Industry rejoices as govt approves two Semiconductor fabs

by Sohini Bagchi    Sep 17, 2013


The India government’s recent approval of the setting up of two semiconductor fabrication plants in the country have brought relief to Indian IT, as many in the industry believe they now have a reason to rejoice. In a statement released today, the IT apex body, MAIT welcomed government’s decision to recently approve setting up of two semiconductor manufacturing facilities in India.

“Considering the fact that IT Hardware industry is highly depended upon imports, homegrown chip would help strengthen the electronics ecosystem in the country. The decision will promote manufacturing of indigenously designed and manufactured chips and help the country to reduce dependence on imports. This would also help the existing IT hardware manufacturing to obtain essential IT components at a much lesser cost,” say senior officials at MAIT.

According to Task Force report, the demand for electronics hardware in the country is projected to increase to $400 billion by the year 2020. The apex body emphasized that the IT hardware industry is at an inflection and setting up of fab would not only boost the industry but would also have a positive impact on the Indian economy. This is a much needed step to boost the ESDM industry and gives the industry a reason to celebrate, it says in a statement.

Not only MAIT, others in IT/semiconductor believe the long-awaited decision has finally seen the light of the day, as India Electronics and Semiconductor Association (IESA) called it “a highly strategic game changer for India”.

The long wait was finally over…

It is known that the Indian semiconductor industry had been lobbying hard for local chip manufacturing since 2005. However, there were multiple challenges in this area. In 2006, for instance, SemIndia, a consortium, wanted to set up a chip manufacturing facility in Andhra Pradesh on the growing demand for electronics in the country. However, in the next two years, the company scraped its original plans and instead focused on assembly and testing activities.

Setting up a chip manufacturing plant isn’t easy. “It is a capital intensive affair - an advanced fab that makes chips for cell phones can require initial investments of upto $5 billion. A less advanced fab that makes chips for automotive and radio applications can cost $1 billion to start off. Huge additional investments in technology need to be made as the fab matures,” tech analyst Goutam Das mentions in Business Today blog.

It was only in 2011 when the government set up an empowered committee for identifying technology and investors for a fab, which resulted into the decision to finally come up with the decision to set up the two semiconductor fab units in the country.

A boost to the economy

Despite the approval, many are still asking the question on why must India have a fab? According to The Department of Electronics and IT, nearly 2000 chips are being designed every year in India and more than 20,000 engineers are working on various aspects of chip design and verification. In such a scenario, the decision seemed logical. Das mentions India is strong in semiconductor design and therefore, it should continue to improve on this domain. 

Major countries around the world have their own fabs. This includes US, France, Germany, Ireland, Japan, Singapore, and China. This will not only mean a major spurt of economic growth for the country from the manufacturing of silicon wafers, but also an opportunity to catch up with the rest of the world when it comes to technology. Analysts at IESA also believe that the presence of a local fab in India would boost the country’s capability to build intellectual properties within India.

Another statement from IESA mentions that the building of silicon wafer fabrication plants will help stabilize the Indian Rupee. It will also prevent project costs from further escalation. Along with this, it will help the development of electronic products in what was earlier a completely fabless semiconductor industry.