The Representative

India's Youth News Tank

India’s Uneaten Multi Billion Dollar Snack – Microchip Manufacturing

2 min read

Taiwanese chip giant TSMC gained $72 Bn in just 2 days this week — equivalent to swallowing Goldman Sachs whole!

Nearly >52% of ALL devices have a chip in it that’s manufactured by TSMC – the largest chip manufacturer in the world, is now planning initiatives worth $12 Bn in the US. Samsung, Intel and Qualcomm are some other key players in this industry.

While India has done well in terms of chip “design”, there exists a BIG void in Semiconductor Wafer Fabrication.

Worldwide shipments of devices in total was 2.2 Bn units in 2019. They all require these semiconductor chips to function.

Economies with large production of these Semiconductor Chips (as small as a fingernail), have grown their GDP at bolt speed over the last decade.

Fact: Samsung accounts for 17% of South Korea’s GDP. And, TSMC made up ~75% of Taiex (market index of Taiwan) recently touched highest mark in 3 decades.

Intel in 2014 stated it had no interest in producing these chips in India due to some specific reasons like :
1) Poor infrastructure & frequent power cuts
2) Lack of technical expertise
3) Unavailability of the purest form of silica
4) High capital investments needed
5) Absence of High Govt support that’s required
6) No clean environments (mandatory 100k times cleaner than an operation theatre) for the chips to be made and work perfectly fine.

Indigenously manufactured chips and micro processors only cater to strategic, defence and military purposes.

A few top Indian players tried to build a semiconductor wafer fabrication unit for industries, but didn’t pull it off.

Indian semiconductor component market is expected to be worth $32.35 billion by 2025, growing at a CAGR of 10.1% between 2018 and 2025, according to IESA.

• India is :
✓ Largest net importer of semiconductor chips, it spends more money on this import than on oil!
✓ World’s 2nd Largest mobile manufacturer.

In India, ~₹50K Cr was allocated by GOI for electronics production in 2020.

Under Make in India for electronics as per Atmanirbhar Mission, semiconductor fabs are going to be the first category.

However, most parts are imported implying that local value addition is a mere $7-10 Bn out of a global market size of $2.1Tn!

Smartphone market: investment by Google in Jio, a catalyst to launch “GOOGL” & capture a market of 500M Indians.

Intel and Qualcomm each have acquired smaller stakes in Jio through their investment arms, for $253m and $97m respectively.

Can Jio attempt to thrive in the smartphone market too?

Can companies like RIL replicate their end to end “Make in India, Atmanirbhar Bharat – self reliant mission” approach, just as Jio’s fibre optic Indian cables, for ‘Made in India’ semiconductor wafer fabrication & micro chips as well?

Or would the foreign investments just act as a “soft pressure on Jio” to buy the chipmakers’ products & tech companies directly?

Can the next Indian Unicorn be a micro chip Innovator/manufacturer? (need to grab just ~1% market share of the global ~433 Bn semiconductor industry).

After all, “Silicon Valley is not just a location, it is a Mindset” – Reid Hoffman.

By: Rony Saha

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