India is aggressively recruiting Taiwanese partners for its semiconductor dream. Not only aiming to produce mature-node semiconductors for its 1.4 billion population market, it also sends out a clear message to IC design houses – come design for India and make for India, don't miss out on the chance.
In a closed-door interview with reporters, Ajai Chowdhry, co-founder of HCL Group, chairman of EPIC Foundation, and now an adviser to India's National Semiconductor Mission, shared the country's vision.
India is trying to replicate China's success and become a Product Nation, and semiconductor is a key part of that plan. "That is why we need Taiwan. You have already done it for China. You did it in 10 years, you must go to India and do it in three years," said Chowdhry, emphasizing it will be of mutual benefit.
"India's goal is that with this program, in the next two years, we should have all the investments closed. And within five years, we should be producing. So that's phase one." Chowdhry said India has already drawn up a 25-year plan for its semiconductor industry development. "And then we will come for more advanced chips in the second phase of development."
In Chowdhry's presentation during the opening ceremony of the 2023 DIGITIMES Supply Chain Summit, he specifically pointed out that the Indian central government is providing a 50% incentive upfront for capital expenditures made by companies to produce CMOS chips, panels, and compound chips. The state government will provide another 20% afterward.
The expenditure for building fabs and buying equipment for mature node chips are much lower than advanced ones, and it takes fewer years to break even. But even so, India has hired global semiconductor experts to make strict evaluations of applications and approve only those that have the highest opportunity to succeed.
Vast opportunity in the 1.4 billion population
India imported nearly US$6 billion worth of semiconductor devices in 2022, and that number is expected to grow in the years to come. As a result of several initiatives taken by the Indian government and efforts of the industry, the domestic production of electronic goods has increased substantially from US$60 billion in 2017-18 to US$101.9 billion in 2022-23 at a Compound Annual Growth Rate (CAGR) of 16.28%, according to the Economic Times.
One would guess that India wants to build chips to meet domestic needs because many electronic supply chains have migrated there to produce notebook PCs and smartphones. But Chowdhry said India is specifically targeting silicon chips processed by 28nm and more mature node technologies. "That market already exists in India because the automobile market and the white goods market (refrigerators, air conditioners, TVs, toasters, etc.) need mature chips. So, that market is huge in India because we have a 1.4 billion population."
A McKinsey Report with the title "India's Urban Awakening" projects that India will have 68 cities with a population of 1 million by 2030, up from 41 now. Urbanization will require a huge amount of investments in infrastructure, including power grid, Internet, smart city planning, etc, which all require semiconductor devices.
"India's gross domestic product (GDP) in 2027 will be US$7 trillion, and we plan to be a US$30 trillion economy by 2047; whichever comes first gets maximum benefit," said Chowdhry, urging Taiwanese semiconductor manufacturers to take action fast.
Although many analysts see the challenges of inadequate infrastructure for semiconductor industry development, Chowdhry argues that it is no longer the case, because India has made tremendous progress in public infrastructure in recent years.
Chowdhry built trust in partnership with Taiwanese companies from decades of cooperation in getting electronic components for manufacturing HCL computers. The geopolitical tension between China and India also made Taiwan a preferred partner for collaboration. Taiwanese products will have less competition in India from low-priced products from China, which is not trusted by consumers in India.
India ranked fourth in automobile sales in 2022, up 23% from a year ago, with local brands taking up over half of the market share. The robust growth of the Indian automobile market would also be an attractive source for automotive IC demand.
The abundant engineer supply in India can also be a solution to Taiwan's talent shortage. According to Manharsinh Yadav, director general of the India-Taiwan Association, 625 Indian colleges have adopted curricula to train semiconductor industry engineers and are also collaborating with good institutes across the world, including those in Taiwan. "By 2025-26, we'll have more than 85,000 semiconductor industry-ready manpower," said Yadav.
Chowdhry pointed out that India exports close to about US$39 billion worth of engineering services in 2022, but that's on transfer pricing. However, if calculated by end user value, it would be close to US$100 billion dollars of just engineering and R&D exports. "Meanwhile, India's engineering R&D capability is phenomenal. Not just make in India, you can design in India." Chowdhry pointed out that there are already 1,600 multinational companies that have established design centers or research and development (R&D) centers in India.
"Why have the Indian engineers to work in Taiwan? Then you have to pay them the Taiwan wage." Chowdhry said, Taiwanese companies should build fabs and design centers in India and have local managers to supervise those Indian engineers to produce the best results. "We produce more engineers than the population in Taiwan. So, you can imagine the capability that you can create."
Currently, around 600 Indian nationals live in the Hsinchu area, with over 300 being employees of the Hsinchu Science Park, while the other 200 or so and their dependents are studying at National Tsing Hua University and National Yang-Ming Chiao Tung University. In 2004, MediaTek set up a design center by acquiring a company in Noida, India, that specializes in man-machine interface software/firmware technology. While Foxconn is still trying to get a partner to produce semiconductors in India, it is determined to achieve the goal and has promised to establish a Foxconn University there, according to Chowdhry.
To attract IC design firms to invest in India, the government has announced the Design Linked Incentive (DLI) Scheme in 2023, pledging financial incentives as well as design infrastructure support across various stages of development and deployment of semiconductor design(s) for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores and semiconductor linked design(s) over a period of 5 years.