Mint Explainer: New chip announcements represent small steps

Is India going to make semiconductors now?

no way. Micron announced plans for an assembly, test and packaging facility, while Applied Materials plans an engineering center that will develop components for chip manufacturing. Meanwhile, Lam Research unveiled a virtual precision-engineering training platform for semiconductor engineers. These are all part of the complex process of making semiconductors, but the first comes after making chips, also known as fabs, in Micron fabrication plants. Fabs are extremely expensive as they require specialized high-tech equipment in addition to uninterrupted power and water.

How will the new projects help India achieve its chip target?

Assembly, testing and packaging facilities are a good first step. Setting up such a facility can help build a supply chain for advanced components and attract many smaller vendors. Once a more robust semiconductor assembly and packaging network is established, it could attract chip fabs to India. The new projects will also help India set up its own semiconductor industry and reduce dependence on other countries for chips. In the long run, this could boost many sectors beyond electronics such as automobiles, appliances and machinery.

What does this mean for India’s only state-owned FAB?

Mohali’s Semiconductor Laboratory (SCL) is expected to be ‘modernised’. Under the $10 billion semiconductor production-linked incentive (PLI) scheme, the central government will invite proposals from corporate entities to take over and modernize the fab, which has focused largely on defense and space requirements. The new test and component development facilities could improve SCL’s chances of attracting investment from international chip makers, largely from a strategic perspective.

How will chip facilities help India geopolitically?

Countries that have their own semiconductor manufacturing and assembly facilities can gain significant strategic advantage and reduce their dependence on the risk-averse Taiwan Semiconductor Manufacturing Company, which alone accounts for 55% of the global chip fab market. Geopolitical tensions involving China make reliance on Taiwan even more risky. New chip facilities in India could help attract smaller companies that serve larger companies like Micron, which in turn could help create a circular economy in the region. However, no country can be completely independent here – despite Taiwan’s fab dominance, the US still controls the vast majority of intellectual property for chip design.

How many jobs will the planned semiconductor facilities create?

Micron said its project would create 5,000 direct and 15,000 indirect jobs. Lam Research said its virtual chip training platform will be used to train 60,000 engineers over 10 years. Vivek Tyagi, a semiconductor industry veteran and advisor to the board of the India Electronics and Semiconductor Association, said the fabs are largely automated, the assembly and test plants will generate employment. They also require engineers to learn new skills. India is already a significant contributor to semiconductor design but lacks hardware engineers. An emerging chip ecosystem could help create that pool.

Updated: June 26, 2023, 03:09 PM IST