics and IT, had said in an interview earlier.
Foxconn withdraws from JV with Vedanta
Earlier Monday, Foxconn said it was pulling out of a joint venture with Vedanta under which the two had planned to set up a chip and display fab for $19.5 billion.
The company in a statement said “In order to explore more diverse development opportunities, according to mutual agreement, Foxconn has determined it will not move forward on the joint venture with Vedanta”.
Foxconn not breaking away: Under the $19.5 billion joint venture, the two firms were set to jointly invest into a semiconductor fabrication plant in Gujarat, which would make 28-nanometre semiconductors. Foxconn was careful to state that it was not breaking away from the Indian semiconductor space entirely and that it still supported the Indian government’s domestic chip-making efforts. The firm said that it would “establish a diversity of local partnerships that meet the needs of stakeholders”. The companies had submitted an application under the modified production-linked incentive scheme, which would have covered 50% of the project’s cost.
Over the past few days, uncertainty loomed over the joint venture, amid reports that the firms were not able to fulfill the government’s push for more technology transfer and investment from European firm STMicroelectronics.
Vedanta statement: In a statement that did not refer to Foxconn, Vedanta said that it would forge ahead with other partners. “We will continue to grow our Semiconductor team, and we have the license for production-grade technology for 40nm [chips] from a prominent Integrated Device Manufacturer (IDM),” the company said. “India remains pivotal in repositioning global semiconductor supply chains.”
Last month, the government announced that a $2.7 billion semiconductor assembly, packaging and testing plant would be built in India by the U.S.-headquartered firm Micron. Applications from other semiconductor proposals under the production-linked incentive scheme remain under review.
Would not impact India’s semiconductor ambitions: MoS IT
Minister of State for Electronics and Information Technology Rajeev Chandrasekhar said on Twitter that Foxconn exiting the venture would not impact India’s semiconductor ambitions. “It’s not for the government to get into why or how two private companies choose to partner or choose not to, but in simple terms ... both companies can and will now pursue their strategies in India independently, and with appropriate technology partners in Semiconductors and Electronics,” Chandrasekhar said.
It is not just the Vedanta-Foxconn proposal — two other proposals for India’s $10 billion chip incentive scheme too remain uncertain. ISMC, backed by Abu Dhabi-based Next Orbit and Israel’s Tower Semiconductor, has asked the Centre not to consider its proposal owing to a pending merger between Intel and Tower Semiconductor. The merger was announced more than a year ago, but has not moved ahead.
Not good news for the India Semiconductor Mission
The Tribune however, states “the pullback is certainly not good news for the India Semiconductor Mission (ISM), which envisages building a vibrant semiconductor and display design ecosystem to enable India’s emergence as a global hub of electronics manufacturing and design. Even as the Union government has struck an optimistic note despite the reversal, the incompatibility that led to the Vedanta-Foxconn breakup needs to be scrutinised. Financial and technical issues that had a bearing on the outcome must be addressed so that a similar fiasco is averted in the future.
“The Centre had told Parliament in March that four schemes with a total outlay of Rs 76,000 crore had been introduced under the ISM. The success of this mission — as also of the ‘Make in India’ initiative — hinges on providing an enabling environment for domestic and foreign companies to work in tandem. India’s efforts to reduce imports from China and become a bigger player in the global electronics value chain can bear fruit if the government goes all out to encourage and incentivise transfer of technology as well as to promote collaborative research and development in the semiconductor industry.”
India’s semiconductor ambition: spate of proposals
India’s semiconductor ambitions are well known as the incentive scheme underlines. During Prime Minister Narendra Modi's recent state visit to the US, several significant announcements were made for the semiconductor sector in India. Micron Technology plans to invest $825 million in a new semiconductor assembly and test facility, aiming to create thousands of job opportunities. Lam Research aims to train 60,000 Indian engineers through its virtual fabrication platform, contributing to India's semiconductor education goals. Applied Materials intends to establish a Semiconductor Centre for Commercialisation and Innovation with a $400 million investment. Additionally, India and the US have signed an MoU to promote collaboration in the semiconductor supply chain and innovation, fostering commercial opportunities and skill development.
The potential of these proposals is huge.
The government's semiconductor programme initially received applications from consortiums like ISMC, Vedanta-Foxconn joint venture, and IGSS Ventures. However, the evaluation process faced delays due to complexities and changes in ownership. Ultimately, only the Vedanta-Foxconn joint venture remained in the field, as ISMC's partner was acquired by Intel, and IGSS Ventures' proposal did not meet the government's standards.
Unfortunately, as multiple reports suggest, the Vedanta-Foxconn joint venture faced challenges in finding a technology licensing partner for manufacturing 28-nanometer chips, resulting in the government incentives not materialising.
Need for a proactive policy
But there are challenges. Analysts emphasise the importance of developing a proactive policy for the semiconductors sector.
There is an urgent need to simplify the process and clarify policies around tax structure. Availability and support for land, electricity, and water should be communicated more effectively.
"Setting up a semiconductor fab facility is a very high CAPEX venture requiring significant upfront investment in infrastructure and machinery. The future attractiveness and subsistence of the industry shall be dependent on achieving sustainable operations by overcoming the challenges that lie ahead," says Chetan Barapatre, Manager of Growth Advisory at Aranca, a business management consultant firm.