Although India demonstrates ambition and has pivoted to invite Taiwanese semiconductor partners to accelerate its chip dreams, analysts are taking a cautious view but said the success of Micron in India is key to the South Asian country's semiconductor future.
During the recent Supply Chain Summit co-organized by DIGITIMES and the India-Taipei Association (ITA), Ajai Chowdry, Co-founder of HCL and Chairman of EPIC Foundation, outlined India's semiconductor mission in which he currently serves as an adviser for said mission. He aims for investment decision closure within two years and production initiation within five years, focusing on 28nm and mature nodes. These chips will prioritize the domestic automobile and white goods markets.
DIGITIMES Research analyst and project manager Eric Chen is optimistic about Ajai's vision but skeptical about the accelerated timeline for mature semiconductor processes. Chen suggests that Chowdry's vision signals the government's commitment to improving investment efficiency. However, he deems Chowdry's proposed timeline overly optimistic, recognizing the complexities inherent in semiconductor manufacturing within such a condensed timeframe.
Achieving mature processes in five years poses a significant challenge, a difficulty even faced by TSMC in completing construction and initiating production within two years. Chen estimates the first semiconductor wafer fabrication plant in India may require an additional 2.5 to 3 years after the initial project announcement.
Identifying hurdles such as insufficient infrastructure, particularly in the stability of power and water supply, as top priorities, Chen points to India's frequent power disruptions as a significant challenge for semiconductor production in controlled environments. Additionally, he underscores favorable conditions for foreign investments being crucial to attract and sustain semiconductor businesses in addition to government subsidies. Substantial talent development and supportive infrastructure are essential for establishing a semiconductor ecosystem.
A Deloitte report projects the Indian semiconductor market to reach $55 billion by 2026. Despite its vast market potential and prowess in software and electronics, India lags in semiconductor production due to the absence of native ecosystems and infrastructure to meet domestic demand. With aims to become a major player in the global semiconductor supply chain, the Indian government, offering substantial incentives and 50% financial support, aims to attract international chipmakers to establish an ecosystem locally to help propel the nation's semiconductor sector under the National Semiconductor Mission. US-based memory maker Micron is leading the charge with plans for its first ATMP facility locally by 2024.
Micron in India: key to India's semiconductor future
While acknowledging Micron's strategic decision to initiate operations in India with backend packaging—a less intricate process than frontend wafer fabrication—as a positive milestone, Chen emphasizes that Micron's success in India will be a key indicator reflecting the readiness of India's semiconductor policy and overall ecosystem preparedness, with implications for the broader Southbound expansion efforts as part of the China+1 trend.
Chen believes Micron's presence can attract more supply chain partners, potentially leading to the development of a more advanced semiconductor ecosystem in the region. Nevertheless, Chen maintains that achieving fully indigenous semiconductor production remains a formidable challenge.
Market potential and trade dynamics
Regarding market potential, with a population surpassing 1.4 billion, Chen underscores the significant demand for semiconductors. Research data from the International Trade Centre (ITC) has revealed a trade deficit of nearly US$21 billion in semiconductor trade for India in 2022, emphasizing the substantial market opportunity for local production.
Source: ITC, compiled by DIGITIMES Research, Nov 2023
Chen asserts that the growth of the Indian semiconductor market is not a fleeting trend. Anticipating sustained growth as more electronic industries establish themselves locally, he envisions long-term opportunities for India's semiconductor ecosystem.
Projecting the establishment of semiconductor manufacturing capabilities in India could localize the electronics supply chain, including the assembly and production of semiconductor-based components for various devices. Given India's vast population and sizable domestic market, companies establishing plants, including Micron, will likely prioritize fulfilling local needs.
Concerning Ajai's emphasis on producing 28nm and more mature processing, Chen finds this direction reasonable. He notes that 28nm covers most products, especially those in white goods. While recognizing the need for advanced processes in core chips, Chen emphasizes that mature processes should suffice for simpler devices, considering factors like maturity, cost-effectiveness, and ease of technology licensing.
To achieve 28nm capabilities in India, Chen advocates a step-by-step approach. Envisioning a realistic timeline of about ten years to establish a mature 28nm process, he acknowledges the challenges posed by equipment, workforce, and ecosystem requirements. Chen remarks that achieving semiconductor self-reliance at the 28nm level in India is a reasonable and promising goal despite its challenges.
About the Analyst
Eric Chen is an Analyst and Project Manager at DIGITIMES Research. Chen received his Master's degree in International Business from Taiwan's Soochow University. His research focuses on the foundry and IC assembly & packaging industry.